He was thus named as Italian representative of the Organisation for European Economic Co-operation (OEEC) soon after the Second World War.

During his tenure, the PLI abandoned its historical identification with the Risorgimento and instead established strong ties with Confindustria, the country's leading association of industrialists.

With the formation of centre-left governments in the 1960s, the PLI was marginalized in the Italian political world, and suffered a decline that was not halted by the party's participation in the second Giulio Andreotti cabinet of 1972–1973.

Malagodi was chosen as Minister of the Treasury in that government, launching a series of measures that favoured younger and more politically-aligned bureaucrats, such as the so-called pensioni d'oro ("Golden pensions").

He abandoned this latter position in 1976 after coming into conflict with Valerio Zanone, the new leader of the PLI, who was more oriented towards a collaboration with centre-left parties.