Economy of Italy under fascism

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The Economy of Italy under Fascism refers to the economy in Italy between 1922 and 1943 when the Fascists were in control. Italy had emerged from World War I in a poor and weakened condition. An unpopular and costly conflict had been borne by an underdeveloped country. Post-war there was inflation, massive debts and an extended depression. By 1920 the economy was in a massive convulsion - mass unemployment,being food shortages, strikes, etc. This conflagration of viewpoints can be exemplified by the "Two Red Years".

Fascist economic policy[edit]

Benito Mussolini came to power in 1922 and tried to transform the country's economy along fascist ideology, at least on paper. In fact he was not an economic radical, nor sought a free-hand in the economy. His main interest was to use economic power to politically reshape the Italian state to fit his ideological outlook. He aligned himself with industrial interests and forged a modus vivendi with the ruling groups of Italian capitalism. As in Nazi Germany the economic policies of Mussolini are difficult to define. There is a messy tangle between economic theory and economic practice which leads to two opposing views - either Mussolini had an economic plan, or that he did not, but instead reacted to changes without forward planning.[1]

To proponents of the first view, Mussolini did have a clear economic agenda, both long and short-term, from the beginning of his rule. The government had two main objectives - to modernize the economy, and to remedy the country's lack of strategic resources.

To stimulate development Mussolini pushed the modern capitalistic sector in the service of the state, intervening directly as needed to create a collaboration between the industrialists, the workers, and the state. The government crushed fundamental class conflicts in favour of corporatism. In the short term the government worked to reform the widely-abused tax system, dispose of inefficient state-owned industry, cut government costs, and introduce tariffs to protect the new industries.

The lack of industrial resources, especially the key ingredients of the industrial revolution, was countered by the intensive development of the available domestic sources and by aggressive commercial policies - searching for particular raw material trade deals, or attempting strategic colonization.

Some historians,[citation needed] however, have argued that Mussolini had essentially no grasp of economics and that Italian fascism was actually a negative force on the Italian economy - holding back genuine modernisation and badly distorting economic development, even before the war.

First steps[edit]

The Fascist government began its reign in an insecure position. Coming to power in 1922, after the March on Rome, it was a minority government until the 1923 Acerbo Law and the 1924 elections, and it took until 1925, after the assassination of Giacomo Matteotti, to establish itself securely as a dictatorship.

Economic policy in the first few years was largely liberal, with the Ministry of Finance controlled by the old liberal Alberto De Stefani. The government undertook a low-key laissez-faire program - the tax system was restructured (February 1925 law, 23 June 1927 decree-law, etc.), there were attempts to attract foreign investment and establish trade agreements, efforts were made to balance the budget and cut subsidies. The 10% tax on capital invested in banking and industrial sectors was repealed, while the tax on directors and administrators of anonymous companies (SA) was cut down by half. All foreign capital was exonerated of taxes, while the luxury tax was also repealed.[2] Mussolini also opposed municipalization of enterprises.[2]

The 19 April 1923 law transferred life insurance to private enterprise, repealing the 1912 law which had created a State Institute for insurances and which had envisioned to give a state monopoly ten years later.[3] Furthermore, a 19 November 1922 decree suppressed the Commission on War Profits, while the 20 August 1923 law suppressed the inheritance tax inside the family circle.[2]

There was a general emphasis on what has been called productivism - national economic growth as a means of social regeneration and wider assertion of national importance.

Up until 1925 the country enjoyed modest growth but structural weaknesses increased inflation and the currency slowly fell (1922 L90 to £1, 1925 L145 to £1). In 1925 there was a great increase in speculation and short runs against the lira. The levels of capital movement became so great the government attempted to intervene. De Stefani was sacked, his program side-tracked, and the Fascist government became more involved in the economy in step with the increased security of their power.

In 1925, the Italian state abandoned its monopoly on telephones' infrastructure, while the state production of matches was handed over to a private "Consortium of matches' productors.[3]"

Furthermore, various banking and industrial companies were financially supported by the state. One of Mussolini's first act was to fund the metallurgical trust Ansaldo to the height of 400 millions Lire. Following the deflation crisis which started in 1926, banks such as the Banco di Roma, the Banco di Napoli or the Banco di Sicilia were also assisted by the state.[4] In 1924, the Unione Radiofonica Italiana (URI) was formed by private entrepreneurs and part of the Marconi group, and granted the same year a monopoly of radio broadcasts. URI became the RAI after the war.

Firmer intervention[edit]

The lira continued to decline into 1926. It can be argued that this was not a bad thing for Italy - cheaper and more competitive exports, dearer imports. Politically however the declining lira was disliked; Mussolini apparently saw it as "a virility issue", the decline was an attack on his prestige. In the Pesaro Speech of August 18, 1926, he began the "Battle for the Lira". Mussolini made a number of strong pronouncements and set his position of returning the lira to its 1922 level, "Quota 90." This policy was implemented through an extended deflation of the economy; the country rejoined the gold standard, money supply was reduced and interest rates raised. This produced a sharp recession, which Mussolini took up as a sign of his assertion of power over "troublesome elements" - a slap to both capitalist speculators and trade unions.

On a wider scale the Fascist economic policy pushed the country towards the "corporative state", an effort which lasted well into the war. The idea was to create a national community where the interests of all parts of the economy were integrated into a class-transcending unity. Some see the move to corporatism in two phases. first the workers were brought to heel over 1925-27. Initially the non-fascist trade unions and later (less forcefully) the fascist trade unions were eliminated. This was a difficult stage - the trade unions were a significant component of Italian fascism, from its radical syndicalist roots, and they were also a major force in Italian industry. The changes were embodied in two key developments. The Pact of the Vidoni Palace in 1925 brought the fascist trade unions and major industries together, creating an agreement for the industrialists to only recognise certain unions and so marginalise the non-fascist and socialist trade unions. The Syndical Laws of 1926 (sometimes called the Rocco Laws, after Alfredo Rocco) took this agreement a step further; in each industrial sector there could be only one trade union and employers organisation. Labour had previously been united under Edmondo Rossoni, giving him a substantial amount of power even after the syndical laws, causing both the industrialists and Mussolini himself to resent him. Thereby, he was dismissed in 1928 and Mussolini took over his position as well.[5]

Only these syndicates could negotiate agreements, with the government acting as an 'umpire'. The laws made both strikes and lock-outs illegal and took the final step of outlawing non-fascist trade unions. Despite strict regimentation, the labour syndicates had the power to negotiate collective contracts (uniform wages and benefits for all firms within an entire economic sector).[6] Firms which broke contract were usually able to get away with it due to the enormous bureaucracy and difficulty there was in solving labour disputes, primarily due to the significant influence the industrialists had over labour affairs.

Employer syndicates were given a considerable amount of power as well: Membership with these associations was compulsory, and the leaders had the power to control and regulate production practices, distribution, expansion and other factors with its members. The controls generally favoured larger enterprises over small producers - who were dismayed by the fact that they'd lost a significant amount of individual autonomy.[6]

Since the Syndical Laws kept capital and labour separate, Mussolini and other party members continued to reassure the public that this was merely a stop-gap, and that all associations would be integrated into the corporate state at a later stage.

The Corporative phase[edit]

These legal and structural changes led into the second phase, the corporative phase, from 1927. The Labour Charter of 1927 confirmed the importance of private initiative in organising the economy, while still reserving the right for state intervention - most notably in the supposedly complete fascist control of worker hiring. In 1930 the National Council of Corporations was established, it was for representatives of all levels of the twenty-two key elements of the economy to meet and resolve problems. In practice it was an enormous bureaucracy of committees, that while consolidating the potential powers of the state resulted in a cumbersome and inefficient system of patronage and obstructionism. One consequence of the Council was the fact that trade unions held little to no representation whereas organized business, specifically organized industry (CGII), was able to gain a foothold over its competitors.

A key effect that the Council had on the economy was the rapid increase in cartels, especially the law passed in 1932 allowing the government to mandate cartelization. The dispute was sparked when several industrial firms refused CGII orders to cartelize, prompting the government to step in. Since the corporations cut across all sectors of production, mutual agreements and cartelization was a natural reaction - hence in 1937, over two-thirds of cartels authorized by the state had started after the founding of the Council, many of which crossed sectors of the economy (IE the noticeable increase in commercial-industrial cartelization). Cartels generally undermined the corporative agencies that were meant to ensure they operated according to Fascist principles and in the national interest, but the heads were able to show that cartel representatives had total control over the distribution of resources, prices, salaries and construction over the individual firms. Businessmen usually argued in favour of 'collective self-regulation' being within Fascist ideological lines when forming cartels, subtly undermining corporative principles.[6]

Government intervention in industry was very uneven, large programs started but with little overarching direction. Intervention began with the "Battle of the Grain" in 1925 when the government intervened following the poor harvest to subsidise domestic growers and limit foreign imports by increasing taxes. This reduced competition and created, or sustained, widespread inefficiencies. According to historian Denis Mack Smith (1981), "Success in this battle was... another illusory propaganda victory won at the expense of the Italian economy in general and consumers in particular" and "Those who gained were the owners of the Latifondia and the propertied classes in general... his policy conferred a heavy subsidy on the Latifondisti".[7]

Larger programs began in the 1930s with the Bonifica Integrale land reclamation program (or so-called "Battle for Land"), which was employing over 78,000 people by 1933; the Mezzogiorno policies to modernise southern Italy and attack the Mafia - per capita income in the south was still 40% below that of the north; the electrification of the railways and similar transport programs; hydroelectrical projects; the chemical industry; automobiles; steel. There was also limited takeover of strategic areas, notably oil with the creation of AGIP.

The Great Depression[edit]

The worldwide depression of the early 1930s hit Italy very hard starting in 1931. As industries came close to failure they were bought out by the banks in a largely illusionary bail-out - the assets used to fund the purchases were largely worthless. This led to a financial crisis peaking in 1932 and major government intervention. After the bankruptcy of the Austrian Kredit Anstalt in May 1931, Italian banks followed, with the bankruptcy of the Banco di Milano, the Credito Italiano and the Banca Commerciale. To support them, the state created three institutions funded by the Italian Treasure: the Sofindit in October 1931 (with a capital of 500 million liras), which bought back all the industrial shares owned by the Banca Commerciale and others establishment in trouble. In November 1931 the Imi (capital of 500 million liras) was also created, and issued five and one-half billion liras in state obligations, reimbursables in a period of ten years. This new capital was lent to the private industry for a maximum period of ten years.

Finally, the Industrial Reconstruction Institute (IRI) was formed in January 1933 and took control of the bank-owned companies, suddenly giving Italy the largest industrial sector in Europe which made use of government-linked companies (GLC). It saved at the end of 1933 the Hydroelectric Society of Piemont, which shares had fallen from 250 liras to 20 liras, while in September 1934, the Ansaldo trust was again reconstituted under the authority of the IRI, with a capital of 750 million liras. Despite this taking of control of private companies through (GLC), the Fascist state did not nationalize any company.[4]

IRI did rather well with its new responsibilities - restructuring, modernising and rationalising as much as it could. It was a significant factor in post-1945 development. But it took the Italian economy until 1955 to recover the manufacturing levels of 1930 - a position that was only 60% better than that of 1913.[citation needed]

After the Depression[edit]

There is no evidence that Italy's standard of living, which is lowest of the major powers, has been raised one jot or tittle since Il Duce came to power.

Life, 9 May 1938[8]

As Mussolini's ambitions grew domestic policy was subsumed by foreign policy, especially the push for autarky after the 1935 invasion of Abyssinia and subsequent trade embargoes. The push for independence from foreign strategic materials was both expensive, ineffective, and economically wasteful. It was achieved by a massive increase in public debt, tight exchange controls, and the exchange of economic dynamism for stability.

Available economic indices supportive from Mussolini's efforts. Recovery from the post-war slag had begun before Mussolini came to power and continuing growth rates were comparatively weaker. In 1929-39 the Italian economy grew by 16%, roughly half the growth rate of the earlier liberal period. Annual rates were 0.5% lower than pre-war rates and the annual rate of growth of value was 1% lower. Despite the efforts directed at industry, agriculture was still the largest sector of the economy in 1938 and only a third of total national income was derived from industry. Agriculture still employed 48% of the working population in 1936 (56% 1921), while industrial employment had grown only 4% over the period of fascist rule (24% 1921, 28% 1936) and there was more growth in traditional than in modern industries. The rate of gross investment actually fell under Mussolini and the move from consumer to investment goods was low compared to the other militaristic economies.

Attempts to modernise agriculture were also ineffective. Land reclamation and the concentration on grains came at the expense of other crops, producing very expensive subsidised wheat while cutting more viable and economically rewarding efforts. Most evidence suggests that rural poverty and insecurity increased under fascism and their efforts failed markedly to create a modern, rational, agricultural system.

In the late 1930s the economy was still too underdeveloped to sustain the demands of a modern militaristic regime. Raw material production was underutilised and finished military equipment was limited in quantity and too often in quality. Despite a minimum of 10% of GDP, almost a third of government expenditure, being directed towards the armed services from the 1930s the country was "spectacularly weak". Notably the investment in the early 1930s left the services obsolete by 1940, especially the army. The expediture on conflicts from 1935 onwards (for instance commitment to the Spanish Civil War, 1936-1939, as well as the Italy-Albania war, 1939) meant little stockpiling for the much greater conflict ahead (the Second World War, 1940-1945 in the Kingdom of Italy).

References[edit]

  1. ^ David Baker, "The political economy of fascism: Myth or reality, or myth and reality?" New Political Economy, Volume 11, Issue 2 June 2006, pages 227 – 250
  2. ^ a b c Daniel Guérin, Fascism and Big Business, Chapter IX, Second section, p.193 in the 1999 Syllepse Editions
  3. ^ a b Daniel Guérin, Fascism and Big Business, Chapter IX, First section, p.191 in the 1999 Syllepse Editions
  4. ^ a b Daniel Guérin, Fascism and Big Business, Chapter IX, Fifth section, p.197 in the 1999 Syllepse Editions
  5. ^ Roland Sarti, Fascism and the Industrial Leadership in Italy, 1919-40: A Study in the Expansion of Private Power Under Fascism, 1968
  6. ^ a b c Sarti, 1968
  7. ^ Denis Mack Smith (1981), Mussolini.
  8. ^ "Fascism / Inside Italy there is also "The Corporate State"". Life. 1938-05-09. p. 31. Retrieved November 29, 2011. 

See also[edit]