The Italian economy under Fascism, 1922-1943
Encyclopedia
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, food shortages, strikes, etc. This conflagration of viewpoints can be exemplified by the two Red years
.
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..
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, 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.
, 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. Mussolini also opposed municipalization
of enterprises.
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. 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.
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."
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 Liras. 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. 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.
". 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 union
s.
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. Only these unions 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.
Government intervention in industry was very uneven, large programs started but with little over-arching 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".
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
.
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..
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.
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 slump 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
).
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
between 1922 and 1943 when the Fascists
Italian Fascism
Italian Fascism also known as Fascism with a capital "F" refers to the original fascist ideology in Italy. This ideology is associated with the National Fascist Party which under Benito Mussolini ruled the Kingdom of Italy from 1922 until 1943, the Republican Fascist Party which ruled the Italian...
were in control. Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
had emerged from World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
in a poor and weakened condition. An unpopular and costly conflict had been borne by an underdeveloped country. Post-war there was inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
, massive debts and an extended depression. By 1920 the economy was in a massive convulsion - mass unemployment, food shortages, strikes, etc. This conflagration of viewpoints can be exemplified by the two Red years
Biennio rosso
The Biennio Rosso was a two year period, between 1919 and 1920, of intense social conflict in Italy. The Biennio Rosso was followed by the extremely violent reaction of the Fascist blackshirts militia and eventually by the March on Rome of Benito Mussolini in 1922...
.
Fascist economic policy
Benito MussoliniBenito Mussolini
Benito Amilcare Andrea Mussolini was an Italian politician who led the National Fascist Party and is credited with being one of the key figures in the creation of Fascism....
came to power in 1922 and tried to transform the country's economy along fascist ideology
Fascism
Fascism is a radical authoritarian nationalist political ideology. Fascists seek to rejuvenate their nation based on commitment to the national community as an organic entity, in which individuals are bound together in national identity by suprapersonal connections of ancestry, culture, and blood...
, 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
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
. As in Nazi Germany
Nazi Germany
Nazi Germany , also known as the Third Reich , but officially called German Reich from 1933 to 1943 and Greater German Reich from 26 June 1943 onward, is the name commonly used to refer to the state of Germany from 1933 to 1945, when it was a totalitarian dictatorship ruled by...
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..
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
Corporatism
Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
. 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, 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
The Fascist government began its reign in an insecure position. Coming to power in 1922, after the March on RomeMarch on Rome
The March on Rome was a march by which Italian dictator Benito Mussolini's National Fascist Party came to power in the Kingdom of Italy...
, it was a minority government until the 1923 Acerbo Law
Acerbo Law
The Acerbo Law was an Italian electoral law proposed by Baron Giacomo Acerbo and passed by the Italian Parliament in 1924. The purpose of it was to give Mussolini's fascist party a majority of deputies.-Background:...
and the 1924 elections, and it took until 1925, after the assassination of Giacomo Matteotti
Giacomo Matteotti
Giacomo Matteotti was an Italian socialist politician. On 30 May 1924, he openly spoke in the Italian Parliament alleging the Fascists committed fraud in the recently held elections, and denounced the violence they used to gain votes...
, to establish itself securely as a dictatorship.
Economic policy in the first few years was largely liberal
Liberalism
Liberalism is the belief in the importance of liberty and equal rights. Liberals espouse a wide array of views depending on their understanding of these principles, but generally, liberals support ideas such as constitutionalism, liberal democracy, free and fair elections, human rights,...
, with the Ministry of Finance controlled by the old liberal Alberto De Stefani
Alberto De Stefani
Alberto De Stefani was an Italian politician. Coming from a background in liberalism to Benito Mussolini's fascism, De Stefani was in charge of Italian economics from 1922 to 1925. His time in charge was characterized by laissez-faire ideals....
. The government undertook a low-key laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
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)
S.A. (corporation)
S.A. designates a particular type of corporation in various countries, mostly those employing the civil law. It originated in Spain during the 16th century. Depending on language, the abbreviation stands for various phrases meaning anonymous society, anonymous company, anonymous partnership, or...
was cut down by half. All foreign capital was exonerated of taxes, while the luxury tax
Luxury tax
A luxury tax is a tax on luxury goods: products not considered essential. A luxury tax may be modeled after a sales tax or VAT, charged as a percentage on all items of particular classes, except that it mainly affects the wealthy because the wealthy are the most likely to buy luxuries such as...
was also repealed. Mussolini also opposed municipalization
Municipalization
Municipalization is the transfer of corporations or other assets to municipal ownership. The transfer may be from private ownership or from other levels of government. It is the opposite of privatization and is different from nationalization.-Services:There have been two main waves of...
of enterprises.
The 19 April 1923 law transferred life insurance
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...
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. Furthermore, a 19 November 1922 decree suppressed the Commission on War Profits
War profiteering
A war profiteer is any person or organization that profits from warfare or by selling weapons and other goods to parties at war. The term has strong negative connotations. General profiteering may also occur in peace time.-International arms dealers:...
, while the 20 August 1923 law suppressed the inheritance tax
Inheritance tax
An inheritance tax or estate tax is a levy paid by a person who inherits money or property or a tax on the estate of a person who has died...
inside the family circle.
There was a general emphasis on what has been called productivism
Productivism
Productivism is the belief that measurable economic productivity and growth is the purpose of human organization , and that "more production is necessarily good".-Arguments for 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
Lira
Lira is the name of the monetary unit of a number of countries, as well as the former currency of Italy, Malta, San Marino and the Vatican City and Israel. The term originates from the value of a Troy pound of high purity silver. The libra was the basis of the monetary system of the Roman Empire...
. 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."
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
Gio. Ansaldo & C.
Ansaldo was one of Italy's oldest and most important engineering companies, existing for 140 years from 1853 to 1993.-From foundation to World War I:...
to the height of 400 millions Liras. 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. In 1924, the Unione Radiofonica Italiana (URI) was formed by private entrepreneurs and part of the Marconi
Marconi Company
The Marconi Company Ltd. was founded by Guglielmo Marconi in 1897 as The Wireless Telegraph & Signal Company...
group, and granted the same year a monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
of radio broadcasts. URI became the RAI
RAI
RAI — Radiotelevisione italiana S.p.A. known until 1954 as Radio Audizioni Italiane, is the Italian state owned public service broadcaster controlled by the Ministry of Economic Development. Rai is the biggest television company in Italy...
after the war.
Firmer intervention
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 LiraBattle for the Lira
The Battle for the Lira was an economic policy undertaken by the Fascists in Italy during the 1920s as an attempt to raise the claims of Italy becoming a great power.-Background:...
". Mussolini made a number of strong pronouncements and set his position of returning the lira to its 1922 level, "Quota 90
Quota 90
The Quota 90 was a controversial revaluation of the lira undertaken by Mussolini, announced on August 18, 1926 at a speech in Pesaro, pegging the exchange rate to 92.46 lira against the Pound sterling by December 1927, which had been the prevailing market rate when Mussolini took power in...
." This policy was implemented through an extended deflation
Deflation (economics)
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% . This should not be confused with disinflation, a slow-down in the inflation rate...
of the economy; the country rejoined the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
, money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
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 union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
s.
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
Syndicalism
Syndicalism is a type of economic system proposed as a replacement for capitalism and an alternative to state socialism, which uses federations of collectivised trade unions or industrial unions...
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
Pact of the Vidoni Palace
On October 2, 1925, the Vidoni Pact, signed between Confindustria and the Italian National Fascist Party regime representatives, abolished Catholic, Socialist or independent unions, and replaced them with a fascist-controlled one...
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
Alfredo Rocco
Alfredo Rocco was an Italian politician and jurist.Rocco was born in Naples.He was Professor of Commercial Law at the University of Urbino and in Macerata , then Professor of Civil Procedure in Parma, of Business Law in Padua, and later of Economic Legislation at "La Sapienza" University of Rome,...
) took this agreement a step further; in each industrial sector there could be only one trade union and employers organisation. Only these unions 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.
The Corporative phase
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 that trade unions were removed from influence at all levels while the realities of private capital and ownership were, mostly, unaffected.Government intervention in industry was very uneven, large programs started but with little over-arching 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
Denis Mack Smith
Denis Mack Smith CBE is an English historian, specialising in the history of Italy from the Risorgimento onwards. He is best known for studies of Garibaldi and Cavour and of Mussolini, and for his single-volume Modern Italy: A Political History...
(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".
Larger programs began in the 1930s with the Bonifica Integrale land reclamation program (or so-called "Battle for Land
Battle for Land
The Battle For Land, started in 1928 in Italy by Benito Mussolini, aimed to clear marshland and make it suitable for farming, as well as reclaiming land and reducing health risks.-Aims:...
"), which was employing over 78,000 people by 1933; the Mezzogiorno
Mezzogiorno
The Midday is a wide definition, without any administrative usage, used to indicate the southern half of the Italian state, encompassing the southern section of the continental Italian Peninsula and the two major islands of Sicily and Sardinia, in addition to a large number of minor islands...
policies to modernise southern Italy and attack the Mafia
Mafia
The Mafia is a criminal syndicate that emerged in the mid-nineteenth century in Sicily, Italy. It is a loose association of criminal groups that share a common organizational structure and code of conduct, and whose common enterprise is protection racketeering...
- 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
Agip
Agip is an Italian automotive gasoline and diesel retailer established in 1926. It is a subsidiary of the multinational petroleum company Eni.In 2003, Eni S.p.A...
.
The Great Depression
The worldwide depressionGreat Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
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
Credito Italiano
Credito Italiano it was an Italian bank, now part of UniCredit Group. It was absorbed by Unicredit in 1998.Founded on April 28 1870 in Genoa as Banca di Genova, it took part in the establishment of Banco d'Italia and...
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
Gio. Ansaldo & C.
Ansaldo was one of Italy's oldest and most important engineering companies, existing for 140 years from 1853 to 1993.-From foundation to World War I:...
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
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
any company..
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.
After the Depression
As Mussolini's ambitions grew domestic policy was subsumed by foreign policy, especially the push for autarkyAutarky
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
after the 1935 invasion of Abyssinia
Second Italo-Abyssinian War
The Second Italo–Abyssinian War was a colonial war that started in October 1935 and ended in May 1936. The war was fought between the armed forces of the Kingdom of Italy and the armed forces of the Ethiopian Empire...
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 slump 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
Spanish Civil War
The Spanish Civil WarAlso known as The Crusade among Nationalists, the Fourth Carlist War among Carlists, and The Rebellion or Uprising among Republicans. was a major conflict fought in Spain from 17 July 1936 to 1 April 1939...
, 1936-1939, as well as the Italy-Albania war, 1939) meant little stockpiling for the much greater conflict ahead (the Second World War
Military history of Italy during World War II
During World War II , the Kingdom of Italy had a varied and tumultuous military history. Defeated in Greece, France, East Africa and North Africa, the Italian invasion of British Somaliland was one of the only successful Italian campaigns of World War II accomplished without German support.In...
, 1940-1945 in the Kingdom of Italy
Kingdom of Italy (1861–1946)
The Kingdom of Italy was a state forged in 1861 by the unification of Italy under the influence of the Kingdom of Sardinia, which was its legal predecessor state...
).