Mussolini and the Economy

State of Italian Economy by 1940

State Intervention in the Economy

Autarky

Rearmament

Empire

Autarky was central by 1935

Increased welfare costs / reliant on Germany

To become a totalitarian state, like Mussolini wanted, the state needed total control over the state.

• Mussolini didn't achieve this
• The ownership of successful businesses remained with businessmen and not Mussolini
• The IRI did mark a major extension in state ownership of the economy, but it only really helped troubled industries (it meant the state had control over more industry than any other country other than the USSR

The Corporate State = Lower state control over the economy

• Because employers gained more control as unions were weakened.

But state intervention did hugely increase, but not too much as he feared big businessmen turning on him

It was driven by efforts from Mussolini to take Italy into war, and just his foreign policy in general.

•The invasion of Ethiopoia (Abyssinian) led to sanctions and therefore imports of strategic raw materials were cut off

•This sanction was imposed by the League of Nations, who normally don't get involved

The sanction of raw materials meant that Mussolini had no choice but to try and increase autarky despite leading to costs elsewhere.

•AUTARKY WAS NOW CRUCIAL!

Not only did military costs increase, so did welfare

•1930 - 1.5billion lira

•1940 - 6.4billion lira

•This was more than 20% of government spending

Over half of government spending was on Military+Welfare

In addition to this there were huge costs on bureaucracy

•organisations were set up packing these posts with party members and people with pointless jobs

•it did reward their supporters

•but it was a very expensive way of keeping people happy and it resulted in uncessary costs and an inefficiency in the system

High costs = DEPENDANT ON GERMANY

25% of Italian exports, especially agricultural produce were going to Germany

•Large numbers of Italian workers worked in Germany

Ger,amy supplied Italy with:

•Coal

•Machinery

•Manufactured Goods

People feared that Italy had become the inferior party here, and that they were mearly a supplier of Germany

The Italian economy was under a massive strain because of autarky, meaning it wasn't ready to fight a war in 1940

Fixing the Economy

Rearmament = Bad effect on balance of payments

Rearmament and Military Expansion = Economic Strain

The impact of the GREAT DEPRESSION on the ITALIAN ECONOMY

Instead of producing goods that would increase exports further, businesses focused on the profitable industry of rearmament

• They stopped producing silk, leather, cotton because they could make more money from machine guns

• Olivetti, a famous typewriter firm, started to produce machine guns as well as typewriters

Yes, it was a profitable industry that provided jobs. However, it had a harmful effect on Italy's balance of payments

Annual spending on military was 15billion lira (over 30% of public spending)

•This was during the Ethiopian (Abyssinian) invasion which didn't really produce any benefits to Italy

During the Spanish intervention government spending increased to 30billion lira

And it increased by 1940 to almost 60billion lira per year, mainly because of rearmament and stress on autarky

Because spending was so high, this meant that Mussolini couldn't keep the lira at the high valuation which was set by the Battle for Lira in 1927 (90lira : £1)

•So in October 1936 they devalued the lira by 40%

•Resulted in sharp inflation

1925 - Time to introduce Fascist Policy

What problems did he face?

2 major problems:

• Dualism (gap between North and the South)
• Post War Crisis (danger of runaway inflation and a breakdown of industrial relations)

De Stefani was sacked as he was never going to implement Fascist policies

• In came a pro-fascist businessman COUNT GIUSEPPE VOLPI
• In addition, he hired ALFRED ROCCO, tasked with setting up the Corporate State

Great Depression for the World, which Italy did not escape.

• Car production fell 50%
• Unemployment rose up to 2million by 1933

But he was LUCKY as he came into power as the world economy was revovering, world trade was picking up and signs suggested Italy were near a boom.

• Showed by the fact exports in cars, textiles and agriculture produce doubled from 1922-25

Solving the Problems

He didn't start an economic revolution, he continued with free-trade economics that was helping get Italy out of the post war crisis

Effect wasn't as bad as other countries

APPOINTED ALBERTO DE STEFANI

• Credible, respectable, free-market economist
• This showed people he wasn't going to be radical

De Stefani was a SUCCESS from 1922-25

• Successfully balanced the budget deficit
• Lowered taxes
• Privitisied telephone industry
• Limited government spending (helping control inflation

Bailed out the banks

Banks were struggling and weren't getting repayment on loans, so the Italian Government stepped in and effectively "bailed out" the banks

They didn't adopt "laissez-faire" policies like the USA and the rest of Europe so they:

Introduced public work schemes

• Building motorways / HEP
• This increased employment opportunities

This increased circulation in the economy, stimulating demand and creating more jobs.

IRI Impact

Institute for Industrial Reconstruction in January 1933

• IRI brought up shares
• IRI lent money to industries to keep them working

Originally a temporary measure,saving industries during the depression and selling the shares when they improved.

• By 1940 the IRI controlled numerous industrial enterprises
• The firms controlled by the IRI remained technically in the public sector, they were really owned by the state
• Fascist propaganda made it seem part of the Corporate State but the people who ran the IRI were able managers with direct industrial experience, not inefficient party bureaucrats who mismanaged the corporations

Ignoring the "old problems"

Mussolini never really tackled the problem of dualism (north / south differences) as he become obssessed with the coroporate state and autarky. He would only ever think about this problem if it became an obstacle to autarky or to his main aims. Other problems he ignored are:

• Rural Poverty
• Industrial Underdevelopment
• Illiteracy

Economic Impact on AGRICULTURE

Battle for Grain + Battle for Land

Mussolini and the Economy

Mussolini and the Economy

Living Standards:

• Heavier wage cuts than industrial workers
• Around 200,000 escaped this by emigrating to the USA each year
• Many also moved into the city
• Mussolini wanted people to move OUT of the city, thus why he tried these propaganda schems of battle for grai and land
• But his policies benefited landowners more than small farmers
• Majority of poverty stricken people lived in the South

Overview:

• Fixing the Economy
• Establishing the Corporate State
• Economic Battles
• Great Depression Impact on the Economy
• Autarky Policy
• State of the Italian Economy by 1940
• Living Standards under the Corporate State

Corporate State

Mussolini's Economic Battles

What was the Corporate State

Every industry would be part of a Fascist-led corporation that would sort out disputes between workers and management, and help to organize production, pay and conditions

Corporations would be set up for each industry and within each corporation the employers and fascist unions would represent the workers.

• If employers and unions couldn't agree on a dispute then the issue would go to the Ministry of Corportations.

EVALUATING THE CORPORATE STATE

Development of the Corporate state was slow and confusing.

• What was intended never really materialized.

MUSSOLINI'S ECONOMIC AIMS

Aims of the Corporate State

ALSO

• Solve problems of class conflict / industrial upset (every Italian citizen was equal)
• Increase state intervention in the economy

Bring the nations together, by bringing employers and employees together to cooperate to maximize production for the good of the nations

• No industrial disputes getting the way
• No strikes getting in the way (banned in syndical law 1926)
• Combing best parts of SOCIALISM and CAPITALISM to create a "third way"

Success?

• Admired abroad
• Original aim, to prevent strieks and industrial unrest was achieved
• Mussolini won the backing of big business and strengthened his regime.

FAILURE?

• Never had real power over the economy, easily bypassed by big business
• It was only a trick to take away power of the unions and allow the bosses and state to exploit workers, thus, wages driven down

Reality of the Corporate State

Why did he have these battles?

• To put his ideology into practice
• Aims weren't just economic, but part of the drive to transform Italian society
• Exercises of propaganda, trying to maximize popular support for the regime

How did the Fascist Syndicates (Trade Unions,) The Employers and the Employees want this to work out

Industrialists were allowed to keep there own non-Fascist employers organizations and therefore pretty much ignored the corporations. Meaning regulations from corporations were only advisory and employers kept there true power

Workers were unable to choose their own representatives in the corporations

• They instead had fascist nominees forced on them
• These fascist officials would ALWAYS side with the employers representatives over key issues, with the exceptions of sick workers pay and paid national holiday went in the favour of employees

The corporate revolution never really happened, conflict between employer and employee was never really solved (although it was suppressed) and the corporaions never achieved the pivotal role Mussolini wanted.

FASCIST UNIONS:

• Wanted to be able to dominate employers to help benefit themselves and employees

EMPLOYERS

• Were nervous of the unions, wanted them to be limited

POLITICIANS

• Wanted it to work well

WORKERS

• Wanted a rise in the standard of living, and Italy to be a better nation

Even though the corporations and chamber of fasces replaced parliament in 1939, this was irrelevant as it was just one pointless organization replacing another

What was involved in Corporatism

• Early on, it was just to make his position secure
• Later on, it was more radical, setting up the Corporate State and striving for Autarky

How did the Corporate State work out

1. Old ideas of economic co-operation

2. Fascist officials organizing production to create a fairer society

3. Conservative, Nationalist ideas to increase national production by combining workers and employers

4. Employers using the corporations to control workers and safeguard their own interests

5. Mussolini looking for international success and providing secure bureaucracy jobs for his supporters

Setting it up

Fascist Unions were weakened not strengthened by the corporate state as Mussolini didn't want to offended big businesses.

The Confindustria dislike all kinds of trade unions and were determined to ensure businessmen kept control of the industries

Bottai wanted little role for unions and wanted to see corporations dominated by a partnership of employers

3 years after the creation of the Ministry of Corporations claimed success.

• Corporate State was ushering in a new economic era and had removed all class conflict in industry
• By 1934 there were 22 corporations covering nearly every aspect of the economy

Surely a success????

1922-25 the driving force behind it was EDMONDO ROSSINI, but he wanted it to benefit the Trade Unions the most as he was a Fascist Syndicate

Battle for land

It was created in 2 parts:

• Weakening of the Unions
• Creation of the Corporate State

Battle for Grain

But the major milestone was in 1926 when Alfred Rocco brought in the Rocco law (Syndical law) which set up the structure of the Corporate State.

Who represented who?

Aim:

• Massive land reclamation project launched in 1928
• Intended to make new land available to carry out the battle for grain
• Designed to impress the outside
• Drain the marshlands to conquer malaria and improve health
• Provide Jobs

Employers represented themselves

Workers were represented by Fascist syndicates, i.e. Fascist officials

AIMS:

• Strong emphasis on autarky and making Italy less reliant on imports
• This battle would mean more grain produced in Italy, and therefore less imports of grain related products
• "Free Italy from the slavery of foreign bread" and therefore make Italy more dependable for war

Basic Concept:

• Drained the marshes, in order to build more land

Weaknesses of this?

• Representation within the corporations was unbalanced
• Powers subordinate to Mussolini, the corporations just discussed issues while Mussolini made the real decisions

Mussolini was CAUTIOUS

Setting it up:

• Stage 1 = WEAKENING OF THE UNIONS

Some say he never took the system seriously apart from the propaganda purposes

He was more concerned with not being annoying the elites

So the CS became an instrument for exploitation of workers by employers, a sham.

The slow, lethargic way in which it was implemented showed his caution

1. 1925 Palazzo Vidoni Pact = Brought unions under fascist control, strengthening position of the employer

2. 1926 Syndical / Rocco Law - Banned strikes and provided cooperation between workers syndicate and employers (Major Step)

3. 1926 Ministry of Coorperations - Set up to deal with disputes, limiting union power

4. 1928 Rossoni's national syndicalist organisation was split up into 6 smaller organisations (fascist unions basically collapsed)

ACTION:

• Laws passed in 1923, 28, 33 on reclamation, extending previous schemes
• Private landowners encourages to co-operate with drainage schemes

• 13 new towns built, many located in the reclaimed area from the pontine marshes
• There was also a town called "Mussolini" built in Sicily
• And another built by Mussolini's home town called Predappio

Setting it up:

• Stage 2: Creation of the Corporate State

RESULTS:

• Pontine marshes near Rome were drained, and because the new cities were mainly by Rome it was easy to show tourists
• New towns - Latina - created as showpieces
• 3/4 of land reclaimed was in the north (not solving dualism!)
• Only claimed 80,000 hectares which was 58% of the reclamation projects and about 1/3 irrigation schemes were completed
• Largely successful in propaganda
• Jobs created, in a time of depression

1. 1927 Charter of Labour - Work was declared a Social Duty

2. 1929 - Bottai - Appointed leader of Ministry of Corporations "Only serious attempt to form Corporate State"

3. 1930 - Reform of CNC, Mussolini / Minister on top, then Civil Servants then Party Officials then reps from the corporations.

4. 1934 - 22 corporations of major economic sectors created

5. 1939 - Parliament replaced by Chamber of Fasces and Corporations

ACTIONS

• High tariffs put on imports for grain
• New marginal land used
• Government grants to farmers for fertilisers

RESULTS

• Wheat production increased sharply (more than 50%)
• Cereal production doubled from 1922-39
• People got behind the autarky policy, creating a buzz
• Other valuable export crops such as olives were neglected
• Still dependant on imports (In 1933 more than 500million tonnes were imported)

Battle for lira

Autarky

• Economic self-sufficiency, making Italy ready for war

Corporate State:

• Fascist led industries, striving towards making Italy into a world power

AIMS

• Halt inflation - which was harming the middle classes / ruining their savings
• Set the exchange ratre at £1 to 90 lira, (in 1926 it was £1 to 138 lira)
• Show the world the lira was a great currency

Autarky

Living Standards under the Corporate State

RESULTS

• Quota 90 achieved in December 1927
• Showed authority of the regime
• However, it harmed the economy by hitting exports (SPICED -> SLICED) as they were now more expensive abroad
• Caused serious deflation
• 20% wage cuts
• 1936 Government had to devalue the lira

ACTIONS

• Banks tightened controls on money suply
• Economy was deflated to drive up the value of the lira
• Mussolini's speech "The Fascist regime is ready to make the sacrifices needed, so that our lira, which itself as symbol of our nation, our wealth, our efforts, our strength, our sacrifices, our tears, our blood, is and will be defended.

"Economic Self-Sufficiency

Why did Mussolini want AUTARKY?

Limits of AUTARKY

Preparing for War

NATIONALISM : To make Italy great and not dependent on other nations

MILITARISM : To prepare Italy for war

Mussolini's aims in industrial policy

Key materials such as oil, coal and iron ore were still imported in large quantities by 1940

• Autarky was limited

The drive for autarky only worsened Italy's financial difficulties

• Expensive autarchic invenstments and military adventures in Spain and Ethiopia cost Italy LOTS
• HUGE government deficit created (paid for by increases in tax and drops in living standards)

Mussolini's economic policies weren't designed to increase the wealth of the country

• They were intended to prepare Italy for war!
• Italy must become self-sufficient and armament industries must be promoted

The Economic sanctions imposed by the LON after the invasion of Ethiopia in 1935 meant Italy could not really rely on imports.

So Mussolini encouraged industries such as steel, chemicals and shipbuilding by giving them large government contracts.

• Government controlled 80% of shipbuilding

If Italy could rely on ITSELF, lowering exports, then it was more prepared for war.

Economic recovery ended at the end of the twenties and from then on living standards for the majority of people got worse.

• Drive for autarky resulted in price rises
• Industry's had to cut wages because of the great depression
• Real wages fell by over 10% from 1925-38

To pay for the falls in living standards, they had to invest lots of money in WELFARE / LEISURE ACTIVITIES

The Dream

• For Italy to produce for itself all its major goods

But Mussolini new this was impossible

• "Total self-sufficiency is impossible, but we can make steps towards it"

To maintain and increase his power

To transform the Italian Economy

AUTARKY from 1935

Economic Battles1926-27

Corporate State from 1926

De Stefani and free-market economics 1922-25