Stock Exchange – Shipping Combine – Council of Corporations – Industry – Money

«The Economist», 5 dicembre 1931, pp. 1070-1071

Turin, November 23

The hopes which were entertained in some financial circles that the Banca Commerciale Italiana deal might mean support to the Bourses were soon disappointed, as the following figures show:

After a short-lived spurt, prices have lost ground in the past week; some sellers were caught short, and were made to pay the penalty of their daring; a few Chatillon shares brought as much as 400. The abolition of the compulsory payment of 25 per cent, cash on speculative transactions (still to be paid on short sales) did not succeed in bringing to life a dead market. Forced liquidations of securities by weak holders is partly prompted by a regulation forbidding savings banks from making advances on collateral other than State or public securities. Savings banks will be able, with the sums thus realised, to buy debentures of the new institute for industrial credit, thereby providing it with the means of absorbing the floating mass of variable dividend shares. The amount of this floating mass is very difficult indeed to estimate. Probably out of 50 billion lire of share capital of the Italian joint-stock companies about 35 are the capital of private companies and never come on the market. Of the other 15 billions, the greatest part is in the coffers of banks as investments or collateral. The creation of the new institute – of which Signor Tumedei, a prominent member of the Budget Committee of the House of Deputies, was appointed vice-president, means that from 3 to 5 millions of these shares will be transferred to it from the banks. The investing public, which since 1925 has shown an invincible distaste for shares, will be persuaded to buy, in their stead, fixed-interest debentures.

The crisis has induced the biggest shipping concerns to combine into a new company, called “Italia”, with a capital of 740 million lire, which, after the New Year, will run the fleets of the Navigazione Italiana and of the Lloyd Sabaudo. Each of these two will contribute 330 million lire, the rest of the capital being allocated to the Banca Commerciale group. The new company will control the Cosulich Line of Trieste, which, in its turn, will control the Lloyd Triestino, and, through it, the Sitmar and the Italiana di Servizi Marittimi. The Italia Company is authorised to issue 450 million lire of debentures, including 300 already extant and sold to the Istituto di Credito Navale, a semi-public body, which does for shipping concerns what the new Istituto Mobiliare Italiano will do for industries in general. As public works and public utilities are already financed by similar institutes, it looks as though the whole of Italian industry is gradually coming under the control of public institutes; that is to say, of the State, which will have its say in the choosing of directors and in the management of the companies. The tendency, however, should not be exaggerated. At the utmost, the direct or indirect public control of private industry will be limited to 15 out of 50 billions; there is a whole host of industrial and commercial concerns which are genuinely private, wholly outside the joint-stock companies’ world, and in agriculture the joint-stock system has certainly not been a success.

More interesting from the point of view of the speculations as to present economic tendencies in Italy were the discussions, closed on November 13 th, at the National Council of Corporations, the supreme consultative and partly legislative body of the corporative state. As Signor Bottai, Minister for Corporations, pointed out, the discussion marked the birth of a new sort of struggle between economic categories, which is taking the place of the old class warfare. It was a very guarded struggle between people promptly made to bow before Signor Mussolini’s authority; but agriculture unmistakably set its face against industry and commerce. The subject was tariffs, a subject to which the imposition of new British duties is likely to add fire. No free traders’ voices were heard; all university professors, with one solitary exception, preferring to serve as unbiassed experts. Strange to observe, agriculturists, who in past times were, except for wheat, free traders, went solidly in favour of protection, advocating a most extreme form of it, the so-called “balanced exports” system, a mercantilist revival in modern garb. Imports, they argued, should be subject to the condition that the importing country shall buy a corresponding amount of Italian goods. How the system could work; how, in a world of inter-dependent nations, separate balances could be struck in groups of isolated two nations, is difficult indeed to imagine. Agriculturists aiming at the exclusion of cereals and meat coming from countries like Argentina, United States, Yugoslavia, etc., whose purchases in Italy are small, hope to restrict in this way imports which to them are a nuisance. Industrialists, whose exports go to countries which could not possibly sell large quantities of goods to Italy, were greatly concerned at the prospect; and while, in the years immediately after the war, they were advocates of an inter-dependent double tariff system and bitter critics of the commercial treaty system, they now come forward as strenuous defenders of the most-favoured-nation clause. A motion was finally approved which sought to conciliate both tendencies, and recommended the appointment of a special reporting committee.

Economic indices are no better. In the first ten months of 1931 imports totalled 8,894 million lire, against 14,432 in the same period of 1930, and exports 8,236, against 10,109. The excess of imports over exports thus decreased from 4,328 million lire in 1930 to 1,658 in 1931; which is very good for the balance of payments, but not so good from the industrial point of view. Production of electricity decreased from 7,657,7 kw.h. in the first nine months of 1930 to 7,313.4 millions in the corresponding period of 1931. In the first ten months iron and steel production decreased respectively from 448,715 and 1,523,997 tons in 1930 to 425,812 and 1,229,982 tons in 1931. Cement and paper output also decreased. The most significant and almost solitary increase was in artificial silk from 22.6 million kg. to 25.5 millions. Goods carried on State railways decreased from 45.9 million tons in 1930 (ten months) to 37.6 in 1931, while goods shipped to and from Italian ports decreased from 30.1 to 27.4 million tons. Owing to the general decrease of industrial activity, unemployment is increasing: -799,744 (of which 226,000 were in receipt of benefit) at October 31th, against 446,496 at the same date in 1930. The October figure is a record for many years past. Even in the category of public works and building the figure is up, at 229,592, against 110,305 at the same date in 1930. This means that probably many public works which the State and other public bodies began for the sake of increasing employment, are being delayed for lack of funds.

The deficit in the State Budget during the first four months of the current financial year (July to October) is 1,099 millions, while the Treasury is in a very strong cash position with 2,574 million lire at October 31th, of which 2,309 were held in deposit at the Bank of Italy. This, in turn, is a consequence of our strong monetary policy. The note issue is not being allowed to increase, and to this end the Treasury are keeping a big deposit at the bank. Only by high taxation and postponement of public expenditures not absolutely urgent is it possible to keep 2,309 million lire of the Exchequer funds at the central bank, thus enabling it to face withdrawals of gold exchange bills reserve, keep internal discount and advances to a level corresponding to the needs of ordinary banks, and at the same time keep down the note issue at a level between 14 and 14.5 billion lire. Albeit achieved through great sacrifice, this stern monetary policy has been hitherto an unmistakable success.