Public Finance – Stock Exchange – Cartellisation

«The Economist», 23 gennaio 1932, pp. 174-175

Turin, January 18

Last week the attention of the public was focussed on the articles inspired, or rather written, by Signor Mussolini in his “personal” newspaper II Popolo d’ltalia. The general optimism diffused by the policy of cancellation of German reparations and inter-Allied debts had the effect of throwing into relief such unfavourable facts as are daily disclosed by official statistics or statements. The last Cabinet Council, for instance, fixed at 20,059.9 million lire the public expenditure for 1932-33, which is 736.2 millions higher than the original estimates for 1931-32. As supplementary variations have increased these 1931-32 estimates from 19,323.7 to 21,120.9 million lire, and these, in their turn, are exceeded in fact, it is to be feared that the new estimates for 1932-33 will prove insufficient. On the other hand, the revenue estimates for 1932-33 are put at 18,647.2 million lire, which is 252.3 millions lower than the original 18,899.5 million lire and 1,525.5 millions lower than the revised 20,172.7 million lire estimates for 1931-32. How the resulting deficit of 1,412.7 million lire will be provided for is not stated; the official communiqué is content to state that before June 30, 1933, means will be found, according to the changing general situation, to balance the Budget. Hopes are abroad that the situation will change for the better and that no further drastic cuts in the salaries of public servants or other turns of the financial screw will be necessary.

The increase of unemployment almost to the million mark – 972,321 at December 31, 1931, against 878,267 at the end of November and 642,169 on the last day of 1930 – failed to shake the newly-born optimism. It is, indeed, an optimism on a slender basis. Bank of Italy shares, which at January 9th were as low as 1,381 lire, closed on January 16th at 1,430; Monte Amiata (quicksilver) rose from 50 to 69; Fiat from 130 to 145; Edison (electricity) from 440 to 483; Beni Stabili (real estate) from 560 to 573. There are significant exceptions, mainly in shipping; the Cosulich (Trieste) Company sank further from 56 to 49, the General Navigation Company from 230 to 224. The public is absent from the market; or rather is devoted to fixed interest securities; for instance, 5 per cent. State nine-year bonds are as high as 101.40, and the 6 per cent, mortgage bonds of the Milan Savings Bank are also above par at 509.50. If a reaction occurs, it will not beget havoc, as nothing savouring of a boom has happened. Recent figures published by the Joint Stock Companies Association show that during 1931 reductions of capital (from winding-up, losses, devaluations) amounted to 5,760.3 million lire, thus exceeding investments, which totalled only 4,332.4 million lire. The total capitalisation of joint-stock companies thus decreased during the year from 52,280.8 to 50,852.9 million lire.

The Corporative system is being more and more utilised for purposes of industrial cartellisation .The National Rice Institute, which began its life on October 13, 1931, sold 100,000 tons of rice at an average price 200 lire per ton higher than the 450-480 lire quotations of August last. The General Confederations of Industry and Commerce have ratified the pact between machinery producers’ and merchants’ associations for the regulation of sales of industrial and agricultural machinery. The interesting point is that conditions of sale are now the result, not of free bargains between the interested parties, but of decisions of semi-public bodies. An even more important step in this direction was made by a legislative decree which gives authority to the Minister for Corporations to create compulsory consortiums between industrialists in the iron and steel industry aimed at the regulation of the production and sale of their products. A syndicate in this field was formed in August, 1929, but dissolved on December 31, 1931, owing to the opposition of what is described as a small minority representing 2 per cent, of the total production. After the publication of the Minister’s decree, the General Confederation of industry is to convene a general meeting of all industrialists in this branch of production. The meeting is to be deemed valid if two-third of members representing four-fifths of total production are present, either personally or by proxies. The meeting will discuss regulations of the consortium; which, if unanimously voted, will become immediately operative. If unanimity is not forthcoming, the President of the General Confederation of Industry will decide finally and without appeal. The life of the compulsory consortium will be limited to September 30, 1932. It is hoped that, before that date, the industry will be reorganised. The problem is the usual one of excessive production and capitalisation, of too numerous firms, of high costs fostered by very high protection. Except during the war period, the iron and steel industry has hitherto led a chequered life, mainly at the expense of taxpayers and consumers. To lift the industry to higher productive plan, without new sacrifices for taxpayers and consumers, would be, indeed, a great feat. Meanwhile, the corporative system is being carried to its logical conclusion. Its action cannot be limited to the regulation of wages and other relations between employers and employees; it is perforce being extended to the regulation of prices, production and distribution. Wages are only one factor in the general economic equilibrium; and their public regulation implies a regulation of all other factors.