Gold – Foreign Trade – Unemployment

«The Economist», 24 ottobre 1931, p. 759

Turin, October 19

Great prominence is given in the newspapers to the fact that 80 barrels of gold were landed on Friday at Genoa for delivery at the Bank of Italy, and that the proportion of gold reserves (exclusive of gold bills), which stood at 25.2 per cent, on December 31, 1927, just after the stabilisation decree, has increased continuously thereafter to the present level of 37.3 per cent. As the legal cover for notes in gold and gold bills is 40 per cent., we are, so the comments run, very near to having reached the legal requirements in gold alone. This would appear to mean that the final policy of the Bank of Italy would be to abandon the gold exchange standard in favour of a return to the full gold standard system. This should perhaps be regarded as a final stage, because at present foreign exchanges are strictly controlled and only “cash” foreign bills are sold. Forward coverings are thus barred, with no small discomfort to industry and trade.

Figures published this week of September foreign trade point to a favourable balance, imports being restricted to 839.2 million lire, against 1,272.6 millions in the corresponding month of last year, while exports decreased only from 901.5 millions in 1930 to 871 millions in 1931. This favourable balance of 31.8 million lire may be exceptional, but it is a symptom of a tendency. In the first nine months imports decreased from 13,066.2 million lire in 1930 to 9,106.5 millions in 1931, while exports decreased only from 9,048.7 millions to 7,405.4 millions, so that the import excess decreased from 4,022.5 millions to 1,701.1 millions. What is the true significance of this sharp contraction of foreign trade, and what will be its future consequences, is not so easy to see. Reductions from 31,451 tons in the first half of 1930 to 22,714 tons in the same period of 1931 in the imports of raw jute, from 128,140 to 95,009 tons of raw cotton, from 31,339 to 26,892 tons of wool, from 521,062 to 284,698 tons of broken iron, from 92,565 to 48,979 tons of pig iron, from 61,376 to 34,217 tons of iron and steel, from 5,375,899 to 4,605,593 tons of coal, from 95,012 to 87,951 tons of cellulose, not fully compensated by some increases such as from 329,555 to 433,694 tons of mineral oils derivates, or from 16,816 to 20,050 tons of hides, may well cause some misgivings as to the activity of Italian industry. But from a monetary point of view they point to an easy situation; so much the more as it is prognosticated that the balance of international payments, including invisible items, will close with a favourable surplus. Pilgrimages, most famous of all that of St. Anthony of Padua, which had been suspended when Church and State were at loggerheads about the Catholic Action, were restarted once peace was restored, and they are bringing money into Italy.

That industrial activity is on the down-grade is indicated by the unemployment figures. In 1930 unemployed were 394,630 at the end of September, reaching 642,169 only at the end of December, and rising to a maximum of 765,325 at the end of February, 1931. After a short-lived decrease to a minimum of 573,593 at the end of June, we are again up with a figure of 757,764 at the end of September. As the subsidy period is generally 90 (in some cases 120) days, the number of unemployed on the subsidy list is only 234,000. To provide for the others a big drive has to be made on public charity, with large subscriptions coming from employers, public bodies, employees and workers on the pay roll.

The limitation of the Bourses to cash transactions has reduced business to a dwindling fraction. In the first week of October transactions in securities reached only 3.5 million lire daily, which is a decrease of 80.5 per cent, on the same week of the past year, and of 96 per cent, on the maximum turnover reached in the third week of May, 1928. Quotations are lifeless but quiet, which is, perhaps, the utmost we can expect.