Gold Standard – New Tariff Powers – Shrinking Trade

«The Economist», 20 maggio 1933, p. 1076

Turin, May 7

The immediate effects of the dollar crisis in Italy were that Stock Exchange operators, who after September 20, 1931, hoped or thought that the lira would follow the pound sterling, at the legal parity of 93 to 1, hoped or thought now that the lira would remain linked to the dollar at the parity of 19 to 1. There was a certain apparent foundation to their surmise, because in one of the decrees concerning stabilisation the parity of 19 to 1 was stated as the basis for the fixation of the gold points between which the Bank of Italy was bound to sell foreign exchanges. A short-lived boomlet was therefore staged on this slight foundation. The Borsa number index of variable dividend securities, which had fallen from 108.20 in the fifth week of the year to 100.32 in the fifteenth, rose to 101.72 in the sixteenth and to 103.82 in the seventeenth week (from April 24th to April 29th), continuing to go up until Thursday, May 4. But it was soon apparent that Governement declined to be drawn into the inflationist policy. Authoritative statements explained that the 19 to 1 parity was subordinated to the major principle that the lira was equivalent to a certain fixed weight of gold, and that no intention was entertained of departing from the principle. A flood of sales appeared on Friday, the week closing weaker.

The communique on the results of the conversations between President Roosevelt and the Italian Finance Minister, Signor Jung, differs from the Roosevelt-MacDonald announcement mainly in a variation of emphasis. The Italo-American announcement says that both statesmen “think it necessary to re-establish a fixed measure of the value of money in the world, the said measure being gold”. The statement is interpreted by the Press here as a declaration that Italy will maintain the gold standard at the present parity. Less emphasis is put in the Italo-American than the Anglo-American statement on the necessity of an increase in the general level of commodity prices, and more on public works as a means to cure unemployment. The silver problem seems not even to have been discussed.

Of greater importance, in view of what is perhaps the more urgent task of the Conference, is a decree published in the Official Gazette of May 4^th, which authorises the Government to increase Customs duties. In cases of goods coming from countries which put special or differential duties against Italian goods or otherwise restrict Italian imports or payment of them, the Government may decree a countervailing duty up to 50 per cent, of the general and ad valorem existing duties. If goods are now duty-free, the countervailing duty shall be 25 per cent, ad valorem. In case of countries with which no commercial treaty exists, the general duties, including ad valorem duties, shall be increased by 20 per cent, for raw materials, 30 per cent, for foods, live animals and half-finished goods, and 40 per cent, for finished goods. Free goods will be taxed with a 20 per cent, ad valorem duty. Special exemptions can be granted in general or within stated quotas.

Even before these enactments Italian foreign trade was still shrinking. The excess of imports over exports in the first quarter of 1933 is only 429 million lire, against 526.2 millions in the same quarter of 1932, which was in its turn less than in the prosperity years from 1922 to 1925, when the yearly excess was from 4 to 5 billion lire. But the reduction is the result of a contraction of international trade, imports going down from 2,205 to 1,931.8 million lire and exports from 1,678.9 to 1,502.8 million lire between the first quarter of 1932 and 1933. Internal trade is likewise shrinking. The deficit in the State Railways will not exceed 650 million lire, against 198 million lire in 1931-32 and 10 millions surplus in 1930-31 (or, as was corrected for strict comparability’s sake by Professor Repaci in the last issue of La Riforma Sociale, against a 475 million lire deficit in 1932-33). The electrification of the railways is being carried out, and from the present 2,240 kilometres is designed to cover eventually 6,605 kilometres, or 41 per cent, of the total railway mileage, with 60 per cent, of the total traffic. In the meantime lesser lines are dismantled. The suppression of 512 kilometres of extra-urban tramways lines has been decided on in the past four years, and another 191 kilometres further will shortly give way to the motor services.