Mussolini’s Policy – Population and the Lira – Stock Exchanges -Readjusting the Price Level – The Campaign for Reduction of Prices

«The Economist», 11 giugno 1927, pp. 1236-1237

Turin, June 1

From the economic point of view, Signor Mussolini’s speech in the Chamber of Deputies, May 26th, is noteworthy for his strong utterances about the population problem and the lira policy. The tax on bachelors recently enacted was an index of the anti-Malthusian spirit of the Premier. The tax was not put for the sake of a yield of from 40 to 50 millions lire, it is intended to serve as a deterrent from individual egotism; if it should prove inefficient, a further tax on childless families is contemplated. The Premier wants for Italy a population of not less than 60 millions in 1950; the present 40 millions are too few in comparison with 90 million Germans, 200 million Slavs, 40 million Frenchmen, backed by 90 millions living in French colonies, 46 million Britishers, with their 450 million inhabitants of the Dominions and of the Colonies. Therefore, he is greatly concerned about the decreasing number of births. The birth-rate is still at 27 per 1,000 inhabitants, against 16.7 in Great Britain, 17 in Sweden, 18 in France, 21 in Denmark, 19 in Norway, 20 in Germany; but in some regions the rate is much lower than the national average, and in the great cities of Northern Italy is increasing only in respect of immigrants. The natural excess of births over deaths increased the population of Genoa only by 168 inhabitants in 1926, of Milan of 22, while the Turin population decreased by 538. Therefore, Signor Mussolini is much against the industrialisation of Rome; only healthy industries – i.e., those industries which are related to agriculture and sea – should be fostered; and he is not an enthusiast for the small agricultural property. Small proprietors, as the French experience shows, are fond of small families, and with “the two sons theory” it is not possible to start empires: Italy would, indeed, descend to the rank of a colony. How could 60 millions live in a country where life is difficult for the present 40 millions? Mussolini’s reply is that in 1815, when the Italian population was only 15 millions, it would have been deemed absurd that 40 millions could live with an immensely bettered standard of living.

The lira problem was discussed by the Premier in equally trenchant language. The pessimistic prophecies about the future of industry, the ruin of many concerns in consequence of the revaluation policy are, in his opinion, gross exaggerations. We must not compare the present level of 90 lire to the pound sterling with the maximum level of 150 lire reached in July and August, 1926, but with the average of the last four or five years, which was 120, or with the level existing at the date of the march on Rome, which was 105 to 110. The 10 or 15 points thus recovered are the very modest recognition of the progress from a huge State Budget deficit to a substantial surplus, of the end of paper inflation, and of a balanced account of international payments.

As to future monetary policy, the Premier has abstained from any binding statement: “On the 90 lire to the pound sterling level we shall remain during the period sufficient and necessary to the adaptation to the same level of all the economic forces”. But “shame to those economic factors which rapidly adapted themselves to the devaluation process when the lire was rapidly tumbling and today seem unable to keep pace with the slow improvement of the revaluation policy”. Economic circles interpreted these words to mean that the Government intends 1) to remain for a time at the 90-lire level, until costs, wages, prices, rents are adapted to it; 2) to proceed further to a lower level as soon as industry and trade are able to support its consequences.

The Stock Exchanges, which see in this policy a continuation for years of reduced dividends and perhaps of big losses, continue to be lifeless. Bachi’s general index of shares (basis 100=December, 1913) marks the following extremes: – Lowest: 70, May, 1915; highest: 137.9, June 1919, during the post-war boom; lowest: 70.75, political instability; highest: 183.05, February, 1925, at the epoch of companies promotions and flight from the lira; lowest: 104.5, December, 1926, after the Pesaro speech, credit restrictions and revaluation of the lira. Since December the index number has changed as follows: – 120.4, January, 1927; 130.1, February; 122.5, March; and 123, April. In May the figure will probably be notably lower.

As to trade and industry, the improvement of foreign exchanges and the decrease of paper-prices has put them in a state of suspense, which makes them not over-anxious to require from the banks increased circulating capital. For the first time after many years the internal level of gold prices has become higher than the external level. From the bulletins of the State Central Statistical Institute I quote the following indexes of gold prices (basis 1913=100):

The premium on exports resulting from the lower level of Italian gold prices had practically disappeared at the beginning of the present year; during the first three months internal and external prices were more or less in equilibrium; in April the internal level moved against Italy. Foreign trade statistics do not disclose as yet any evil consequences from this changed relation of the two levels of prices. Exports in the first three months of 1927 diminished by 80.2 millions lire, but as imports decreased by 436.4 millions lire the adverse commercial balance decreased for the same period from 2,601.7 to 2,245.4 millions lire.

A rearrangement, however, of internal costs of production is clearly due if Italian industry wishes to hold its hardly-won ground in foreign markets. Hence the campaign started by the Government, the corporations (employers’ and employees’ syndicates), and the Press for the reduction of salaries, wages, rents, and prices. The first step was made by the Government in announcing the abolition of the cost-of-living allowances for the higher classes of public employees, and a decrease for the lower classes. Syndicates representing industry, agriculture, and trade followed suit. House rents were diminished from 10 to 25 per cent., according to the proportional increases above the pre-war level. Retail traders were invited to reduce prices, and stringent measures, even exile to some small island, were threatened as penalties to offenders. In times of revaluation prices are bound to be reduced. What is highly interesting in the economic process of readjustment of prices which is going on at present in Italy is the dramatic intervention of the State, of other public bodies, of the newly organised public syndicates, and the united campaigning of the Press. Americans sometimes organise highly advertised drives on a gigantic scale toward a political or economic goal; but it is doubtful whether such a unified drive towards a lower level of costs or prices as is proceeding in Italy today has ever been organised anywhere.