Stability of the Lira – Internal and Foreign Gold Prices -Cost of Living – Rents – Compulsory Arbitration – Taxation

«The Economist», 13 agosto 1927, p. 289

Turin, August 4

The policy of the revaluation of the lira seems to have come to a halt. An official statement by the Finance Minister, followed by a more emphatic declaration from the Prime Minister, gave the assurance that the pound sterling exchange price will be “indefinitely” maintained in the neighbourhood of 90 lire. Industrial, agricultural and commercial circles would have perhaps preferred “definitely” or “permanently” to such a non-committal word as “indefinitely”; but they are nevertheless thankful for the maintenance of the 90 lire level in place of previous fluctuations and the fear of a continuous rise in the price of the lira with a consequent fall in wholesale prices.

In consequence of the pegging of the lira to the 90 lire level, gold prices, which were rising in Italy, much to the discomfort of the exporters, to a level higher than in foreign countries, experienced a setback in July. Owing to a slight rise in some gold countries and the combined results of the stabilisation of the lira and the continuous decreases of the paper-prices level the adverse gap which began in March is at present rapidly disappearing.

The cost of living is decreasing less rapidly than wholesale prices. From August, 1926, to June, 1927, the internally consumed goods’ paper prices have diminished from 611.4 to 488.7, i.e., by 20 per cent. Probably the July index number will mark a more substantial decline in the cost of living owing to the drastic measures taken towards lowering the rents of houses. What may be called a universal system of rent fixing for old and new houses has been inaugurated. All rents of houses and apartments up to five rooms (kitchen, bath, entrance, &c, to be counted as one) must be lowered to four times the pre-war level; all rents of house and apartments from six to eight rooms must be reduced by 10 per cent. No rent even of sumptuous houses can be raised above the present level. Recalcitrant house owners can be, by administrative decision, sent to forced domicile (confino) or admonished. It is perhaps difficult for Britishers, who are protected by habeas corpus, to understand exactly what are the penalties of confino and of admonition. These mean that persons, who are not guilty of misdemeanour or crime punishable by ordinary judges, can, by an administrative body, be deemed men unfit for usual social intercourse, and as such can be sent to some distant place, usually to some small island around Sicily, for a term of two, three, or even five years. When not sent to forced domicile, people held as unfit can be admonished, and then they cannot leave their residence without authorisation of the police and must not be out of their houses between sundown and sunrise. In several cases such a penalty, which was heretofore limited to habitual criminals and recently to political offenders, was extended to house owners deemed guilty of exacting exorbitant rentals from their tenant.

The revaluation of the lira has given origin also to the first case of compulsory arbitration. Raw rice, which in the past year was quoted at 1,260 lire per ton, and in March last at 1,200 lire, fell in June to 900, and even 750 later. After fruitless endeavours to secure reduction of wages by common consent, the National Fascist confederation of agriculturists (employers), called the National confederation of Fascist syndicates (employees) before the Court of Appeal of Rome, requesting that wages for the July campaign should be reduced from 17.10-19.50 lire per day to 14 lire. This was the first time in which the law for the prevention of conflicts between capital and labour was put into motion, and the award was awaited with great interest all over the country. The Court, however, recognising that there had been a severe reduction of prices, granted only a reduction of wages of 0.60 lire. The employees’ federation claims to have offered the same reduction during the conciliation stage. While employers’ counsels emphasised the argument of the non-capacity of agriculture to bear the burden of existing wages, the employees’ side was very strong on the necessity that the cost of living should first decline before wages can be reduced. As a result the Court, however non-committal to an exclusive principle, gave judgment mainly on the cost-of-living basis. The decision will be compulsory for all employers and employees in that stage of rice cultivation which is called the monda, or destruction of bad vegetation.

In the Cabinet Council of August 1st several important tax reductions were decided upon for a total amount of 1,135 millions lire: 550 millions of taxes on incomes proper, 385 of taxes on transfer of goods and property, and 200 millions on railways freights, post and telegraph prices. Among the most important tax reductions may be mentioned the decrease from 10 to 7.5 per cent, of the rate of the tax on house incomes, and the increase from 25 to 33.33 per cent, of the grant for expenses on the gross rental of houses; the decrease from 10 to 7.5 per cent, of the tax on income of landowners, and from 10 to 5, from 5 to 2.5, and from 16 to 8 per cent, of the income of the farming industry for cultivating landowners, metayers, and tenant farmers respectively.