The Corporative State and its Cost – Labour Agreements -Tax Changes – Sinking Fund – International Trade -Industrial Dividends

«The Economist», 14 giugno 1930, pp. 1330-1331

Turin, May 19

Even apart from international events, the last few weeks have been full of important political and economic developments. The inauguration of the National Council of Corporations is the crowning of the new corporative State. Signor Mussolini rightly stated that schedule 12 of the law creating the Council meant nothing short of an economic revolution; because the new body is empowered, if such questions are referred to it by agreement of the associations concerned, to legislate on prices, on quantity to be produced and all other possible points concerning industry. The network of syndicalism appears to be now complete. On March 1, 1930, there were in existence six employers’ confederations (industry, agriculture, commerce, land transport, sea and air transport, banking) with 661 subordinate associations; 6 corresponding employees’ confederations with 3,549 subordinate associations. The cost of this extensive structure is estimated in the report for 1930-31 of the Budget Committee of the Chamber, as follows 25.5 million lire paid to the Corporations Department for general purposes; 24.1 million lire to be paid into a fund guaranteeing the observance of collective contracts entered into by syndicates; 20.5 millions to be paid to the after-work, Balilla, care of mothers and infants, anti-tuberculosis and other social funds; 67.3 millions to the central confederations; 118.1 millions to the regional, provincial and local syndicates and federations. This sum of 255.6 million lire includes only compulsory contributions paid by employers and employees whether they are or are not members of the associations, and consists therefore of true public taxes, of which account is taken in a sort of appendix to the State budget. To this sum there must be added the volontary contributions paid by members of associations. As these are deemed to be a private matter, no account of them is published.

The Budget Committee report observes that, as a set-off, Italy has saved the cost of strikes and lock-outs, which in the last four years of the old régime caused the loss of 53 million days’ work in the two years 1919 and 1920, and 15 millions in 1921 and 1922. The strike epidemic was subsiding; but the new legislation put a stop to it altogether. Between January 1, 1929, and January 31, 1930, there were concluded 1,238 local and single shop labour agreements; and between April 8, 1926, and March 10, 1930, there were registered 199 inter-provincial and national labour agreements. As syndicates and associations are public bodies, it can be said that today conditions of labour are almost completely regulated by public authorities.

A succession of changes in taxation has kept the publie keenly interested. The octroi or internal customs barriers which encircled almost all medium and great Italian cities have been abolished. The reform was welcomed because internal barriers obstructed commerce, and sometimes created protected territories of grotesque smallness. As, however, somebody must pay the piper, wine and meat were subjected to a general consumption tax. Wine, for instance, previously paid little in the country and small towns, and was substantially hit only in octroi cities. Now all consumers must pay, whether they reside in the country or the cities. Unfortunately, the wine industry is suffering at present from low prices and sales difficulties.

In consequence of this programme for the reform of local taxation and the redemption of land and other public works, stamp duties have been increased and succession duty reintroduced. Succession duty was abolished in 1923 in the family group, between parents and sons, ascendants and descendants in general, husband and wife, brothers and sisters, uncles and nephews, descendants of brothers and sisters if they succeed by right of representation. The tax is now re-established in full, at rates intermediate between those of 1914 and 1923, but estates passing between parents and sons, or husband and wife, in families where there are or have been at least two sons, are exempt.

The most recent decree concerning taxation enforced an all-round increase of about 20 per cent, in the price of tobacco sold by the State monopoly. The increase is estimated to yield 500 million lire yearly, which will be paid into the Debt Sinking Fund. This fund was created by a decree of August 5, 1927; and was made to rely mainly on budget surpluses. But, as budget surpluses, in our system of accounting, are not synonymous with hard cash, the old fund made little headway. The new Sinking Fund will be presided over by the Governor of the Bank of Italy, and will have a special administration. The yield of the increase in the price of tobacco will be paid at once into a current account at the Bank of Italy, so as to insure the prompt purchase in the market and cancellation of public debt certificates. Only Consols can be purchased and cancelled.

The practical working of this excellent plan is conditional on prevention of any increase in the total State debt. According to the last published Treasury account, the total of internal public debt increased from 87,124 million lire at June 30, 1929, to 88.026 million at March 31, 1930. If the new sinking fund is to be effective, the grand total of public debt must be lowered.

Statistics of international trade show a big decrease in the passive balance. In 1929 imports were only 21,300 million lire, against 21,920 in 1928. As exports increased from 14,559 to 14,889 million, the excess of imports over exports decreased from 7,361 to 6,411 million. The change has been accentuated in the first four months of 1930, when imports totalled 6,078 million, against 7,723 million in the corresponding period of 1929; and exports 4,139 million, against 4,665 million; so that the excess diminished from 3,058 to 1,939 million lire. It is doubtful, however, if the decrease in imports is wholly to the advantage of the country. It may, indeed, readily be granted that a decrease of 1,237 million lire in the wheat imports in against 1928, and of 389 million lire in the first three months of against the corresponding period of 1929, is a net gain; but what of the decrease in the imports of raw materials of industry?

Complaints of bad trade are the loudest in the textile industry. The silk industry carries large stocks, which it has not been possible to sell, as usual, in the United States. The cotton and wool trades complain of sales difficulties in the Levant, the Far East and South America. Directors of joint stock companies, who, in fixing dividends, are more under the influence of prospects for the current year than of results achieved in the past year, to which dividends refer, are in a prudent mood. Out of 130 companies, dividends for 1928 (fixed in 1929) were unchanged as against the preceding year in 64 cases, increased in 55 and decreased in 11 cases only. Out of 135 companies, dividends for 1929 are now unchanged in 79 cases, increased in 31 and decreased in 25 cases. This prudent dividend policy checked the tendency toward better quotation of securities in Stock Exchange. Perhaps the announcement today of a new lowering of the official rate of discount from 6 to 5.50 per cent, can be viewed as a consequence of abundance of money. Discounts at the Bank of Italy were low, because ordinary banks did not need to rediscount, and first-rate customers obtained accommodation at less than the official rate.