AXIS WAR FINANCE; ITALY IN TROUBLE

Press, Volume LXXVIII, Issue 23747, 19 September 1942, Page 4

AXIS WAR FINANCE; ITALY IN TROUBLE

MUSSOLINI FIGHTS INFLATION

Italy is the first belligerent State in which the problem of finance has be come menacing. In Germal jy w . a H z ideology has always encouraged tne belief®that State indebtedness could increase to infinity without in the least incommoding the war effort And m Germany until now has happened to convince the bioad masses of the contrary. Although me Reich national debt has risen abov the peak reached in the first world war, Nazi Germany still seems to suffer no military embarrassment in consequence By the maintenance of castiroa control over the prices_of all prime necessities the worst effects of inflation have so far been avoided. Hitler himself has never been under any illusion about the peril. From the time of his advent to power he has gone on reiterating that he would never allow the reichsmark to depreciate. Nobody knew better than he how the ingrained fear of a second inflation is stirred up among the mass of the Germans whenever the mere thought arises that depreciation is again possible. So long as the prices of prime necessities can be Kept reasonably steady the rank and file ol the working people will nq doubt taxe Hitler at his word, But it is now being found necessary to, reassure those with longer memories and keener understandings.

Funk’s Solution Funk, the president of the Reichsbank, explained towards the end ot last year that, through the annexation of European Russia, Germany would be able after the war to liquidate her State debts very quickly. He proposed that Russian industrial plant and Russian farmlands should be sold ny the Reich to the German people, presumably in exchange for war bonds. This scheme must have seemed less attractive after the great Russian mill, tary recovery. In April he developed at Klagenfurth a variant of the plan. He declared that, once the war was over, German war debts would soon be liquidated, because victory would put Germany, in command of such abundance of cheap labour and raw materials —presumably from the occupied countries—that she would be able to manufacture at prices far below those on the world market, so that, by controlling her foreign trade, she would be able to undersell all competitors and still earn such huge profits that taxation of the margin would provide funds enough to pay off the debts quickly and buttress the reichsmark currency. ... Thus Funk admitted plainly that, even if the increase of State indebtedness did not hamper the German effort now, it would have to be reduced to manageable proportions immediately the war was over: and confessed that the only plan the Nazis had for doing this depended on their winning and so compelling all other European peoples to surrender all their belongings and work for wages low enough to enable German industry to undersell every competitor on the world market. Mussolini and the Lira It is more difficult for the Italian regime to bolster up confidence with such claims. The Fascist Government has been losing grip on the price level. As long ago as March Mussolini himself uttered an ominous warning on the imminence of Inflation. After his return from the Salzburg conference, where he learned that the war might go on indefinitely, he summoned a council of Ministers to pass a multitude of belated emergency measures to cope with disintegration on the home front; and above all to arrest the depreciation of the lira.

Whereas in Germany, the possibility of a long war having been seen from the outset, an effective control over wages and prices was maintained after Hitler came into power in 1933, in Italy —where the collapse of France was taken ,to mean that the end of the war was at hand—no shch safeguards were imposed. Since Italy entered the conflict wages have not been increased, but even controlled food prices have risen by 50 per cent. Almost all unrationed necessities now cost two to three times as much as then, while on the black market foodstuffs are sold at as much as 10 times the control prices. Semiskilled workers and minor officials—post office clerks, for example—earn

[By a Correspondent of "The Times."]

about 1500 lire a month, but a suit clothes costs 2000 to 3000 lire. No effective check on black yet exists, because, as even the dsdl* press is made to disclose, the higpt market is organised and run by officials high in the Fascist Party whose job it is to fight illicit trading. A pum within the party is now said to be g®, ing on. At all events, some attempt will be made to regulate prices. Since the beginning of June standardised clothing has been on sale. A pair of shoes or a metre of cloth costs 160 li» To check the flight from the lira, hinb are being dropped that the State might nationalise all joint stock company shares, paying holders only the orki nal cost, or might tax all increment in values except of State securities To discourage another form of flw from the lira, the GovernmentesL threatened to close all second-hanfcSjS antique Shops, but in reality hesitates to deprive numberless people suddenly of a living.

Italy has thus reached the climax'}*finance sooner than Germany. DeprS ciation is accelerated by effects In herent in totalitarian finance. tarian economy means the utilisation ot almost all productive capacity for mill 1 tary ends, and the strangulation of civilian production. So workers am unable to use their earnings to W what they need. Shopkeepers cannot replenish their stocks and do not know > what to do with the money. Indtutriil profits and interest on mortgages can not be invested. Wear and tear can' not be made good, the reserverw aside for that purpose mounting B v»r higher. Interest on loans remains m spent. People who have more monc» than they can spend become extras Coal and Rye Loans The more distant the prospect for an Axis victory, the less reliance js thtta upon any form of saving for the future An article entitled "Stability of valiS' without gold,” in the “Stampa” of Anrit 17 by Alberto de Stefani, former lul, ian Finance Minister, discussed th»' possibility of issuing State loans, not; m lire or gold but in coal and rye. orevaluated according to an index'cim, ; piled to show the fluctuations in th* ; true cost of Jiving. Loans In coal and rye were issued in Germany durine the 1923 inflation, these commodities being considered, amidst the general distrust of money symbols, as a suit, able and convenient measure of values More recently the "Stampa” declarS. that “the industrious and productive people of Italy are coming round to the view that the price of com is the proper measure of the price of all other commodities." Corn being vated to this position, it becomes of the first importance to maintain a sup. ply of corn at what the people regardas a reasonable price. "A price stop og corn,” wrote Gayda a month ago, "sig* nifies a stop on the rise of prices of su sorts, rural, urban, and industrial." -

The. fanners and peasants of Italy, however, show little readiness to let themselves be victimised in thft inter, ests of the stability of prices, and th» Government is obliged, in a variety of ways, to pay some 50 percent, mole for the corn than the price at wljicj it is distributed, To base the-wholf price structure on a price which Jl itself a political price is surely a rickety conception. Even apart from such consideration* the results of this year’s harvests,b»vs an enormous importance for the.ran.' ning of the economic machine of | country which has by now .-’been - stripped of so many layers of The recent talks of the German'. Slid Italian Ministers of Agriculture.., ;ar| said to have resulted in a advance of wheat by Italy to Gttwte a step which could be publicly luSfinM only on the. hypothesis of biMpej crops, and which anyway need over, the frontier. While presses Italy to increase fopg tion to the maximum, the. which Italian war industries PUff-ftMJ for the Axis effortjdMesJfeWP IWpjor . into a secondary rank. -BhortaiKM fuel is here one of the, limttihgfs«|wt De Stefani indeed recognises mew, portance of fuel as a mcMUTfc ». V«i for any country which attemptsMO rank as an industrial producer, x-m total dependence of Italy upon ’tMp many for coal supplies. is a pen « Italy's sacrifice which there to think is becoming increasinglyPWr fui.