FASCIST CONTROL

Evening Post, Volume CXXVI, Issue 74, 24 September 1938, Page 16

FASCIST CONTROL

CAPITALISM IN ITALY

THE BANKS LOSE POWER

CURBS ON BUSINESS

By their support of the Fascist movemen'' after 1920 and by their indispensable aid in the founding of the Fascist regime in 1922, writes the financial correspondent of the "Manchester Guardian," the Italian industrialists and ttrUers, who then felt themselves to be the "capitalists" indicted by Socialists and Communists, secured protection against the serious troubles which they had suffered in the first years after the war—against interruption of business by strikes or by breaches of discipline in the work 3, against pressure for wage-rises without regard to profit prospects, against a levelling of the style of life to their disadvantage. Together with -the Nationalists, a small.party which had long advocated a-monopolistic organisation of,ltalian - irfdustry and were themselves supported/, by the highly-protected steel industry, and with the Syndicalists, who were vindictive rebels from Socialism, the exporting industrialists and the merchants and their political friends pressed into the Fascist movement, seeing in it a way of breaking the power o£ the trade unions and returning to an orderly conduct of business. Indeed, some economic Free-traders hoped much of Mussolini, who had at times let fly at the highly-protected heavy industries as "parasitic." FIRST FRUITS. For the first year or two of the regime the business supporters of Fascism got all they expected out of it. They were able to reduce wages, for in practice strikes were rendered at once impossible (and later illegal), and as.the workmen no longer lost wages for weeks on end through striking, they did not substantially reduce their consumption. Successive duties were abolished or scaled down; income-tax Inquisition was relaxed. A large Stock Exchange and financial speculation developed, and the stockbrokers of Milan became exceedingly prosperous. The banks' contango loans expanded by about one-third from 1923 to 1924. The political enemies of the regime missed no opportunity to put this speculative activity 'in the most unfavourable light, especially when, in 1924, the Fascist regime appeared in serious risk of political collapse. Throughout 1925 and 1926 sellers of lire prevailed in the exchange markets, putting the price of sterling up from a steady 100 to 120, and-later to 150. At this point such Fascist demagogues as Farinacci accused "Jewish Masonic International Finance" of being secretly at work to bring the regime to ruin. LOSING THEIR GRIP. He called for the arrest of Signor Toeplitz, the general manager of the Banca Commerciale Italiana (the biggest of the Italian banks and one suspected throughout the war of being still under German influence; it had been German founded). Signor Toeplitz escaped arrest, but he and his like from that time were losing their grip. In the-exchange crisis of 1925 Mussolini dropped his orthodox capitalist Finance Minister De Stefarii (since turjied dogmatist of anti-Liberalism). Against the advice and desire bf all business people he next forced an appreciation of the lira from about 120 to 9?£,,0r, say, from 2d to 2Jdppr lira. This was only possible by dint.of allround wage and salary cuts, ordered by decree; but whereas in 1923 the industrialists had cut wages purely to' the advantage of profits, in 1927 they were obliged to reduce their own selling prices fully in line with the wage cuts, From this moment the financial capitalists .were thrown into dependence on the State. The banks in Italy, as in Germany, were not only "deposit" banks, but also issuing houses and investment trusts. Against their unchanged liabilities (lire deposits) they held great blocks of shares and property, of which the Government had virtually ordered a sharp depreciation. . CONTROL OF BROKERS. At this time the Government began submitting stockbrokers to close control. At first' (1927) they merely limited the number of brokers, and required all who remained in business to deposit a, large guarantee fund in State securities, while all new entrants had to be approved by the authorities. Some years later stockbroker^ were still more closely controlled by being given the status of civil servants. In the year from early 1926 to mid--1927 Stock Exchange values on the Milan Bourse declined by one-third. The banks *had had their calculations frustrated by the Government exchange policy, and were reckoned to have lost a.largepart,if not the greater part, of their capital. In the course of 1931-34 the big nation-wide banks were shade to set their houses in order by making over their, industrial holdings to State financial organisations. This entailed the State gaining the majority voting rights in many large industrial concerns previously controlled by the banks, while the banks themselves had to write off a substantial part of their reserves. In 1936 the Government promulgated a new Banking Charter, when ownership of bank share capital was . subjected to certain conditions arid banking shares withdrawn from Stock Exchange quotation. At the same time a State bank inspectorate Was given .large powers of inquiry. The banks, which were a power in Italy in 1925, were thus under the closest Governmental control a decade .later.';:- \ ~ > -' .. FASCIST TRADE UNIONS. The industrialists of Italy, organised in. the General Confederation of Industry, were on.close terms with the Fascist leaders from the start, ifet, hot altogether without remonstrance, they consented to recognise the Fascist trade unions in 1923, giving them, at a time when, far the larger part of the workmen still adhered to the Socialist and Catholic unions, the sole right of representing the wage-earners. For a ■while the factory workers continuad to elect, according to the pre-Fascist law, "internal commissions" in each factory to negotiate with the management. In the Fiat works at Turin, and probably in most others, the internal commissions elected in 1925 were anti-Fascist. Some of the managements—it was gathered—persisted for some time in negotiating with these chosen representatives of the men even when the internal commissions were abolished. But the Government, with ever more elaborate and more stringent legislation, built up the Fascist "syndicates", as an organisation of wage and salary earners, recognised as co-equal and jointly responsible with the" employers' associations (which latter, however, were merely the old associations, with a prefix "Fascist"). A Ministry of Corporations took to itSelf powers to arbitrate either at headquarters or locally between the two organisations on every question of vwges, hours, conditions, employment, and dismissal. CONTROL OF INDUSTRY. Already before 1934 the industrial's tend equally the big trading firms) rilt themselves constrained at every point to follow the ordex-s of a new bureaucracy, and if the bureaucracy has worked to the general rule that the enterprise must be allowed to declare profits, it has seen to it that the jftrm uses in the interests of Govern-

ment policy all but the bare amount of receipts needed for dividend distributions. • As in Germany, dividends have been limited to a maximum declaration of 6 per cent., or in some cases 8 per cent., and remaining pro-j fits compulsorily absorbed as loans to the; State. (Since 1936 a graduated supertax has been imposed on dividends above these percentages, or in excess of earnings of recent years.) All assets owned abroad have long since been ceded to the State except in such special cases as insurance companies with foreign commitments. In 1937, moreover, a compulsory levy was instituted to the amount of 10 per cent of all company capital (with certain qualifications). Moreover, ti^e bureaucracy is now working on a programme of price control on the one hand and wages increases on the other, in order; to maintain workers' purchasing power in spite of. the national losses through wars and unproductive expenditure. Since 1933 a law has forbidden any industrialist to decide upon any extension or modernisation of his machinery or plant without special permission from the Ministry of Corporations^ From time to time the Ministry an' nbunces that of so many applications a dumber have been opposed, rejected, or suspended. For example, the Special Committee of the Ministry let on April 28, 1934. Forty-three inquiries., were ; received; thirteen were rejected, twenty-two approved, eight suspended. GENERAL POWERS. The approved- projects were five from engineering, eight from chemical, and the rest from miscellaneous establishments; those rejected were four from engineering, two from chemical, and one each from cement, glass, shipbuilding, wireless, refrigerator, and electrical establishments. Thus., two years before the Ethiopian war, the Fascist Government had already assumed general powers to direct all the capital development in the country. Since then the controls have been greatly tightened in order to ensure the politically most advantageous use of scarce raw materials, foreign exchange, and even internal monetary resources. The industrialist may find himself called upon by a corporative official'to make a certain sale at a given price; he protests that he cannot do so without loss, to which the official answers by assuring him raw material or other supplies at a reduced price, which'somebody else is then constrained to produce. In these dealings the firm which is large enough to have an office in Rome which can go straight to Ministerial headquarters is at a great advantage, while small firms located in Turin or I Triestecan only hold their own by continually sending representatives on 24- ---, hour train journeys. Thus the oligarchs of Italian industry have, under Fascism, come off much better than their small competitors, even while ceding so much to the new bureaucracy.