Economy of Italy Under Fascism - After The Depression

After The Depression

As Mussolini's ambitions grew domestic policy was subsumed by foreign policy, especially the push for autarky after the 1935 invasion of Abyssinia and subsequent trade embargoes. The push for independence from foreign strategic materials was both expensive, ineffective, and economically wasteful. It was achieved by a massive increase in public debt, tight exchange controls, and the exchange of economic dynamism for stability.

Available economic indices supportive from Mussolini's efforts. Recovery from the post-war slag had begun before Mussolini came to power and continuing growth rates were comparatively weaker. In 1929-39 the Italian economy grew by 16%, roughly half the growth rate of the earlier liberal period. Annual rates were 0.5% lower than pre-war rates and the annual rate of growth of value was 1% lower. Despite the efforts directed at industry, agriculture was still the largest sector of the economy in 1938 and only a third of total national income was derived from industry. Agriculture still employed 48% of the working population in 1936 (56% 1921), while industrial employment had grown only 4% over the period of fascist rule (24% 1921, 28% 1936) and there was more growth in traditional than in modern industries. The rate of gross investment actually fell under Mussolini and the move from consumer to investment goods was low compared to the other militaristic economies.

Attempts to modernise agriculture were also ineffective. Land reclamation and the concentration on grains came at the expense of other crops, producing very expensive subsidised wheat while cutting more viable and economically rewarding efforts. Most evidence suggests that rural poverty and insecurity increased under fascism and their efforts failed markedly to create a modern, rational, agricultural system.

In the late 1930s the economy was still too underdeveloped to sustain the demands of a modern militaristic regime. Raw material production was underutilised and finished military equipment was limited in quantity and too often in quality. Despite a minimum of 10% of GDP, almost a third of government expenditure, being directed towards the armed services from the 1930s the country was "spectacularly weak". Notably the investment in the early 1930s left the services obsolete by 1940, especially the army. The expediture on conflicts from 1935 onwards (for instance commitment to the Spanish Civil War, 1936-1939, as well as the Italy-Albania war, 1939) meant little stockpiling for the much greater conflict ahead (the Second World War, 1940-1945 in the Kingdom of Italy).