Economy of Italy Under Fascism - The Great Depression

The Great Depression

The worldwide depression of the early 1930s hit Italy very hard starting in 1931. As industries came close to failure they were bought out by the banks in a largely illusionary bail-out - the assets used to fund the purchases were largely worthless. This led to a financial crisis peaking in 1932 and major government intervention. After the bankruptcy of the Austrian Kredit Anstalt in May 1931, Italian banks followed, with the bankruptcy of the Banco di Milano, the Credito Italiano and the Banca Commerciale. To support them, the state created three institutions funded by the Italian Treasure: the Sofindit in October 1931 (with a capital of 500 million liras), which bought back all the industrial shares owned by the Banca Commerciale and others establishment in trouble. In November 1931 the Imi (capital of 500 million liras) was also created, and issued five and one-half billion liras in state obligations, reimbursables in a period of ten years. This new capital was lent to the private industry for a maximum period of ten years.

Finally, the Industrial Reconstruction Institute (IRI) was formed in January 1933 and took control of the bank-owned companies, suddenly giving Italy the largest industrial sector in Europe which made use of government-linked companies (GLC). It saved at the end of 1933 the Hydroelectric Society of Piemont, which shares had fallen from 250 liras to 20 liras, while in September 1934, the Ansaldo trust was again reconstituted under the authority of the IRI, with a capital of 750 million liras. Despite this taking of control of private companies through (GLC), the Fascist state did not nationalize any company.

IRI did rather well with its new responsibilities - restructuring, modernising and rationalising as much as it could. It was a significant factor in post-1945 development. But it took the Italian economy until 1955 to recover the manufacturing levels of 1930 - a position that was only 60% better than that of 1913.