The impact of the First World War and the crisis of capitalism led industrial entrepreneurs such as Giovanni Agnelli of car producer Fiat (founded in 1899) and Guido Donegani of mining company Montecatini (established in 1888) to support Mussolini’s blackshirts that had forged the Partito Nazionale Fascista in 1921. The industrial unrest and social conflicts of the Biennio rosso (two red years) of 1919 and 1920 had undermined trust in the capacity of liberal capitalism to solve the pressing problems in postwar Italy.

As a result, liberal Prime Minister Giovanni Giolitti had to resign in July 1921. Even though many businessmen perceived the violence of the squadristi as a nuisance, the Fascists promised to shield industrialists from nationalization and preserve private property. Moreover, entrepreneurs counted on the “blackshirts” in their efforts to control and quell social conflict in factories. In a similar vein, large estate‐owners employed Fascist squads in order to suppress sharecroppers and agricultural labourers who had seized land in northern Italy.

From October 1922 onwards, the Fascist régime seemed to support a political economy that was amenable to industrialists, businessmen and landowners. In their view, Fascism promised to lend beleaguered capitalism a new lease of life.²⁰

[…]

As they competed with private enterprises, the new public institutions threatened the freedom of entrepreneurs who had succumbed to the opportunities that state support had entailed. Montecatini, for instance, had been rescued from bankruptcy at the price of losing its independence.²³

All in all, state intervention into economic development and control of big business grew in the 1930s. A bank reform that was enacted in 1936 increased state control by restricting bank loans to small and medium‐sized industrial companies. While links between industry and banks weakened, the former benefited from state support. By contrast, small and medium‐sized companies were neglected.

Eventually, capitalism was not abolished in Fascist Italy, as Mussolini did not intend to generally replace private control over the allocation, accumulation, and distribution of economic resources. Proposals to nationalize industry in the Repubblica di Salò did not come to fruition in the final phase of the Second World War, as [Berlin] feared that plans advocated by Fascist intellectuals such as Nicola Bombacci and Carlo Silvestri would reduce Italy’s industrial output needed for the [Axis] war effort.

All in all, however, the new public institutions that the Fascist régime had created restricted the freedom of entrepreneurs in key sectors of industry throughout the 1930s and early 1940s.²⁴

[…]

The turn to autarky had been accompanied by preparations for a war economy as early as the mid‐ and late 1920s. Yet self‐sufficiency and economic independence was strongly enhanced after the Fascist régime had attacked Abyssinia in October 1935. In response to the invasion, the governments of eighteen member states of the League of Nations imposed an economic boycott on Italy.

Based on growing state intervention, new oligopolies in steel, chemical, electrical, and mechanical industries mirrored the rulers’ determination to promote autarky and set up a war economy. Support for key sectors such as aviation as well as the production of artificial rubber and textiles was also based on the policy of self‐sufficiency that aimed at imperial rule and the colonial expansion in Africa, as well. In these industries, profits grew considerably.

At the same time, however, entrepreneurs and businessmen depended on government demand. The lack of competition on markets also created excess capacity and reduced efficiency and productivity. Not least, the predominance of military over civil needs inhibited the development of domestic markets and consumer industries. Altogether, the Fascist policy of autarky and state intervention that characterized the war economy aggravated structural imbalances in Italian capitalism.²⁶

(Emphasis added.)