(Mirror.)

To salvage the bond market and raise revenue, in 1936 the régime offered to convert the Redeemable Bond—purchased at L. 80 with a nominal value of L. 100 but now valued at only L. 68 on the market—into a new bond of L. 100 nominal value, if the bondholder paid L. 15 in cash. With little alternative, most bondholders accepted the conversion, generating six billion lire net.⁷⁶ While these bonds generated some revenue, they mostly allowed the state to monopolize savings capital and control inflation.⁷⁷

Raising capital by restricting liquidity and suppressing consumption also led to wage compression among workers, as economic historians Vera Zamagni, Maria Gómez‐León, and Giacomo Gabbuti demonstrated; the wages of industrial workers, in particular, declined or stagnated, even as industry flourished.⁷⁸ Workers’ well‐being, measured by any metric, fell substantially throughout the 1930s. For example, the number of under‐nourished Italians grew from one in five in 1922 to one in three by 1938.⁷⁹

As working‐class tables grew more spartan, the property owners remained relatively unmolested.⁸⁰ After 1936, Thaon di Revel studied various tax reforms to target the wealthy, but few were successfully introduced, such as a 10% withholding tax on the coupons of all private bearing securities and other taxes to limit the distribution of dividends.

More serious reforms failed. Property owners decried the October 1936 special property tax as a “forced loan,” pressuring the régime to modify the measure to allow property holders to borrow the taxed amount from the bank, in effect, using the tax as cover for further money creation.⁸¹ Consequently, the régime continued to rely primarily on indirect taxes, which disproportionately affected working‐class consumers and increased inequality.⁸²

By creating money, soaking up liquidity, and suppressing consumption, the régime financed military operations and multi‐million‐lire public contracts to [Fascist] industrial firms, especially those in IRI’s portfolio, to supply and support the invading armies.

The largest civil expense was road construction, which represented some 81% of public expenditure on civil projects (ca. 8,075 million lire).⁸³ Most of the work was done by Italy’s premier road construction company, Puricelli. By 1936, the firm had been taken over by IRI and its leader, Piero Puricelli, was replaced with a man of IRI’s choice, suggesting it was more closely controlled than other firms in IRI’s portfolio.⁸⁴

According to economic historian Gian Luca Podestà, Puricelli obtained 1.3 billion lire in public contracts to build roads in AOI between 1936 and 1940, putting the company in the black by 1939.⁸⁵ By February 1939, the Italians had built or reinforced an estimated 3,352 km of road in AOI.⁸⁶

All sorts of enterprises popped up to supply and service the advancing [Fascist] military apparatus and the construction sites across the Horn. One of the largest was trucking, as everyone and everything had to be trucked from the low‐lying Italian Red Sea ports to the Ethiopian high plains.

Mid‐sized trucking companies, like Gondrand Transports, saw the imperial project as a chance to make themselves a globally significant firm. Even very small companies like Gotti S.p.A. of Massa Lombardo, a company with only eight trucks, jumped at the opportunities offered by the imperial market flush with public money.⁸⁷

The booming battlefront economy pulled Italy’s under‐ and unemployed workers to AOI. An estimated 330,000 Italian soldiers and militiamen, together with 100,000 militarized Italian workers, were in East Africa by late‐Spring 1936.⁸⁸ Many furloughed soldiers stayed. An estimated 102,548 Italians migrated to AOI in 1936 alone.⁸⁹

By June 1937, an estimated 63,530 Italians were employed as roadworkers, alongside 43,720 “native” workers, and 10,680 Yemeni and Sudanese workers.⁹⁰ Unskilled Italian workers could expect to make about ten times the daily wage of an equivalent African worker (ca. 1934–1936) and about twice what they earned in Italy. The differences were even greater for Italian skilled workers and professionals, who had ample opportunities as African workers were summarily removed from skilled positions and excluded from most forms of skilled work.⁹¹

This seems like a good spot to stop the excerpt, but there are a few more paragraphs that I wish to quote as they feel particularly relevant given recent events.

[A]s the war dragged on, Guarneri and Thaon di Revel grew increasingly concerned about Italy’s reserves and Italy’s difficulty accessing foreign markets.¹⁰⁰ In October 1936, Guarneri and Thaon di Revel convinced Mussolini to devalue the lira under the guise of pegging it to the floating dollar. This devaluation of more than 40% would enable Italy to continue buying and selling on foreign markets.¹⁰¹

Guarneri privately urged Mussolini to be cautious with the treasury reserves—as the liberal government had been—because Italy would need them to rejoin the global capitalist market.¹⁰² Extending the Italian economy so far was a colossal risk.

And it did not pay off.

The war was neither lightning‐fast nor conclusive. The [Fascists] confronted a much stronger and more enduring resistance than they had anticipated. By early 1937, the [Fascists] occupied only the main cities of Ethiopia and some of the hinterlands. The countryside was a stronghold for the Ethiopian resistance, which grew only stronger in response to the régime’s brutal attacks on the civilian population. The regions around Gondar, Lake Tana, and Addis Ababa were in continuous revolt (see Fig. 2).¹⁰³

Not only did the war last longer than expected, but the cost ballooned. While more research is needed to establish exact expenditures, even Podestà’s conservative estimates show the régime far exceeded the estimated 2,400 million lire per year in expenditures (Table 1).¹⁰⁴

Maione, in contrast, estimates [that] the [Fascists] spent in total 57,303 million lire (1935–40).¹⁰⁵ By most estimates, the occupation and colonization of AOI amounted to about 25% of all public expenditure and between 10–12% of national income.¹⁰⁶

The war was the most important factor in increasing these expenses. Roads were also costly, especially because the hastily built roads needed constant repairs.¹⁰⁷ Moreover, [the Kingdom of] Italy had to use its reserves to buy war matériel, including petroleum, and pay taxes and service fees at Djibouti in French Somaliland and the British‐controlled Suez.¹⁰⁸ And it was precisely here—the weakest point in the Italian economy—that the League of Nations’ economic sanctions hit the hardest.¹⁰⁹

While sanctions eased in 1936 and European powers had largely accepted [Fascist] Italy’s claims to Ethiopia by 1937, Ethiopians continued to resist [Fascism].¹¹¹ As a result, agricultural output in the Horn of Africa diminished substantially due to the ongoing conflict, land seizures and failed agricultural experiments, and the number of Africans abandoning agriculture for wage work.¹¹²

(Emphasis added in all cases.)