(Mirror.)
It was a widespread belief at the beginning of the 1930s that competition between firms was one of the causes of the slow recovery of the economy, in that it kept wages and prices down, discouraged optimistic business expectations, and consequently reduced investment, demand, and employment. Hence a common action undertaken by most industrialized countries at the time was the implementation of cartelization policies to fight deflation.¹⁷
[Fascist] Italy was no exception. The powerful Confindustria (Confederation of Italian Industry), in fact, fought for a price-raising and wage-cutting policy in order to increase industrialists’ profits and to avoid a further drop in production, as can be seen from documents preserved in the Confederation’s historical archives.¹⁸ The Fascist régime strongly supported this view and favored the creation of obligatory cartels (consorzi obbligatori) by passing a first procollusion law on 16th June 1932.¹⁹ These cartels were considered an emergency measure.²⁰
However, as such, they could only be created if requested by a high percentage of firms of a particular sector and if deemed to be “necessary” by the government. Alongside these obligatory cartels, voluntary ones (consorzi volontari) were also highly encouraged by the same law.
The former cartels were necessarily extended to the remaining firms of the sector, whereas the voluntary cartels only included the firms which willingly adhered to them. Confindustria was against a generalized policy of obligatory cartels, but favored the voluntary ones [Confederazione Generale Fascista dell’Industria Italiana (1933, p. 463)].
Therefore, apart from three obligatory cartels in the cotton, rice, and sulfur industries,²¹ which actually were a result of specific legislation and not of the general law of 1932, all other cartels were created on a voluntary basis. Another noteworthy law was that of 12 January 1933, № 141, which required a mandatory government authorization to be able to enlarge existing industrial plants or to create new ones.
This law was an obvious extension of the previous one: after having successfully eliminated all competition in a given sector, it was natural to attempt to block its return with the creation of new firms. This second law therefore helped guarantee the integrity, and the effectiveness, of the existing cartels.²²
The advantages adduced in Confindustria’s documents for introducing cartel legislation were the following: (a) cartels adjust production to consumption and to the absorbing capacity of the market, thereby guaranteeing the correct quota of work force to each firm, eliminating stockpiles, and stabilizing prices and sales; (b) they centralize the purchase of raw materials and the sale of the goods produced, lowering costs and simplifying the two processes; (c) they ensure that the risk in production is shared between all the firms; (d) they organize exports more efficiently; (e) the higher prices that cartels guarantee to the producers allow firms to have greater revenues and to be able to invest in new technologies.
Just as the flourishing of cartels in the United States was a direct consequence of the NIRA, the [Fascist] consorzi too significantly increased in number after the enactment of the corresponding legislation, as Table 2 clearly shows. Nearly half of these cartels operated at the national level. Initially, the consorzi were created in order to reduce competition and to fight deflation, but after the war in Ethiopia in 1935 they were used to help tackle the problems of building up stocks of provisions, of distributing raw materials imported from abroad, and of rationalizing domestic inputs, hence changing their function.
However, most of the 498 cartels existing in 1942 had been created specifically to raise prices and to reduce competition: “… with regards to the cartels’ functions, it must be underlined that most of the cartels created disciplined the market and production […] Not only was there a higher number of cartels with these functions, but they were formed before the others. We can thus conclude that cartels [under Fascism] were mostly stimulated by the necessity of reducing competition rather than by the desire to improve production” (Confindustria document, 1942, p. 3, translation from Italian).²³
(Emphasis added. Click here for more.)
Another crucial set of legislation passed by the Fascist régime concerned Italy’s labor markets. Since the Patto di Palazzo Vidoni of 1925, strongly supported by the then head of Confindustria, Antonio Stefano Benni, only one workers’ trade union was allowed to negotiate workers’ contracts with the industrialists’ union (Confindustria).
Workers could in principle decide not to join the union, but this was a highly unrealistic possibility, in that they were forced to pay fees to the union and to adhere to its rules and decisions in any case. The union leaders were not democratically elected, and often came from the upper classes of society, close to the Fascist régime. The right to strike was abolished and punished with imprisonment after 1925.³²
Finally, the Fascist contracts further eradicated the possibility of creating a national workers’ movement by fixing different salaries across regions and across industries.³³
The original feature of Italy’s labor market was its direct and coercive control by the Fascist régime, which set wages exogenously. In particular, the 1930s labor policies aimed at keeping wages, deflated by consumer prices, constant at a subsistence level corresponding to around 15 lire (1938 prices) [Zamagni (1976, p. 337)].
Therefore, initially as a consequence of the massive deflation due to the return to the gold standard, the government enacted a series of wage cuts in order to maintain this target, but also to accommodate the industrialists’ requests to keep their profits unvaried, notwithstanding the fall in prices.
When the Great Depression then broke out, the new reason for introducing these measures was that, to keep employment levels constant, the workers’ purchasing power had to be sacrificed. In the industrial sector, the first cut, introduced by law, was by 20% in 1927 with further cuts undertaken in 1930 (8%), 1933, and 1934 (cumulatively, another 10%). Table 7 presents data on hourly average wages for different industries, in which the effect of the enforced wage cuts can be seen in all sectors.³⁴
The Fascists’ money supply grew when they prepared for war:
A further cause of the slow recovery could be the tight monetary policy [that the Fascists] pursued. The money supply did fall in those years, a fact which could justify, in a Friedman and Schwartz (1963) framework, the concurrent fall in output. However, from 1935, the money supply began to grow once more [under Fascism] in order to finance the war in Ethiopia.
Click here for events that happened today (January 19).
1863: Werner Sombart, ex‐socialist turned fascist economist, existed.
1883: Hermann Abendroth, the Third Reich’s Kapellmeister of the Gewandhausorchester Leipzig, was created.
1932: Joseph Goebbels and Adolf Schicklgruber travelled to Munich, Germany together; en route, Goebbels attempted to convince Adolf Schicklgruber to run for the office of the President of Germany.
1939: The Fascists launched T10 at the F. Schichau yard in Elbing, Germany (now Elblag, Poland).
1940: Fascist submarine U‐9 torpedoed and sank Swedish(!) merchant ship Patricia, massacring nineteen folk but leaving four alive. Fascist submarine U‐55 sank Norwegian vessel Telnes off the Orkney Islands, Scotland, slaughtering eighteen folk, and submarine U‐59 torpedoed and sank French steamer Quiberon off Great Yarmouth, England, exterminating the crew. Fascist submarine U‐44 began tracking Greek steamer Ekatontarchos Dracoulis in the Bay of Biscay. Around midnight, U‐44 fired a torpedo at the Greek ship, but the torpedo detonated prematurely before reaching the target.
1941: Benito Mussolini visited Adolf Schicklgruber at Berchtesgaden, accepting Reich assistance in North Africa, but not Albania. The Chancellor noted that he would launch an invasion of Greece if British troops there began to threaten the oil refineries at Ploiesti, Romania. The Axis lost the railway junction at Kassala, Sudan, on the border with Axis‐occupied Eritrea to the Allies, and it lost its submarine Neghelli along with its entire crew to Allied depth charges. Luftwaffe Stuka dive bombers assaulted Valletta Harbour, Malta for the fourth consecutive day, damaging a couple Allied ships but losing an aircraft in the process. Lastly, Luftwaffe aircraft bombed RAF Feltwell in England.
1942: The Axis commenced its conquest of Burma; it captured the airfield at Tavoy (now Dawei). Axis troops landed at Sandakan, British North Borneo unopposed and an Axis air raid took out the headquarters of the Indian 45th Brigade in Malaya. Tōkyō named Rensuke Isogai Hong Kong’s new Governor‐General.
1943: Axis troops landed at Wewak, New Guinea, but the Empire of Japan lost a cargo ship off Honshu to Allied torpedoes.
1944: Although the Wehrmacht managed to avoid being encircled at Novgorod, the Axis had to cancel a motor torpedo boat raid on Allied‐held Naples. The Axis likewise lost the Usines Ratier airscrew works, in southwestern France; the resistance wrecked it so thoroughly that it never resumed production in wartime. The charges with 30‐minute fuses, laid while Axis guards patrolled the yards outside, detonated with such force that one 30‐ton press was sent twenty‐five feet into the air.
1945: Adolf Schicklgruber ordered that any attacks or retreats by divisions or larger units must be approved by him beforehand. The Reich commenced evacuating settlers from Breslau, Germany (now Wroclaw, Poland) as the Axis lost the Łódź ghetto to the Soviets. Of the ghetto’s more than 200,000 inhabitants in 1940, fewer than 900 had survived the Axis occupation. Later, an Axis V‐2 rocket hit Town Quay, Barking, London.
1979: Moritz Jahn, Fascist principal, died.
1983: The authorities arrest Axis war criminal Klaus Barbie in Bolivia.