[ISSN 1974-028X]








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N. 51 - Marzo 2012 (LXXXII)

quota "90"
economy of italy in the twenties
di Antonio Anelli


The Fascist era economic system was characterized by structural elements of a permanent nature such as a low level of income per capita, a high elasticity of labor supply, a strong international outlook, a strong duality both sectoral and territorial.

The complementarity between the constant structural and economic variables does not establish the initial years of economic policy as Fascist years of hiatus, since the organization of the production system and the economic policies of the regime followed, at least until the 1933-34 biennium, the tendency of other countries. In fact, the event's monetary "quota 90" or the price of ninety dollars for a pound was similar to the stabilization processes put in place in other European countries and as such is not included elements of originality, as the methods used to impose deflation the country, set a fairly high level of exchange control and implement labor market as part of a policy of social stabilization, implemented alongside that of monetary stabilization.

The economy of Fascist Italy was hardly revealing dynamic oriented economy to stagnation. After the brief boom in the 1919-20 biennium, tied to a strong expansion of credit granted by banks to the private sector, and particularly from the Commercial Bank, Bank Discount Italian, Italian Credito and Banco di Roma, came the year 1921, known well as the year of bank failures and industrial. This situation arose from the excessive indebtedness of many companies which recorded serious difficulties in the face of falling demand and relative price stability, after the great wave of inflation that had made it look very easy and convenient use of credit.

The period 1922-25 was characterized by: a decrease in the presence of the public sector in the capital market, due to a fiscal policy aimed at balancing the state budget, the central banks as financial intermediaries and as creators of money and a vibrant As ephemeral vitality of Stock Exchange. From 1922 to 1925, the pound remained fairly stable compared to an underestimation of its purchasing power parity with the dollar.

In the year 1925, mainly through drastic cuts in expenditure, the actual deficit was reduced to 1% of national income and was totally eliminated the following year. On the monetary front we can say that the speculative use that was made of the available funding probably contributed to the weakening of the pound in 1925 and again in 1926, resulting in undesirable increases in the prices of raw materials and thereby contributing to the inflationary spiral.


But the crux of the problem remained in the banks and the ease with which it was obtained or granted the credit it did anything but solid businesses thrive, contributing to the next wave of bankruptcies. The banks had created a situation developing that caused some difficulty to foreign competition, but it was hopeless to continue without their generous support. The same bank balance sheets were heavy with items immobilized so large an extent as to be incompatible with the same management of an investment bank.

The year 1925 is nationally outstanding crop year. The process of import substitution was documented by a rise in domestic demand and production of wheat, respectively by 3.8 and 14.2% a year. However, there occurred a massive reallocation of resources for agriculture rich, many had suggested, that would create a natural effect of the abolition of duty on wheat.

In the South there was some reduction in area under wheat and drew short-term benefits determined by the exceptional increase in the price of wine and oil in the north while production increases were due to better yields, greater mechanization and increased use of fertilizers produced by the chemical industry had a strong impetus from the war. As for products for which Italy was traditionally exporting, they endeavored to farmers and the country good earnings in foreign currency, given the trend in international prices and exchange rate, but not stimulated an increase of its productions. This period, on the whole, was characterized by the rapid expansion of demand generated by growth in the industrial sector and in turn supported by the supply of investible funds, there being no evidence of a strong performance of investment in agriculture.

The year 1925 is considered to hinge on the result of replacing the Ministry of Finance of the liberal De 'Stefani with the financier Volpi. He felt the need to promote more ambitious programs and outside national borders, which called for negotiations for which De 'Stefani did not seem to experience and knowledge the right person.

The index of stock prices fell in 1925 the highest level of the interwar period and no doubt was shared that it was a boom in speculative caused by excess liquidity in the existing system and the behavior of banks. Operators with a measure of 28 February, were forced to cover, with a cash payment, at least 25% of the securities purchased in the end. Another activity, though of considerable notoriety, is the law for the regulation of public control over the bags. These and other measures of De 'Stefani of that year were strongly criticized by the world of credit and high finance, and it was believed that the falling stock price and the external value of the pound will be a direct consequence, instead of ignoring these phenomena were the result of deeper causes. In June 1925 De 'Stefani, before a further depreciation of the lira showed himself hostile to protectionism and, once again, this conduct was strongly criticized. Mussolini, in the circumstances, he asked the Minister De 'Stefani to resign, thus favoring also the demands of the Confederation who has long called for the replacement.

The new finance minister Volpi promoted a new course in the Italian economy, the first important measure was the restoration of the duty on wheat on coarse grains and their derivatives. Just restored the duty on wheat to this product guaranteed protection equal to 15% ad valorem, and as such amounted to about half that age Giolitti. On the other hand were expected to be granted successive increases in parallel with measures in favor of big business that took place on time, to reach for common level of protection equal to about 75%. Volpi doubled the duty on sugar, reintroduced on 11 February 1925, earning the acclaim of the agrarian and industrial class in perfect opposition to what he had done his predecessor.

The year 1925 marks the new direction of agricultural policy with fascist so-called battle of the grain whose objective was the country's grain self-sufficiency to be achieved through higher yields per hectare rather than cultivated area. Another important element that gives character to the year 1925, the hinge between the two periods of economic history of fascist Italy, was formed by the Palazzo Vidoni Pact, signed in October of that year. It included the recognition of only fascist union representing the employees and, therefore, the authority to sign employment contracts. The signing of the Pact Vidoni Palace, ensuring the regime in control of the labor market, formed an essential prerequisite for the kind of economic policy that they wanted to pursue and who went by the nom de guerre of the lira.

In the mid-twenties appeared the difficulties and the inherent weakness of the mechanism of development that had marked the Italian economy in the early years of Fascism. In 1924 Italian exports were to grow considerably and our country had succeeded in penetrating international markets due to the stability of domestic prices accompanied by the undervaluation of the exchange, but now, imports had increased faster than exports and this is to the absence of factors that had previously incurred due to the strong domestic demand.

Faced with these circumstances, the solutions were: internal deflation or devaluation of the currency value, in the absence of corrective policies, the Italian economic system adopted the second package. Between December 1924 and August 1925 the lira lost 15% of its value so, what was the virtuous circle in recent years became an inflationary spiral. To support external accounts needed a devaluation of the exchange that produced an increase in domestic prices and in turn created the conditions for a new devaluation.


Emerged in this period a speculative component which became the main mechanism for the operation of the system and, even in these years, the Italian industry depended largely on the world of credit and banks were willing, in inflationary conditions, to extend lines credit as long as property values received as collateral for loans would suffer a good appreciation in stock price. Then, the stock market crash began in spring 1925 put in difficulty not only banks but also the great industries they financed and pushed to revise the mechanism of growth that had sustained the economy for years. In fact, the Confindustria, in April 1925, officially warned that inflation and fluctuating exchange rates certainly avvantaggiavano speculators but not businesses. His proposal was to implement a deflationary policy that stabilize the purchasing power of the pound and lowered production costs, aware, moreover, that such conduct could result in recession.

A first experiment in these terms was initiated by Volpi and what was new in regard to the policy of De 'Stefani. Thanks to Volpi was introduced the supervision of the Treasury on the foreign exchange market that became a reality in the << prohibition of banks to open credits or pay bills for abroad, to purchase their own foreign currency to purchase on behalf of customers without the simultaneous provision of lire to carry over divided by providing lire in favor of foreign banks>> in order to curb speculation. The foreign exchange market operations were concentrated in the hands of the Foxes after the Bank of Italy had unsuccessfully burned part of a loan of $ 50 million granted by the bank Morgan to settle its war debts.

At the end of 1925 Volpi abolished the autonomy of the National Institute of exchange rates and devoted himself to the arrangement of the war debt to England and the United States. The payment proposal was put forward by Italy to defer the repayment in ninety years, however, was quickly rejected by Washington, was asked to send a delegation to Mussolini expert in the field. Foxes took advantage of this opportunity to highlight their skills both as Minister of Finance and as a man of diplomacy. The Foxes November 14 signed an agreement very favorable to our country: Italy pledged to pay 2,042 million dollars in 62 years at a variable rate which reached a maximum of 2% after the fiftieth year. Volpi Then he went to London where he negotiated the arrangement of the debt of war with Great Britain and the British being willing to trading, the results were better than those achieved in the U.S. and the amount of the initial debt was reduced by 85%.

In May 1926, the domestic prices grew, the deficit in international payments was high and increased the money supply on the initiative of the big commercial banks to meet the needs of enterprises. Central bankers wished, deflationary measures that the Italian government did not adopt, given the strong performance of the production and the low level of unemployment.

Foxes tried a new process of stabilization to be achieved through structural interventions to facilitate the effort to bring Italy to fixed parities. This line culminated on August 22 in recognition of the Bank of Italy's monopoly of the currency. The same law revoking the right to issue the Banco di Napoli and Banco di Sicilia, which were forced to shift their concerns to the Bank of Italy. In addition, the Bank of Italy also had the responsibility to collect the notes of the southern benches that were in circulation. The bankers of other countries is not frowned upon the centralization of the direction of monetary policy appeared, among other things, unable to effectively monitor the commercial banks.

Became a priority in the fascist policy of deflation to restore parity in purchasing power relative to the pound and the consolidation of the floating debt was used to reduce the liquidity of banks. On November 6, was officially launched on Littorio loan which envisaged the conversion of public debt securities with maturities of less than seven years in the securities of the Littorio.

At the end of 1926, a reduction of 10.4% in wholesale prices could not offset the exchange rate appreciation and practiced industrial wage cuts and the protective measures adopted. The small industries put into effect automatically and without directives from a reduction in wages and salaries of its employees. From then until 1927 he continued to wage cuts unofficial but tolerated by the government.

The deflationary maneuver was not carried out only with the instruments of monetary and fiscal policy but also by direct government intervention in the reduction of wages and prices. The objectives proposed the savage deflation of 1927 were successfully achieved.

The years 1926-27 marked the return to gold policy to enter Italy in international capitalism in the new Gold Standard was the symbol. Along with deflation maneuvers to help ensure the stabilization, we must not forget the role of the Bank of Italy who sold lira against the currency to maintain exchange rate at the desired altitude. In January 1927 the Italian stock of foreign exchange reserves amounted to only $ 10.4 million. In December it had risen to 180 million, 87% of which was accumulated after the decision in May to maintain a stable exchange rate to around 90 pounds sterling and that is to a level slightly lower than that required by international speculation.


By a decree published on G.U. the Bank of Italy was forced to convert their notes in gold. Equal to 92.46 pounds sterling was fixed to allow the payment of any debt of the Treasury to the Bank of Italy. In addition, the Bank of Italy was forced to keep a reserve in gold equal to 40% of its notes in circulation. The governors of central banks of European countries were concerned about the level of stabilization adopted, providing for such difficult times for our country.

The year 1925 marks the split between two different periods of economic history of our country. The end of the 1922-25 period was characterized by the growth of production and private investment, a fiscal policy can provide the State with the financial resources to productive uses, the devaluation of the currency that helped exports and an inflation rate high. In early 1925, the Italian economy began to show signs of weakening, Italy saw shrinking spaces for exports in the Balkan area in front of the progressive advance of Germany on the competitive scene. In this new context, to support exports through the devaluation of the lira in Italy became more difficult and more expensive in terms of inflation.

In March 1925 there was a sharp fall of stock market indices as a symptom of a new course in the real economy. Between March and December of that year, the stock index was reduced by more than 25%, and really, when banks were burdened with fixed assets of an industrial character. The portfolio of the banks was loaded with equity values acquired not only as a guarantee of loans made, but also for speculation. This situation created difficulties for banks generating assets and also a crisis of liquidity. The main case that reflects this phenomenon is the Italian commercial bank. Toeplitz, managing director of the bank, attributed the low liquidity of the bank only in part with loans needed to support equity prices and high demand for long-term credit by firms. He believed instead that the main cause of the poor liquidity of the most important financial institution resident in "artificial scarcity of circulating medium", implemented to curb the currency devaluation.

The lack of liquidity forced the BCI in the first half of 1925, to resort to the deferral of the portfolio at the Bank of Italy for a figure that, at June 30, amounted to less than 2 billion pounds and stood at over 30% of the collection. From this operation did not reveal conditions favorable rate, and among other things, the effects rediscounted possessed the canonical features. Nevertheless, the Italian Commercial Bank was able to quickly reduce their exposure up to remove it completely in early 1926. For this reason, instead of talking about saving real was better identify the operation of the BCI rediscount at the Bank of Italy as a credit transaction of last resort, undoubtedly large.

The second half of 1925 was marked by the maneuvers of the Minister of Finance, Volpi, for exchange rate stability. After a brief but violent devaluation of the lira began the deflationary policy which led to “Quota 90”.


Riferimenti bibliografici:


Baffi P., La rivalutazione del 1926-27, gli investimenti sul mercato e l’opinione pubblica, Milano, Giuffrè, 1973;
De Felice R., Mussolini, il duce, vol. I, la conquista del potere, Torino, Einaudi, 1989;
Toniolo G., L’economia dell’Italia fascista, Roma-Bari, Laterza, 1986.




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