The economy of Fascist Italy refers to the economy in the Kingdom of Italy during the Fascist period. Italy had emerged from World War I in a poor and weakened condition and, after the war, suffered inflation, massive debts and an extended depression. By 1920, the economy was in a massive convulsion, with mass unemployment, food shortages, strikes, etc. That conflagration of viewpoints can be exemplified by the so-called Biennio Rosso (Two Red Years).
The Mussolini regime enacted substantial government control of the economy, with frequent price fixing of goods. When faced with international sanctions, the Mussolini regime set a fixed exchange rate, relied on bilateral trade agreements, and nationalized private banking. The regime implemented a corporatist system to manage the economy.
Background
There were some economic problems in Europe like inflation in the aftermath of the war. The consumer price index in Italy continued to increase after 1920 but Italy did not experience hyper-inflation on the level of Austria, Poland, Hungary, Russia and Germany. The costs of the war and postwar reconstruction contributed to inflationary pressure. The changing political attitudes of the post-war period and rise of a working class was also a factor and Italy was one of several countries where there was a disagreement about the tax burden.
Fascist economic policy Benito Mussolini came to power in 1922 under a parliamentary coalition until the National Fascist Party seized control and ushered in a one-party dictatorship by early 1925. The growth in Mussolini's popularity to the extent of becoming a national leader was gradual as would be expected for a leader of any fascist movement. The doctrine only succeeded in Italy because the public was as enthusiastic for change as Mussolini was committed to doing away with the liberal doctrines and Marxism in the country. Therefore, he would later write (with the help of Giovanni Gentile) and distribute The Doctrine of Fascism to the Italian society, which ended up being the basis of the Fascist agenda throughout Mussolini's dictatorship. Mussolini did not simply thrust himself into the dictatorship position, but rather rose gradually based on his understanding of the existing support for his ideas in the country.
Before the dictatorship era, Mussolini tried to transform the country's economy along fascist ideology, at least on paper. In fact, he was not an economic radical, nor did he seek a free-hand in the economy. The Fascist Party held a minority faction of only three positions in the cabinet, excluding Mussolini;Howard M. Sachar, The Assassination of Europe 1918-1942: A Political History, University Press of Toronto Press, 2015, p. 48 and providing other political parties more independence. During the coalition period, Mussolini appointed a classical liberal economist, Alberto De Stefani, originally a stalwart leader in the Center Party as Italy's Minister of Finance,Howard M. Sachar,The Assassination of Europe, 1918-1942: A Political History, Toronto: Canada, University of Toronto Press, 2015, p. 48 who advanced economic liberalism, along with minor privatization. Before his dismissal in 1925, Stefani "simplified the tax code, cut taxes, curbed spending, liberalized trade restrictions and abolished rent controls", where the Italian economy grew more than 20 percent, and unemployment fell 77 percent, under his influence.Jim Powell, "The Economic Leadership Secrets of Benito Mussolini," Forbes, Feb. 22, 2012. Source:
To proponents of the first view, Mussolini did have a clear economic agenda, both long and short-term, from the beginning of his rule. The government had two main objectives—to modernize the economy and to remedy the country's lack of strategic resources. Before the removal of Stefani, Mussolini's administration pushed the modern capitalistic sector in the service of the state, intervening directly as needed to create a collaboration between the industrialists, the workers and the state. The government moved toward resolving class conflicts in favour of corporatism. In the short term, the government worked to reform the widely abused tax system, dispose of inefficient state-owned industry, cut government costs and introduce tariffs to protect the new industries. However, these policies ended after Mussolini took dictatorial controls and terminated the coalition.
The lack of industrial resources, especially the key ingredients of the Industrial Revolution, was countered by the intensive development of the available domestic sources and by aggressive commercial policies—searching for particular raw material trade deals, or attempting strategic colonization. In order to promote trade, Mussolini pushed the Italian parliament to ratify an "Italo-Soviet political and economic agreement" by early 1923.Xenia Joukoff Eudin and Harold Henry Fisher, Soviet Russia and the West, 1920-1927: A Documentary Survey, Stanford University Press, 1957, p. 190 This agreement assisted Mussolini's effort to have the Soviet Union officially recognized by Italy in 1924, the first Western nation to do so.Stanley G. Payne, A History of Fascism 1914—1945, University of Wisconsin Press, 1995 p. 223 With the signing of the 1933 Treaty of Friendship, Nonaggression, and Neutrality with the Soviet Union, Fascist Italy became a major trading partner with the USSR, exchanging Soviet natural resources for Italian technical assistance, which included the fields of aviation, automobile and naval technology.Donald J. Stoker Jr. and Jonathan A. Grant, editors, Girding for Battle: The Arms Trade in a Global Perspective 1815-1940, Westport: CT, Praeger Publishers, 2003, page 180
Although a disciple of the French Marxist Georges Sorel and the main leader of the Italian Socialist Party in his early years, Mussolini abandoned the theory of class struggle for class collaboration. Some fascist syndicalists turned to economic collaboration of the classes to create a "productivist" posture where "a proletariat of producers" would be critical to the "conception of revolutionary politics" and social revolution.A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, pp. 59-60 However, most fascist syndicalists instead followed the lead of Edmondo Rossoni, who favored combining nationalism with class struggle,Franklin Hugh Adler, Italian Industrialists from Liberalism to Fascism: The Political Development of the Industrial Bourgeoisie, 1906-1934, Cambridge University Press, 1995, p. 311 often displaying a hostile attitude towards capitalists. This anti-capitalist hostility was so contentious that in 1926 Rossoni denounced industrialists as "vampires" and "profiteers".Lavoro d'Italia, January 6, 1926
Since Italy's economy was generally undeveloped with little industrialization, fascists and revolutionary syndicalists, such as Angelo Oliviero Olivetti, argued that the Italian working class could not have the requisite numbers or consciousness "to make revolution".A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, p. 55 They instead followed Karl Marx's admonition that a nation required "full maturation of capitalism as the precondition for socialist realization".A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, p. 59 Under this interpretation, especially as expounded by Sergio Panunzio, a major theoretician of Italian fascism, "[s]yndicalists were productivists, rather than distributionists".A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, p. 60 Fascist intellectuals were determined to foster economic development to enable a syndicalist economy to "attain its productive maximum", which they identified as crucial to "socialist revolution".A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, pp. 60-61
Structural deficit, public works and social welfare Referring to the economics of John Maynard Keynes as "useful introduction to fascist economics", Mussolini spent Italy into a structural deficit that grew exponentially.James Strachey Barnes, Universal Aspects of Fascism, Williams and Norgate, London: UK, (1928) pp. 113-114 In Mussolini's first year as Prime Minister in 1922, Italy's national debt stood at Lit.93 billion. By 1934, Italian anti-fascist historian Gaetano Salvemini, estimated Italy's national debt had risen to Lit.149 billion.John T. Flynn, As We Go Marching, New York: NY, Doubleday and Company, Inc., 1944, p. 51. Also see "Twelve Years of Fascist Finance," by Dr. Gaetano Salvemini Foreign Affairs, April 1935, Vol. 13, No. 3, p. 463 In 1943, The New York Times put Italy's national debt as Lit.406 billion.John T. Flynn, As We Go Marching, New York: NY, Doubleday and Company, Inc., 1944, p. 50. See New York Times, Aug. 8, 1943
A former school teacher, Mussolini's spending on the public sector, schools and infrastructure was considered extravagant. Mussolini "instituted a programme of public works hitherto unrivaled in modern Europe. Bridges, canals and roads were built, hospitals and schools, railway stations and orphanages; swamps were drained and land reclaimed, forests were planted and universities were endowed".Christopher Hibbert, Benito Mussolini: A Biography, Geneva: Switzerland, Heron Books, 1962, p. 56 As for the scope and spending on social welfare programs, Italian fascism "compared favorably with the more advanced European nations and in some respect was more progressive".A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, p. 263 When New York city politician Grover Aloysius Whalen asked Mussolini about the meaning behind Italian fascism in 1939, the reply was: "It is like your New Deal!".Grover Aloysius Whalen, Mr. New York: The Autobiography of Grover A. Whalen, G.P. Putnam's Sons, 1955, p. 188
By 1925, the Fascist government had "embarked upon an elaborate program" that included food supplementary assistance, infant care, maternity assistance, general healthcare, wage supplements, paid vacations, unemployment benefits, illness insurance, occupational disease insurance, general family assistance, public housing and old age and disability insurance.A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, pp. 258-264 As for public works, Mussolini's administration "devoted 400 million lire of public monies" for school construction between 1922 and 1942, compared to only 60 million lire between 1862 and 1922.A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, p. 260
In contrast to European democracies in the time period, Italy under fascist rule saw growing inequality.
First steps The Fascist government began its reign in an insecure position. Coming to power in 1922 after the March on Rome, it was a minority government until the 1923 Acerbo Law and the 1924 elections and it took until 1925, after the assassination of Giacomo Matteotti, to establish itself securely as a dictatorship.