Battle for Grain explained
The Battle for Grain, also known as the Battle for Wheat, was a propaganda campaign launched in 1925 during
the fascist regime of Italy by Benito Mussolini, with the aim of gaining self-sufficiency in wheat production and
freeing Italy from the "slavery of foreign bread". This campaign was successful in increasing wheat output and
lowering the trade balance deficit, but was ultimately economically counter-productive for Italy's agricultural
sector as farmers who grew other produce had to clear their land for grain cultivation which decreased exports and
thus resulted in higher food prices which placed Italian families under financial strain.
Aims
Some of the policy's aims included:




Boost grain production to make Italy self-sufficient in wheat
Reduce the trade balance deficit
Reduce the need of importing bread
Project Italy as a major European power
Impact
In the year following the announcement of the Battle for Grain, wheat production levels stood at 50% higher than
those in 1914 and this was because farmers were encouraged to ditch traditional farming methods in favour of
purchasing modern equipment and adopting new techniques in order to increase efficiency and maximise wheat
yields. However, this programme depended on farmers clearing their land for grain cultivation which many did,
but this resulted in a sharp decline in Italy's chief exports such as wines, cheeses and fruits as well as meat and
dairy products since there was limited agricultural space for viticulture and livestock rearing and other European
rivals such as Spain and Greece subsequently took over and prospered from their trade. Consequently, there were
food shortages which meant the price for these products soared and families were placed under considerable
financial difficulty as each household had to pay an extra 400 lire per year in food costs. This meant that
Mussolini was forced into increasing imports to appease the discontented Italian population and these rose to over
500 million tonnes by 1933. Furthermore, to ensure wheat grew en masse, fertilisers were required which needed
to be imported from elsewhere. Therefore, it is clear that the Battle for Grain was merely a propaganda initiative
designed to project an image of a hard-working, ruralised Italian populace who were loyal fascists successfully
fulfilling Mussolini's fanatical policies of Italy being a self-sufficient, autarkic state. In reality, Italy lacked the
necessary infrastructure and development to achieve this goal which was compounded by apathy from Italian
farmers to carry out Mussolini's wish. This farcical campaign was merely a façade to disguise Italy's internal
weakness from being known by other more powerful and developed countries such as Germany and Britain, which
profoundly intimidated Mussolini.
Battle for Births explained
The Battle for Births was one of four economic battles that took place in Fascist Italy (1922–1943), the others
being the Battle for Grain (to make the country more self-sufficient), the Battle for the Lira (an increase in the
value of the currency), and the Battle for Land (which involved policies of land reclamation). Prime
Minister Benito Mussolini, often known as Il Duce, envisioned an Italian Empire to rival that of the Romans, and
in order to carry out this objective, foresaw the need to increase the population. Mussolini pursued an often
aggressive foreign policy to achieve his colonial aims: the Italian army invaded Abyssinia (now Ethiopia) in
October 1935. The phrase "Battle for Births" was also used, in contemporary sources, to describe policies developed
in Nazi Germany.[1]
Implementation
Mussolini feuded with the Catholic Church over a number of issues in his time in office, but their views, at that
time, coincided on the issue of gender roles and contraception: both felt that women should assume a role as wife
and mother, and both disagreed with contraception and abortion, with Mussolini banning the former. The Battle
for Births began in 1927: Mussolini introduced a number of measures to encourage reproduction, with an objective
of increasing the population from 40 million to 60 million by 1950. Loans were offered to married couples, with
part of the loan cancelled for each new child, and any married man who had more than six children was made
exempt from taxation. Mussolini, who had developed a cult of personality, argued that the Italian people had a
duty to himself to produce as many children as possible according to Lisa (2009) and Talent et Al.
In correspondence with these incentives, laws were brought in to penalize any citizens who proved to be less
productive. Bachelors were taxed increasingly, and by the late 1930s, the civil service began recruiting and
promoting only those who were fertile and married. The state exercised some control over the number of women in
employment through nationalized businesses, and the state-owned railway company sacked all women employed
since 1915, with the exception of war widows. These policies extended to private industry as well, with the majority
of companies reserving promotions for married men.
Outcome
Unlike the Battle for Grain and Battle for Land, which were considered to be moderately successful, the Battle for
Births is seen as a failure. By 1950—seven years after Mussolini had been ousted by King Victor Emmanuel III,
and five years since his execution—Italy's population stood at 47.5 million. Marriage rates stayed virtually the
same during Mussolini's reign, and birth rates decreased until 1936, after which there was a modest increase.
The birth rate of 112 per 1000 in 1936 was below that of pre-World War I levels (1911: 147 per 1000). Mussolini
felt that the lack of enthusiasm shown by the Italian nation had cost him 15 army divisions in World War II (in
which Italy had fought alongside the Axis Powers).
Battle for the Lira explained
The Battle for the Lira was an economic policy undertaken by the Fascists in Italy during the 1920s as an
attempt to raise the claims of Italy becoming a great power.
Background
When Benito Mussolini took over as Prime Minister of Italy in 1922 the economy was in a bad state
following World War I. Between 1922 and 1925, the financial and economic situation generally improved
dramatically and this helped to increase the power of Italy, who strived to be one of the world's leading countries.
Italy wanted to restore some of its purchasing power. But in order for this to happen it was vital that they
strengthen the lira. Mussolini took the view that a weak lira would look bad for the country when presenting Italy
as a great power across Europe and the United States.
Details
Aims
The policy had a number of aims. These comprised:




to fix the lira at a rate of Lit. 92.46 ("Quota 90") to sterling (£ stg)
to reduce inflation
to confirm the image of Fascism bringing stability
to show the world that Italy could be a great force, with a strong, desirable currency
In October 1922 (when Mussolini first became prime minister), Lit. 90 to £1 stg had been the prevailing rate but
it had declined sharply, even reaching Lit. 150 to £1 stg in 1926.
Actions
The policy was confirmed at the Pesaro Speech on 18 August 1926 and was given the name Quota 90, referring
to the value they wanted to achieve.
Results
The revaluation hit Italy's export trade, but, by making imports cheaper, benefited heavy industries, such as steel
and chemicals, which relied on imported raw materials. These industries later provided the basis for an expanded
rearmament industry and so supported the 'active' foreign policy, which became the chief characteristic of the
fascist state. Tariffs on undesirable imports such as consumer goods and foodstuffs kept their high price and
restricted demand, protecting Mussolini's Battle for Grain policy. However, Italian workers were pressured into
accepting wage cuts to match the new value of the lira to the point where wages fell more than food prices and
living standards for working-class Italians rapidly declined.
Battle for Land explained
The Battle for Land, started in 1928 in Italy by Benito Mussolini, aimed to clear marshland and make it suitable
for farming, as well as reclaiming land and reducing health risks.
Aims
The primary aims of the Battle for Land was to increase the amount of land available for cereal production, to help
with the Battle for Grain. This would in turn provide more jobs and show dynamic action from the government,
impressing foreign governments. Another important aim of the Battle was to improve health by reducing malaria,
which was an issue due to the wildlife populating the marshlands.
Actions
The government expanded the previous government's schemes of providing money to drain or irrigate farmland.
Private landowners were made to cooperate with drainage schemes and other projects via the landholder association,
which determined contributions.[1] Malaria swamps were drained and a network of small farms were set up, owned
by ex-servicemen, as Fascist propaganda stressed the need to revive the rural areas and to build up a strong
peasantry - which would strengthen the fascist regime. The government also abolished day and short term labour.
Collective contracts were negotiated which secured long-term employment in agriculture. This encouraged
relocation to the countryside, particularly in the South.[2]
Consequences
Public health was improved, due to the destruction of the habitats of malaria-carrying wildlife. The Battle created
thousands of jobs during the depression, and resulted in the creation of new towns for show pieces
– Latina and Sabaudia – as well as reclamation of 80,000 hectares of land from the years 1928 to 1938. However,
the 80,000 hectares reclaimed was only one twentieth of the propaganda claim, which was one sixth of Italy's land.
Three quarters of the reclaimed land was in the North; the South, which was most in need of improvement, was
largely neglected. Southern landowners who were unable to make great enough contributions in terms of finance,
stock or employment had their land expropriated, albeit rarely.[3] The Fascist regime achieved nothing in the way
of land redistribution, which was, in any event, inconsistent with the central thrust of the higher-profile Battle
for Grain. Due to these failures, the scheme was abandoned in 1940.
Economy of fascist Italy explained
The economy of Fascist Italy refers to the economy in the Kingdom of Italy under Fascism between 1922 and
1943. 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).
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.[1]
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. [2] The
doctrine only succeeded in Italy because the public was just as enthusiastic for change as much 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. [3] 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.[4]
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;[5] 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, [6] 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.[7]
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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.[8] This
agreement assisted Mussolini’s effort to have the Soviet Union officially recognized by Italy in 1924, the first
Western nation to do so.[9] With the signing of the 1933 Treaty of Friendship, Nonaggression, and
Neutrality with the Soviet Union, Fascist Italy became a major trading partner with Joseph Stalin's Russia,
exchanging natural resources from Soviet Russia for technical assistance from Italy, which included the fields
of aviation, automobile and naval technology.[10]
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. [11] However, most
fascist syndicalists instead followed the lead of Edmondo Rossoni, who favored combining nationalism with
class struggle,[12] often displaying a hostile attitude towards capitalists. This anti-capitalist hostility was so
contentious that in 1926 Rossoni denounced industrialists as "vampires" and "profiteers". [13]
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".[14] They instead followed Karl Marx's admonition that a nation
required "full maturation of capitalism as the precondition for socialist realization". [15] Under this interpretation,
especially as expounded by Sergio Panunzio, a major theoretician of Italian fascism, "[s]yndicalists were
productivists, rather than distributionists".[16] 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".[17]
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. [18] 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.[19] In 1943, The New York Times put Italy’s national
debt as Lit.406 billion.[20]
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". [21] 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".[22] 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!".[23]
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.[24] 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.[25]
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.
Economic policy in the first few years was largely classical liberal, with the Ministry of Finance controlled by
the old liberal Alberto De Stefani. The multiparty coalition government undertook a low-key laissezfaire program—the tax system was restructured (February 1925 law, 23 June 1927 decree-law and so on), there
were attempts to attract foreign investment and establish trade agreements and efforts were made to balance the
budget and cut subsidies.[26] The 10% tax on capital invested in banking and industrial sectors was repealed
while the tax on directors and administrators of anonymous companies (SA) was cut down by half. All foreign
capital was exonerated of taxes while the luxury tax was also repealed. Mussolini also opposed municipalization of
enterprises.
The 19 April 1923 law transferred life insurance to private enterprise, repealing a 1912 law that created a State
Institute for insurances, which had envisioned construction of state monopoly ten years later. [27] Furthermore, a
19 November 1922 decree suppressed the Commission on war profits while the 20 August 1923 law suppressed
the inheritance tax inside the family circle.[28]
There was a general emphasis on what has been called productivism—national economic growth as a means of
social regeneration and wider assertion of national importance.
Up until 1925, the country enjoyed modest growth, but structural weaknesses increased inflation and the
currency slowly fell (Lit.90 to £1 stg in 1922, Lit.135 to £1 stg in 1925). In 1925, there was a great increase in
speculation and short runs against the lira. The levels of capital movement became so great the government
attempted to intervene. De Stefani was sacked, his program side-tracked and the Fascist government became more
involved in the economy in step with the increased security of their power.
In 1925, the Italian state abandoned its monopoly on telephone infrastructure while the state production of
matches was handed over to a private "Consortium of matches' productors". [27]
Furthermore, various banking and industrial companies were financially supported by the state. One of
Mussolini's first acts was to fund the metallurgical trust Ansaldo to the height of Lit.400 million. Following a
deflation crisis that started in 1926, banks such as the Banco di Roma, the Banco di Napoli and Banco di
Sicilia were also assisted by the state.[29] In 1924, the Unione Radiofonica Italiana (URI) was formed by private
entrepreneurs and part of the Marconi group and granted the same year a monopoly of radio broadcasts. URI
became the RAI after the war.
Lending to the private sector increased at an annual rate of 23.8 percent: total net profits of joint-stock banks
doubled, providing 'excellent opportunities for financial intermediaries.' When this period was halted, the burden
of deflationary policies disproportionately fell on the workers and employees.[30]
Firmer intervention
The lira continued to decline into 1926. It can be argued that this was not a bad thing for Italy since it resulted
in cheaper and more competitive exports and more expensive imports. However, the declining lira was disliked
politically. Mussolini apparently saw it as "a virility issue" and the decline was an attack on his prestige. In the
Pesaro Speech of 18 August 1926, he began the "Battle for the Lira". Mussolini made a number of strong
pronouncements and set his position of returning the lira to its 1922 level against sterling, "Quota 90". This
policy was implemented through an extended deflation of the economy as the country rejoined the gold standard,
the money supply was reduced and interest rates were raised. This action produced a sharp recession, which
Mussolini took up as a sign of his assertion of power over "troublesome elements"—a slap to both capitalist
speculators and trade unions.
On a wider scale, the Fascist economic policy pushed the country towards the corporative state, an effort that lasted
well into the war. The idea was to create a national community where the interests of all parts of the economy were
integrated into a class-transcending unity. Some see the move to corporatism in two phases. First, the workers
were brought to heel over 1925–1927. Initially, the non-fascist trade unions and later (less forcefully) the fascist
trade unions were nationalized by Mussolini's administration and placed under state ownership. [31] Under this
labour policy, Fascist Italy enacted laws to make union membership compulsory for all workers. [32] This was a
difficult stage as the trade unions were a significant component of Italian fascism from its
radical syndicalist roots and they were also a major force in Italian industry. The changes were embodied in two
key developments. The Pact of the Vidoni Palace in 1925 brought the fascist trade unions and major industries
together, creating an agreement for the industrialists to only recognise certain unions and so marginalise the
non-fascist and socialist trade unions. The Syndical Laws of 1926 (sometimes called the Rocco Laws
after Alfredo Rocco) took this agreement a step further as in each industrial sector there could be only one trade
union and employers organisation. Labour had previously been united under Edmondo Rossoni and his General
Confederation of Fascist Syndical Corporations, giving him a substantial amount of power even after the
syndical laws, causing both the industrialists and Mussolini himself to resent him. Thereby, he was dismissed
in 1928 and Mussolini took over his position as well.[33]
Only these syndicates could negotiate agreements, with the government acting as an "umpire". The laws made
both strikes and lock-outs illegal and took the final step of outlawing non-fascist trade unions. Despite strict
regimentation, the labour syndicates had the power to negotiate collective contracts (uniform wages and benefits
for all firms within an entire economic sector).[34] Firms that broke contracts usually got away with it due to the
enormous bureaucracy and difficulty in solving labour disputes, primarily due to the significant influence the
industrialists had over labour affairs.
Employer syndicates had a considerable amount of power as well. Membership within these associations was
compulsory and the leaders had the power to control and regulate production practices, distribution, expansion
and other factors with their members. The controls generally favoured larger enterprises over small producers, who
were dismayed that they had lost a significant amount of individual autonomy. [34]
Since the syndical laws kept capital and labour separate, Mussolini and other party members continued to
reassure the public that this was merely a stop-gap and that all associations would be integrated into the corporate
state at a later stage.
The corporative phase
From 1927, these legal and structural changes led into the second phase, the corporative phase. The Labour Charter
of 1927 confirmed the importance of private initiative in organising the economy while still reserving the right
for state intervention, most notably in the supposedly complete fascist control of worker hiring through statemandated collective bargaining. In 1930, the National Council of Corporations was established and it was for
representatives of all levels of the twenty-two key elements of the economy to meet and resolve problems. In practice,
it was an enormous bureaucracy of committees that while consolidating the potential powers of the state resulted
in a cumbersome and inefficient system of patronage and obstructionism. One consequence of the Council was
the fact that trade unions held little to no representation whereas organized business, specifically organized
industry (CGII), was able to gain a foothold over its competitors.
A key effect that the Council had on the economy was the rapid increase in cartels, especially the law passed in
1932, allowing the government to mandate cartelization. The dispute was sparked when several industrial firms
refused CGII orders to cartelize, prompting the government to step in. Since the corporations cut across all sectors
of production, mutual agreements and cartelization was a natural reaction. Hence in 1937, over two-thirds of
cartels authorized by the state, many of which crossed sectors of the economy, had started after the founding of
the Council, resulting in the noticeable increase in commercial-industrial cartelization. Cartels generally
undermined the corporative agencies that were meant to ensure they operated according to Fascist principles and
in the national interest, but the heads were able to show that cartel representatives had total control over the
individual firms in the distribution of resources, prices, salaries and construction. Businessmen usually argued
in favour of "collective self-regulation" being within Fascist ideological lines when forming cartels, subtly
undermining corporative principles.[34]
Government intervention in industry was very uneven as large programs started, but with little overarching
direction. Intervention began with the "Battle of the Grain" in 1925 when the government intervened following
the poor harvest to subsidise domestic growers and limit foreign imports by increasing taxes. This reduced
competition and created, or sustained, widespread inefficiencies. According to historian Denis Mack
Smith (1981), "[s]uccess in this battle was [...] another illusory propaganda victory won at the expense of the
Italian economy in general and consumers in particular", continuing that "[t]hose who gained were the owners of
the Latifondia and the propertied classes in general [...] his policy conferred a heavy subsidy on
the Latifondisti".[35]
Larger programs began in the 1930s with the Bonifica Integrale land reclamation program (or so-called "Battle
for Land"), which was employing over 78,000 people by 1933; the Mezzogiorno policies to modernise southern
Italy and attack the Mafia as per capita income in the south was still 40% below that of the north; the
electrification of the railways and similar transport programs; hydroelectrical projects; and the chemical
industry, automobiles and steel. There was also limited takeover of strategic areas, notably oil with the creation
of Agip (Azienda Generale Italiana Petroli—General Italian Oil Company).
The Great Depression
The worldwide depression of the early 1930s hit Italy very hard starting in 1931. As industries came close to
failure they were bought out by the banks in a largely illusionary bail-out—the assets used to fund the purchases
were largely worthless. This led to a financial crisis peaking in 1932 and major government intervention. After
the bankruptcy of the Austrian Creditanstalt in May 1931, Italian banks followed, with the bankruptcy of
the Banco di Milano, the Credito Italiano and the Banca Commerciale. To support them, the state created three
institutions funded by the Italian Treasure, with the first being the Sofindit in October 1931 (with a capital of
Lit.500 million), which bought back all the industrial shares owned by the Banca Commerciale and other
establishments in trouble. In November 1931 the IMI (with a capital of Lit.500 million) was also created and it
issued five and one-half billion liras in state obligations as reimbursables in a period of ten years. This new
capital was lent to private industry for a maximum period of ten years.
Finally, the Institute for Industrial Reconstruction (IRI) formed in January 1933 and took control of the bankowned companies, suddenly giving Italy the largest industrial sector in Europe that used government-linked
companies (GLC). At the end of 1933, it saved the Hydroelectric Society of Piemont, whose shares had fallen from
Lit.250 liras to Lit.20—while in September 1934, the Ansaldo trust was again reconstituted under the authority
of the IRI, with a capital of Lit.750 million. Despite this taking of control of private companies through (GLC),
the Fascist state did not nationalize any company.[29]
Not long after the creation of the Institute for Industrial Reconstruction, Mussolini boasted in a 1934 speech to
his Chamber of Deputies: "Three-quarters of the Italian economy, industrial and agricultural, is in the hands of
the state".[36] [37] As Italy continued to nationalize its economy, the IRI "became the owner not only of the three
most important Italian banks, which were clearly too big to fail, but also of the lion’s share of the Italian
industries".[38]
Mussolini's economic policies during this period would later be described as "economic dirigisme", an economic
system where the state has the power to direct economic production and allocation of resources. [39] The economic
conditions in Italy, including institutions and corporations gave Mussolini sufficient power to engage with them
as he could.[40] Although there were economic issues in the country, the approaches used in addressing them in the
fascist era included political intervention measures, which ultimately could not effectively solve the strife. [41] An
already bad situation ended up being worse since the solutions presented were largely intended to increase political
power as opposed to helping the affected citizens.[42] These measures played a critical role in aggravating the
conditions of the great depression in Italy.
By 1939, Fascist Italy attained the highest rate of state ownership of an economy in the world other than the
Soviet Union,[43] where the Italian state "controlled over four-fifths of Italy's shipping and shipbuilding, threequarters of its pig iron production and almost half that of steel". [44] IRI also did rather well with its new
responsibilities—restructuring, modernising and rationalising as much as it could. It was a significant factor
in post-1945 development. However, it took the Italian economy until 1935 to recover the manufacturing levels of
1930—a position that was only 60% better than that of 1913.
After Depression
As Mussolini's ambitions grew, domestic policy was subsumed by foreign policy, especially the push
for autarky after the 1935 invasion of Abyssinia and the subsequent trade embargoes. The push for independence
from foreign strategic materials was expensive, ineffective and wasteful. It was achieved by a massive increase in
public debt, tight exchange controls and the exchange of economic dynamism for stability.
Recovery from the postwar slump had begun before Mussolini came to power, and later growth rates were
comparatively weaker. From 1929 to 1939, the Italian economy grew by 16%, roughly half as fast as the earlier
liberal period. Annual growth rates were 0.5% lower than prewar rates, and the annual rate of growth of value was
1% lower. Despite the efforts directed at industry, agriculture was still the largest sector of the economy in 1938,
and only a third of total national income was derived from industry. Agriculture still employed 48% of the
working population in 1936 (56% in 1921), industrial employment had grown only 4% over the period of fascist
rule (24% in 1921 and 28% in 1936), and there was more growth in traditional than in modern industries. The
rate of gross investment actually fell under Mussolini, and the move from consumer to investment goods was
low compared to the other militaristic economies. Attempts to modernise agriculture were also ineffective. Land
reclamation and the concentration on grains came at the expense of other crops, producing very expensive
subsidised wheat while cutting more viable and economically rewarding efforts. Most evidence suggests that rural
poverty and insecurity increased under fascism, and their efforts failed markedly to create a modern, rational
agricultural system.
In the late 1930s, the economy was still too underdeveloped to sustain the demands of a modern militaristic
regime. Production of raw materials was too small, and finished military equipment was limited in quantity
and too often in quality. Although at least 10% of GDP, almost a third of government expenditure, began to be
directed towards the armed services in the 1930s, the country was "spectacularly weak". Notably, the investment
in the early 1930s left the services, especially the army, obsolete by 1940. Expenditures on conflicts from 1935
(such as commitments to the Spanish Civil War in 1936 to 1939 as well as the Italy-Albania War in 1939)
caused little stockpiling to occur for the much greater World War II in 1940–1945.