Italy. New «Corporations» policy

«The Economist», 13 gennaio 1934, pp. 66-67

The outstanding political event of January will be the discussion and vote on the Corporations Bill by Parliament. As foreshadowed in the Prime Minister’s speech at the end of the last session of the Corporations Council, the Bill states that as many Corporations (Guilds) shall be created as the Government may deem useful, after taking the advice of the Central Corporative Council. The Corporations may represent single industries or groups. Several Corporations may be temporarily grouped for special purposes. Corporative Committees relating to special products may be formed. By giving thus a flexible structure to the new bodies, the Government is trying to resolve the controversy over the industrial group and product conceptions of the Corporations. The most important point is the duties of the Corporations. They may give advice when requested – and sometimes the advice will be enforceable; they may act as mediators between employers’ and employees’ associations; and they may legislate. Previously in virtue of the Statute law of March 20, 1930, the National Corporations Council had the power to issue «orders for the regulation of collective economic relations»; but the power could be exercised only if requested by two or more interested associations and with the assent of the Prime Minister. Now a single Corporation will issue rules «for the regulation of collective economic relations and towards the unitary discipline of production». It can also regulate the prices of productive services in their respective fields. Such plans, rules and regulations are made on request (1) of a competent Minister, and (2) of one of the interested associations, with the consent of the Prime Minister. Plans, rules and regulations must be approved by the General Meeting of the National Council of Corporations and are compulsory when published in due form with a Decree of the Prime Minister.

The far-reaching economic changes embodied in the Bill cannot, of course, become a reality in a few days. The first task has been the reorganisation of the thirteen big Confederations, which now include all employers’ and employees’ associations. The Corporations are now to be living organisms and represent single industries or products and the big Confederations are to fall somewhat into the background. Employers’ and employees’ associations and federations, while maintaining, for purely wages, hours and other conditions of labour, their allegiance to national Confederations, will become directly part and parcel of the new Corporations. A new Chamber will be shortly elected, presumably in April next, on the same lines as the present, largely, that is to say, on a professional or corporative plan.

MORE WAGE CUTS LIKELY: Much attention has been given to a speech of Signor Asquini, Under-Secretary for Corporations, on the difficulties imposed on Italian exports by exchange depreciation, high tariffs and quotas. Starting from the announcement of a decrease of 15 per cent. in exports during the August-October period of 1933, compared with the corresponding period of 1932, and in face of a 5.5 per cent. increase in imports, Signor Asquini concluded that Italy must seek recovery in a reduction of costs. There are many costs, he said, which are kept on a high level. Cost must be reduced, Signor Asquini added, if Italy wished internal consumption to rise, because all producers whose prices have been reduced below the general level are gravely handicapped in their purchases. These very moderate Ministerial utterances were soon wrongly construed to foreshadow a general reduction in wages, salaries, rents, interests, prices, etc. If is safe to conclude that no general drive is in contemplation; but that continuous efforts will be made for a reduction of costs in the special fields where they are out of equilibrium with the general price level. A more recent speech by Signor Biagi stated that both employers’ and employees’ associations are revising their wage schedules in cases where old scales conflict with industrial and commercial exigencies. A recent cut of 10 per cent. in the winter wages of annually-engaged men in the rice district is an instance of the policy.

TREASURY CONVERSION OPERATION: A loan of 4,000 million lire Treasury 9-year 4 per cent. bonds with bi-yearly premiums was announced yesterday. The loan is primarily intented to reimburse 2,915 million lire old 5 per cent. bonds, due for repayment in 1934. The surplus will reinforce the Exchequer. The reduction from 5 to 4 per cent. in the standard rate of interest paid by the State on 9-year bonds – the net yield, taking account of premiums, works out at about 4.60 per cent. – is taken as foreshadowing further conversion. The internal Public Debt proper was 97,712 million lire on November 30, 1933, of which 71,290 millions consists of 5 per cent. and 3.1/2 per cent. consols, 16,987 millions of 9-year and other long-term redeemable bonds, and 9,435 millions of floating debt. Besides, there are the 1,607 million lire Morgan loan and long-term annuities for public works (these being estimated in a recent Budget Committee report as at present worth 20,137 million lire), which do not come within the range of conversions. The biggest block consists of 61,392 million lire of 5 per cent. consols; which, however, are not convertible by reimbursement until December 31, 1936.

As the money seeking gilt-edged investment is abundant, and there is little demand for land, houses or variable dividends securities, it is highly probable that if the Exchequer offered a new 4 per cent. consol assured against redemption for, say, 20 years, the great majority of holders would voluntarily tender for exchange their present 5 per cent. bonds, if only a small inducement of a few lire capital premium were offered to them. The price of 5 per cent. consols, which was on an average 82.40 for the year 1932, and opened 1933 at 86, is, to-day, at 96.1/2 ex-dividend.

FALLING INTEREST RATES AND INCREASED SAVINGS: The official discount rate, after remaining at 4 per cent. from January 9, 1933, to September 4, was then reduced to 3.1/2  and on December 11th to 3 per cent. The private discount on high-class commercial paper was also reduced between January, 1933, and January, 1934, from 4–4.3/4 per cent. To 3.1/2 – 4 per cent. Other financial indices are as follows:

The reorganisation process is continuing; the net result being that the total capital of joint stock companies was, for 17,384 companies, 52,281 million lire at the end of 1930; was, for 18,518 companies, 49,602 millions at the end of 1932; and, for 19,257 companies, 47,539 millions at the end of August, 1933. The rate of decrease is slowing and the average capital is decreasing.

Savings were as follows at the end of the periods concerned:

There is considerable shifting, in fact, between various groups. Discounts

and advances by the Bank of Italy were as follows:

This is not, however, a complete index to business in Italy, as the Bank of Italy carries out public as well as private business; and, as in the aggregate the public business has probably increased, the decrease in private operations partly explains why the best outlet for old and new savings is still to be found in public issues.