The Transition to free Trade in Wheat -Proposals for Increasing Expenditure -The Resignation of the Giolitti Cabinet and Financial Problems -The Fall in Stock Exchange Quotations

«The Economist», 9 luglio 1921, pp. 54-55

Turin, July 2

Since my last letter signor Soleri, the High Commissioner for Food, has obtained the consent of the Cabinet to a scheme for the final passage to free trade in wheat. After declaring that they will accept until August 31, 1921, all offers from agriculturists of national wheat at 125 lire per quintal for soft wheat and 145 lire for hard wheat, with additional premiums of 21.50 and 25 lire for southern provinces, islands, and territory formerly occupied, the Government were obliged to forbid until the same date any commercial intercourse between the two sets of provinces, those with and those without premiums, as otherwise all wheat could be smuggled from the latter into the former provinces for the sake of the premiums.

For the two months of July and August the sale price by the Government to millers is fixed at 128 and 150 lire for the two qualities. They hope that agriculturists will prefer to sell to private millers at a price from 125 to 128 lire rather than to the Government at 125 lire, so that the Government will be relieved of the burden of too great a mass of wheat thrown upon it by national producers fearing the competition of foreign wheat at lower prices. As the imports of foreign wheat will be made free only from September 1^st, the prices will oscillate until that date about 128 and 150 lire. The loss of the national Exchequer will be reduced to the payment of the premiums in the Southern and other privileged provinces. One may hope that this will be the last loss, and that after September 1st the State will be free from this appalling source of expenditure, and the wheat trade definitely restored to its natural freedom.

In his recent speeches the Premier uttered significant warnings against proposals of new expenditure which are forthcoming after the announcement, repeatedly made by responsible Ministers, that the deficit of the Italian Budget was reduced from 14 billion lire in 1920-21 to 4 billions in 1921-22. Signor Giolitti said very pointedly that 4 billions are not a matter to be trifled with, and that the deficit figure will easily increase if Parliament and Government will not set their faces resolutely against all new expenditure. The proposal, largely patronised in the Chamber of Deputies, of giving another monthly bonus of 200 lire to all public employees would add 900 millions lire to the expenditure. A scheme for national health insurance would cost another 900 millions, and so on.

The warnings fall as yet on sterile ground as far as concerns the House of Deputies, where the Government encountered a bitter opposition when they proposed the reduction of the number of public employees and the concession to this end of the necessary discretionary powers to Ministers. The Cabinet had to resign, apparently upon a doubtful vote on foreign policy, but in reality also owing to the difficulties encountered in the task of limiting the increase of expenditure and of applying the somewhat wild schemes of taxation voted by Parliament in September last. Especially the total confiscation of war profits is proving difficult in a falling market. As the law of September 24, 1920, prescribes that the valuations for taxing purposes shall be made at the date of June 30, 1920, and as at that date all prices were in Italy at their maximum, the taxpayers are confronted with the impossible task of paying enormous taxes upon a basis of values which is fast disappearing. For example, taxpayers who had invested, upon the advice of the Government, their war profits in ships, when these had to be bought from 2,000 to 2,200 lire per deadweight ton, are today obliged to pay these same 2,000-2,200 lire to the public Exchequer when the price of the ton has fallen to 500 lire.

To this cause of financial instability there is added the menace of compulsory inscription of all private securities. Inscribed securities are far from popular in Italy, where only bearer securities are practically negotiable. The fear of compulsory inscription is not the least cause of general decreases in the prices of stocks and shares. A recent calculation by Professor Bachi gives the following results on a basis of 100 for December, 1918:

For cotton, wool, silk, and miscellaneous maximum prices were quoted later than December, 1920. The land and houses category is alone enjoying a continuous rise, owing to better prospects for the future, when the exceptional Rent Restriction Acts will cease to operate. The fall was most severe in navigation, mines, engineering, motorcars, which were the greatest war profiteers, and reaches its maximum to the metallurgical group, owing to the artificial nature of this industry in a country like Italy deprived of coal and iron. One of the last acts of the Giolitti Cabinet was a decree promulgating the new fiscal import and export duties. The publication of this new general tariff is awaited with interest, as it is feared that protection has gained by it a signal victory just at a time when all people are clamouring for a reduction in the high cost of living.