Price Control in Fascist Italy 9780231888547

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STUDIES IN HISTORY, ECONOMICS AND PUBLIC LAW Edited by the FACULTY OF POLITICAL SCIENCE OK COLUMBIA UNIVERSITY

N U M B E R 444

PRICE CONTROL IN FASCIST ITALY BY

HENRY S. MILLER

PRICE C O N T R O L IN FASCIST ITALY

BY

HENRY S. MILLER, Ph. D.

NEW

YORK

COLUMBIA UNIVERSITY

PRESS

LONDON : P . S. K I N G & SON, L T D .

1938

COPYRIGHT,

1938

BY COLUMBIA UNIVERSITY P R E S S

PRINTED I N THE UNITED STATES OF AMERICA

tr o SARAH A. BAXENDALE

PREFACE THE bulk of the work on this study was done in Italy during the period from June, 1937 to April, 1938. For most of this time I was the recipient of an exchange fellowship between Columbia University and the Università Commerciale Luigi Bocconi at Milan, Italy, administered by the Institute of International Education. Without the aid of this grant the study could not have been completed at this time. Since I had attended the summer session of the Università Royale di Firenze in 1931, this was my second stay in Italy. Most of the detailed reference work was done in the Library of Bocconi University which has the finest collection of material on economic matters in Italy. When I first entered this library and saw the empty spaces on the shelves where the statistics from November, 1935 to December, 1936 should have been, my heart sank. However, I found most of this material in later publications. Little has been written about price control in Italy except in periodicals. Therefore a great part of my work consisted in interviewing officials at Rome and in other cities, and seeing conditions at first hand throughout the peninsula. Among other cities I was able to visit Palermo, Naples, Siena, Florence, Milan, Pisa, Pavia, Turin, Bergamo, Como and Genoa. Responsibility for all translations from the Italian and the interpretation of these rests with the author. I wish to acknowledge especially the help and advice in Italy of Professor Riccardo Bachi of the University of Rome, Dr. Alberto Campolongo of the Banca d'Italia, Dr. Carlo Pagni, of the National Federation of the Woolen Industry, Signora Olivia Rossetti Agresti of the Fascist Confederation of Industrialists at Rome, Professor Francesco Vito of the Università Cattolica at Milan, Professors Libero Lenti, Giorgio Mortara, Giovanni Demaria, Gino Borgatta and Fausto Pagliari (Librarian) of Bocconi University and many others, including 7

8

PREFACE

former members of the Central Price Committee and price officials, scattered throughout Italy, who received me hospitably and took time from busy days to answer my insistent questions. T o Professors Bachi and Lenti I feel particularly indebted, since the former furnished me with a working plan for my study early in my residence abroad, while the latter helped tremendously with the statistical part of the study. T o Miss Olive I. Carter the author is indebted for several suggestions as to how to improve the style of the manuscript. A t Columbia University my sponsors, Professor James W . Angell and Dr. Michael T . Florinsky, have directed my work very carefully. Although Professor Angell has not seen the finished work, his suggestions were of great aid. Dr. Florinsky, himself an authority on the corporate state, piloted me through the most perilous straits, and I am very grateful for his enduring patience and kindness. I have been greatly helped by the counsel of Professors Wesley C. Mitchell, Frederick C. Mills, Herbert W . Schneider and B. Haggott Beckhart. Dean Roswell C. McCrea has followed all my efforts with kindly interest. My wife has not only aided greatly with the proof reading, but also has been a constant source of inspiration. H. S. M. N E W YORK JUNE, 1938.

CITY,

CONTENTS PAGE

PREFACE

7

CHAPTER I Early Price Measures

15 C H A P T E R II

Central Control Begins

33 C H A P T E R III

The Effect of the Devaluation of the Lira

40

C H A P T E R IV The Corporative Control of Prices

62

CHAPTER V I. The Aims and Theory of Price Control I I . The Origin of the Control Committees III. Trusts and Prices

73 81 83

CHAPTER VI The Methods and Effectiveness of Local Control

86

CHAPTER VII The Statistics of Italian Prices

93

CHAPTER VIII Conclusions

136

BIBLIOGRAPHY

142

INDEX

145

9

LIST OF CHARTS PAGE

CHART I. Graphs of the Indices of Wholesale Prices, Retail Prices and Cost of L i v i n g , Monthly, Jan., 1934 to Feb., 1938

95

CHART I I . Graph of the Indices of Cost of L i v i n g , Hourly Industrial W a g e s and Real Wages, Monthly, Jan., 1934 to A u g . , 1937 . .

98

CHART I I I . Graph of the Indices of Cost of L i v i n g , Daily W a g e s in Commerce and Real W a g e s , Y e a r l y , 1930 to 1935, Monthly, Jan., 1936 to N o v . , 1937 . . . 103 CHART I V . Graph of the Indices of Cost of L i v i n g , Monthly Industrial W a g e s , and Real W a g e s , Yearly, 1930 to 1937, Monthly, from Jan., 1934 to D e c . , 1937

106

CHART V . Graph of the Indices of Import and Export Monthly, Jan., 1934 to July, 1&37

125

Prices,

CHART V I . Graph of the Indices of the Wholesale Prices of Raw Materials, Half-finished Goods and Finished Goods, Monthly, Jan., 1929 to Jan., 1938

11

131

LIST OF TABLES PAGE

Wholesale Price, Retail Price and Cost of Living Indices, Yearly, 1929 to 1937 TABLE II. Cost of Living, Hourly Industrial Wage and Real Wage Indices, Yearly, 1929 to 1937 T A B L E I I I . Wholesale Price, Retail Price and Cost of Living Indices, Monthly, Jan., 1934 to Feb., 1938 T A B L E I V . Indices of Cost of Living, Hourly Industrial Wages and Real Wages, Monthly, Jan., 1934 to Aug., 1937 T A B L E V. Average Daily Wages in Commerce; Indices of Daily Wages in Commerce, Cost of Living and Real Wages, Yearly, 1930 to 1936 ; Monthly, Jan., 1936 to Nov., 1937 T A B L E VI. New Hourly Industrial Wage Index ; Number of Hours Worked per Month, Monthly Industrial Wage Index, Cost of Living and Real Wage Indices, yearly, 1928 to 1937; Monthly, Jan., 1934 to Dec., 1937 TABLE V I I . Wages of Agricultural Laborers and Indices of Agricultural Wages for Men, Women and Children, Yearly, 1930 to 1935 TABLE V I I I . Comparison of Average Retail Prices and Index Numbers of 20 Common Foods, from Dec. 1, 1935 to Dec. 1, 1936 with their percentage differences TABLE I X . Similar to Table V I I I . for the Period from Oct. 1, 1936 to Oct. 1, 1937 TABLE X . Wholesale Prices of Soft Wheat, Olive Oil, Rayon, Steel and Coal; Monthly, July, 1935 to Dec., 1937 T A B L E X I . Value of Italian Imports and Exports, 1928 to 1937 with Trade Deficits . . TABLE X I I . Indices of Import and Export Prices, Monthly, Jan., 1934 to July, 1937 TABLE X I I I . Indices of the Quantities of Exports, Yearly, 1929 to 1937 T A B L E X I V . Indices of Import and Export Prices of Food, Raw Materials, Half-finished Goods and Finished Goods in 1937 . . . T A B L E X V . The National Wholesale Price Index and the Indices of the Wholesale Prices of Raw Materials, Half-finished Goods and Finished Goods, Monthly, Jan., 1929 to Jan., 1938 TABLE X V I . Indices of the Prices of Consumers' Goods and Instrumental Goods, Yearly, 1928 to 1936 TABLE X V I I . Comparison of Retail Price Increases in Naples, from Nov., 1935 to July, 1937; Results of an Independent Investigation Compared with Official Italian Government Statistics . . . . TABLE I .

13

93 94 96 99 102

104 108 ill 113 114 122 123 126 126 128 132 134

CHAPTER I EARLY PRICE MEASURES PRICE control is no new thing for Italy or any other country. Indeed in Roman days the government meted out bread to the common people either as a g i f t or at artificially low prices. The first definite record of price control exists in an edict issued by Emperor Diocletian in 303 A . D., which fixed maximum prices for the entire Roman Empire. 1 Several centuries later we find the mediaeval guilds placing severe limitations not only on prices but also on the conduct of trade and commerce. More recently the Italian government controlled prices rigorously during the World War as every warring nation did. The scope of the present investigation is restricted to a study of price control in Italy under the Fascist regime. The story is told in general outline from the end of the World War to October, 1935 ; from that time on the problem has been treated intensively. A f t e r the World War most of the emergency price statutes were repealed. However the laws on clear display of price signs and explicit declaration of brand and quality were retained. The first action of the Fascist government on prices came two years after the March on Rome, when the Minister of National Economy acted on October 19, 1924 to halt the mounting price of bread due to the poor wheat crop.2 The orders sent out directed that a processing tax be placed on bread of common type and that provincial commissions be made up of the prefect to act as president, representatives of the syndicates of the principal Communes, and the most responsible local representatives of the millers and the bakers. These 1 Edict of Diocletian Fixing

a Maximum of Prices throughout the Roman

Empire, A. D. 303, published in English, London-, 1826; Latin page 8 to 28, the balance in English; the John Murray Publishing House. 2 Politica e tecnica fascista dei preszi by Lorenzo L a V i a , pp. 12-13.

IS

l6

PRICE

CONTROL

IN

FASCIST

ITALY

commissions were to ascertain the cost of flour f o r their respective provinces. In addition they were to watch over the processing of wheat and to pass on suggestions to the ministry f o r eventual general action. Further action was taken A u g u s t 13, 1926, when a royal decree law dealt with the processing of wheat, subject to the jurisdiction of the provincial commissions mentioned above and of a new central market committee (comitato

centrale annonario).3

Its purpose was to limit the

sale of luxury bread, the sweetening of flour and the use of flour in pastry. T h e commissions were to check on the current price of wheat, and to determine the prices f o r flour and wheat by-products. In their deliberations the fundamental elements to be considered in determining the price of flour w e r e : 1 ) the current price of wheat, 2 ) the expenses of milling, 3 )

the

current price of wheat by-products, and 4 ) the risks due to oscillations of prices and 5 )

an equitable industrial profit.

E v e n at this early date Lorenzo L a V i a sees in this process of

commission

tive."

investigation

" a procedure almost

corpora-

4

B y the decree law of December 16, 1926 the Communes were given the power to make price lists and fix prices f o r each municipality. " In accordance with the decisions of the Provincial Councils of economia)

Economy

(Consigli provinciali

dell'

and of the interested syndical organizations, the

power was given to the Communes of fixing prices o f the principal kinds of food at retail."

5

T h e price committees o f the

3 Ibid., p. 13. 4 Ibid., p. 14. 5 " L a disciplina dei prezzi e la funzione dei prezzi indicative" by Carlo Spantigati in II Sole, April 27, 1935. II Sole is the leading financial newspaper in Italy. It is published daily at Milan. In addition to the usual financial news, stock quotations, etc., it contains pertinent articles by economists of national repute o n government financial and economic policies. M a n y of its longer articles have been reprinted in Italian economic journals. There is frequently outspoken criticism of government policy. It contains all the price orders issued by agencies of the government. T h e numerous references in this study t o the files of II Sole

EARLY

PRICE

MEASURES

17

Communes, presided over by the Mayor (Podestà) in cooperation with the government enti (Commissions) were to consult consumer interests, the economic and social desirability of any price, and the harmony of all interests. From the beginning there was some difficulty about the overlapping of the authority of the Intersyndical Committees and that of the municipal bodies. In 1927 the work of the Intersyndical Committees was fixed as follows : 1 ) to discover the costs of production of the original producers, 2 ) differences in quality and 3 ) costs of marketing. 8 The control by the Communes was unsatisfactory and on May 19, 1930 all regulatory powers possessed by those bodies was abrogated. Dr. Carlo Spantigati comments : " It was absurd that while the whole economic life of the nation was attaining a greater coordination and was permeated by the syndical-corporative order that a sector, so serious as that of prices should remain entrusted to an organ exclusively administrative and political, devoid of technical competence in materia economica." 7 T h u s - f r o m M a y 19, 1930 there was no organized control for four years over prices in general. T h e supervision of the wheat, flour and meat prices by the central government continued. Numerous decrees in 1927 contained general provisions for flour and the licensing of millers. In 1932 the types of bread and flour were more clearly defined by weight and quality. I f the retailer did not have the type of bread asked for, he had to substitute the next best quality at the price of the bread requested. Food pastes 8 were divided into three qualmay strike the reader as strange. However, Professor Riccardo Bachi of the University of Rome who first advised me to use the paper assured me of its reliability and told me I would find things in it I could get nowhere else. The extensive use of material from this paper involves no loss of scientific accuracy. In fact, without II Sole it would have been impossible to complete the work. SPolitica

e tecnica fascista dei prezzi by Lorenzo La Via, pp. 30-31.

7 II Sole, Aprii 27, 1935. 8 Such as macaroni, spaghetti, etc.

l8

PRICE

CONTROL

IN

FASCIST

ITALY

ities in 1933. Fines were to be levied in case of false declaration of the quality sold or for lack of any declaration. Other laws in this period had to do with regulating the proportion of hard wheat that might be mixed with soft and the amount of foreign wheat that might be used with domestic. 9 All these provisions were part of the " battle of the w h e a t " begun in 1925 to make Italy independent of foreign supplies of wheat. Starting in 1927 the government sought to regulate the meat market. Regulations provided that fresh and cold storage meat be differentiated and that the various kinds of fresh meat be properly labeled. Also stricter sanitary standards were set up. Horse meat had to be sold in special shops for that purpose. 10 During 1927-1928 the principle of the " fixed p r i c e " was more effectively established in the interest of the consumer. That is, the price of each article was to be clearly displayed and maintained. This provision was aimed at the practice of " haggling " over prices which has all but disappeared in Italy. Fines were established by law in 1923 and 1928 of from 50 to 2,000 lire for non-observance of "fixed price", and 10,000 lire in case of continued infractions. 11 According to laws, passed in 1923 and 1926, licenses were to be revoked in cases where prices were charged higher than those marked. T o understand the next steps in price control, it is necessary to review the general policy of the Italian government from 1927 to 1934. The stabilization of the lira in 1927 initiated a policy of deflation that was not relinquished until Ethiopia had been conquered. In December, 1930 wages and rents were reduced to keep in line with rapidly declining prices. There was no need for government reduction of prices. The depression was taking care of that. During the period from 1927 to I 934> wages and rents were reduced in successive stages by 9 La Via, pp. 15-20. F r o m this point on Lorenzo La Via's book, Politico e tecnica fascista dei prezsi shall be referred to as simply—La Via. 10 La Via, p. 22. 11 Ibid., p. 29.

EARLY PRICE MEASURES

19

as much as 4 0 % . T h e last reduction occurred on April

15,

1934, when wages were reduced f r o m 6 to 1 2 % and rents f r o m 12 to 1 5 % . In defense of this policy, Benito Mussolini spoke in the Chamber of Deputies M a y 27, 1934 of the changes and asked, " H a v e prices decreased ? Y e s , prices have creased!"

( S o n o diminuiti

i prezzi?

Si,

sono

de-

diminuiti!)

,12

T h e retail price index ( 1 9 1 3 = 100) fell f r o m 647 in A u g u s t , 1926 to 387 in March, 1934. T h e price of bread in Rome fell f r o m 2.48 lire in 1926 to 1.50 lire in 1934, and even to 1.30 lire in some parts of the city, for " I have bought it at that price," declared Mussolini in the same speech amidst much laughter. 1 3 B y the spring of 1934 conditions were changing. Recovery f r o m the long depression had started in England and the United States. In Italy prices were no longer declining, but beginning to rise. Thus the new reductions in rents and wages called for reductions in prices, if the status quo in their adjustment was to be kept. T h e government, however, took no immediate action on prices. Instead the Commissariat of the Fascist Confederation of Merchants, Dr. M a r i o Racheli, started a " high pressure " campaign of persuasion and propaganda to bring prices in line with incomes April 16, 1934. 1 4 Meetings

of

the

Fascist

Federations

of

Merchants

were

held

throughout Italy. A l l action was voluntary and on a patriotic basis at least at the beginning. A t Milan the Fascist Provincial Federation of Merchants agreed to lower the prices of meat 5 % , bread 5 centesimi clothes 5 % ,

hats

5%,

etc.

per kilogram, vegetables Cards

were printed

10%,

containing

notice of the reductions and were distributed to each store on April 18, 1934. A special commission was to watch over reductions. In other cities we note similar reductions: Bolzano 1 0 % , L i v o r n o 5 to 1 0 % , and Montavo 1 0 % . Fiume lowered 12II Sole, May 28, 1934. 13 Ibid. 14II Sole, April 17, 1934.

20

PRICE

CONTROL

IN

FASCIST

ITALY

water rates 12 to 1 5 % and gas and electricity rates 10%. In Bologna food prices were lowered 5 to 10% on April 21, 1934. In Perugia general reductions were to be made by the Comitato di presidenza del consiglio dell' economia corporativa.ls The persuasive and emotional side of the campaign for the adjustment of prices (adeguamento di prezzi) and the reduction of costs (riduzione di costi) is reflected in the comments of " L. B.", Rome correspondent of II Sole.16 H e claimed " the spiritual and corporative atmosphere makes lower prices possible." If prices were to be reduced, costs of production had to be drastically reduced. " L . B . " pleads for a complete organization of the entire market from producer to retailer in each branch of industry to bring about revision of costs and prices downward. Retail meat prices were too high in his opinion compared with the prices of meat on the h o o f ; sugar prices were too high, while iron and steel prices in Italy were out of alignment with prices in other European countries. " Some prices have been revised, but a more complete and thoroughgoing revision from producer outward is needed, rather than the mere reduction of the margin distributors enjoy." 17 The Secretary of the Fascist Party {Partito Nazionale Fascista) first enters the picture by declaring in party orders that reductions in price must not mean reduction in quality. 18 Enforcement of control during this period was in the hands of the Fascist Confederation of Merchants. This body made 700 careful investigations and reported that over 50 companies were found disobeying the price orders of the Confederation. 19 They were to be reported if they did not come into line. 15 This is the Committee now entrusted with price control in each province. 16 April 22-23-24, 1934. 17 Ibid. 1811 Sole, May 3, 1934. This is the first printed account of Party action on Prices. It is possible and highly probable that the Party was active before this.

19II Sole, May 4, 1934.

EARLY

PRICE

21

MEASURES

It is interesting to trace the feeling about direct government intervention in the price field. A s early as January 30, 1934, " L . B . " wrote about the rising prices, frauds, chiseling and price discrepancies in general. 20

H e declared in this

same

article, " One fine morning laws shall issue f r o m Rome about all t h i s ! " Later in the midst of the campaign to lower prices, the same writer said, " T h e Provincial Councils of Corporate Economy

(Consigli

provinciali

dell'economia

corporativa)

under the guidance of the prefects and the Fascist Party, including representatives of agriculture, industry, transport and finance,

could do the job of proper adjustment of prices to

incomes and the cost of living. T h e corporate and party organization would insure the success of such a move."

21

T h e Fas-

cist Party had begun to act as noted above; in fact its Secretary appointed commissions of control, including experts on prices and commerce to help the Fascist Federations of Merchants. Thus, it was not the Fascist Party, but the Confederation of Merchants that initiated control in 1934. A t a meeting in Rome D r . Racheli, the head of the Confederation of Merchants, fixed the procedure for price-fixing on M a y 8, 1934. 22 Periodical price lists were to be made up with the consent and the collaboration of the competent local and central authorities. These lists were to include the 21 principal items of food

23

used by the Central Institute of Statistics

f o r their retail price index. T h e meeting proposed that the central authorities agree with the local ones on the setting up of corporative committees to watch over and enforce the price lists; also to establish in each locality professional commissions to control the daily progress of prices in retail stores. These recommendations were to be reported to the head of the government as a powerful means of regulating the program of 2 0 I I Sole, January 30, 1934. 21 Ibid., May 5, 1934.

22 Ibid., May 9, 1934. 23 In fact twenty items were food and one was charcoal with which to cook them.

22

PRICE

CONTROL

IN

FASCIST

ITALY

deflation. Racheli said, " The future will not underrate the good sense and the serious intent of the proposals of Italian merchants ! " 2 4

the

Meantime the added power of the Corporations (or guilds) 2 5 was bringing these unwieldy bodies nearer to ultimate control of the entire economic system. O n February 5, 1934 a new law declared that the Corporations should exert their power to stabilize prices of economic services and goods, offered to the public " under conditions of privilege." In other words the guilds were to clamp down on monopoly prices, special transportation rates or any special arrangements that would give monopolies unusual concessions. It is significant as well that on M a y 9, 1934 in the midst of the first attempts at planned price control that the new plan for putting the Corporations to work was announced of which I shall speak later. 26 Early discipline over prices was somewhat haphazard. There was no uniformity in the> organization o f control. In some provinces announcements of price reductions were simply posted by the merchant in his w i n d o w ; in others the maximum price lists were made up by the Fascist Federations of Merchants; and elsewhere the price lists were made up by the Provincial Councils of Corporative Economy or the Communes. T h e Secretary of the Fascist Party organized Commissions of Control (Commissioni di controllo) to supervise prices and the quality of goods. The maximum price lists were roundly criticized in Rome, Genoa, Palermo, Verona and Como, since consumers complained that the prices in these lists were much higher than the prices practiced in the market. 27 24II Sole, May 9, 1934. 25 For American readers the word guild is preferable to corporation, since the latter word brings to mind a joint-stock company rather than the Italian corporate unit. There is no accurate word to use in English. I have used " g u i l d " and "corporation" interchangeably in this study. 26 It must be remembered that the Corporations existed only on paper unitil after the passage of these laws. 27 " La battaglia dei prezzi," by M. M. in II Commercio, May, 1934, p. 278.

EARLY

PRICE

MEASURES

23

Meantime actual market prices were revealing the effects of the campaign for lower prices. In round figures the prices of foods had been reduced by 5-7%, clothes and shoes 5 to 10%, hotel rates 12%, and public services (gas, water, etc.) 10%. 28 Taking the higher import duties instituted in 1934 into account, a reduction of 5% on an imported article (or an article made from imported materials) meant an actual reduction of about 10%. The attack was centered on retail prices which meant that retailers had to work on smaller margins. This is the method pursued in almost all government price fixing. The local merchant must first cut down on his margin of profit, while wholesalers and producers are free to manipulate their prices. Only later do the authorities get around to regulating costs and prices all through the cycle of production. The purpose of the price campaign in 1934 was to keep the monetary relationship in terms of purchasing power as it was before and to lower costs of production and prices in Italy to aid exports. A measure of the effectiveness of the campaign to reduce prices in the spring of 1934 is found in the decline of the retail price index ( 1 9 1 3 = 100) from 386.6 in April, 1934 to 364.2 in June, 1934, a reduction of 5-8%.29 Finally on June 16, 1934 the Secretary of the Fascist Party, Starace, sent out definite orders to all the provincial secretaries to regularize local price enforcement.30 Power was given solely to the Intersyndical Committees (Comitati intersindacali) in each province to issue price lists. The Maximum Price List (Listino Preszi Massimi) was to include the maximum prices of the twenty-one principal consumption articles: bread, wheat flour, corn flour, rice, dried beans, food pastes, potatoes, beef, fresh pork, sausage, dried cod fish, eggs, lard, salt pork, cheese, 28 Of course, any price change is due to a variety of causes. I believe the chief, but not the only cause, in this case, was the compaign to reduce prices. 29II Sole, August 7, 1934. 30II Sole, June 20, 1934.

24

PRICE

CONTROL

IN

FASCIST

ITALY

butter, olive oil, sugar, roasted coffee, milk and charcoal. In forming maximum prices the Intersyndical Committees were to take into account all costs to the retailer, including transportation, costs of sale and a reasonable profit. Since no list could be formed for clothing, changes in that field were to be announced as percentages of decrease or increase over former prices. For hotels a uniform reduction of 1 5 % on rooms and 10% on other services was fixed. The local committee was to avoid favoring the local market as contrasted with those of neighboring provinces and to avoid great differences in prices between provinces. The National Confederation of Merchants was to furnish technical information on request. The Fascist Provincial Federations of Commerce were to communicate price lists to all merchants in the province. These were to be the maximum prices except for slight changes that might be made under the surveillance of the Mayor or the Secretary of the Fascio di Combattimento in consideration of special local conditions. Each Federal Fascist Secretary was ordered to institute a claims office to receive and evaluate the grievances of consumers who thought they had been overcharged. Supporting documents had to be supplied in each case. If the complaint was verified, the infraction had to be reported to the Price Commission for action. In turn the Intersyndical Committees should report the names of the guilty ones to the Provincial Federations of Commerce for disciplinary action and post notice of it in the local newspaper at the expense of the guilty party. Party orders provided for another price list, the Indicative List (Indicative) Listino). These lists were not compulsory. They listed the lowest prices practicable for the community concerned and included many more items and varieties of articles than the Maximum Price Lists. 31 The Indicative List in Turin contained 100 items. These Indicative Lists had two 31 " La disciplina dei prezzi e la funzione dei prezzi indicativi," by Carlo Spantigati in II Sole, April 27, 1935.

EARLY

PRICE

MEASURES

25

functions: i ) to set a " just price " for that locality and 2) to exert a moderating influence on the market, as merchants would not wish to make prices any lower, since that would wipe out the narrow margin of profit, and they did not want to charge higher prices, since they would lose their clientele if they did.32 Each merchant who agreed to maintain the prices posted on the Indicative Lists was permitted to display a notice to that effect in his shop. There is no evidence of just when these lists disappeared. Probably they ceased to function in various provinces at irregular intervals after October, 1935. Giuseppe Binello says that " The indicative prices were suppressed because of their rather hybrid character. The Indicative Lists finished by being indeterminate and in some provinces they came to be equal to the maximum prices. Therefore their existence was nothing but pleonastic, a cause for misunderstanding and confusion both for the buyer and the seller." 33 Binello explains why but not exactly when these lists were discontinued. Such was the price-fixing arrangement from June 16, 1934 to October 16, 1935. It was a loose local control with no central supervision except the orders of the Secretary of the Fascist Party and the general interest of the Fascist Confederation of Merchants. Grave differences in prices between provinces resulted. The best evidence of the inefficiency of control in this period lies in the striking rise of prices during the first nine months of 1935. But even in June 1934 Dino Gardini described the control system as a "triumph of a regulated e c o n o m y " ( t r i o n f o della economia regolata),34 Not all the critics praised the system of controls. " L . B . " said the only way to control prices is to control costs through the whole productive process. " T h e present empiricism stupidly 32 Ibid. 33 " II prezzo politico ed il profitto commerciale," by Giuseppe Binello in

Lo Stato, June, 1937, p. 376. 34 " L'Azione del Partito sui prezzi," by D i n o Gardini in II June, 1934, p. 341-

Commercio,

20

PRICE

CONTROL

IN

FASCIST

ITALY

accompanied by a police attitude (mentalità poliziesca) tries in vain to realize such a reduction in the cost of living." 35 He praised local action on twenty-one goods, but asked for action on wholesale prices and the prices of other goods. Later the same writer praised the maintenance of wheat prices at 75 lire per quintal for soft wheat and 90 lire for hard.36 Wheat prices were sustained by the granting of anticipatory loans on this basis by the wheat pools (ammassi granari). These pools were not made compulsory until June, 1936, so that control of wheat prices was not fully effective until then. In the comments of Italian economic writers in the winter and spring of 1934-1935, we can see the desire for a more corporative and thoroughgoing system of price control. Conado Petrone asked how the law of February 5, 1934, giving the corporations control over " prices of consumption goods, offered to the public under conditions of privilege " should be interpreted.37 Later he wrote, " In Italy the great head of the national economy, Il Duce, has had for many years his fine formulated program and has put it into action, gradually adapting it with intelligent intuition and perfectly practical adherence to contingent problems. The head of the government shall move to fix prices in good time." 38 Professor Filippo Carli issued a plea to " corporatize " the markets (corporativizzare i mercati),39 if we may use such a translation of Carli's coined word. " Leave public cleanliness of markets, etc. to the market police (polizsia annonaria) and the municipal authorities," he said.40 The Corporations should take over their technical-economic management. On March 9, 35 / / Sole, June 26, 1934. 36 Ibid., June 28, 1934. 37 " Il prezzo corporativo," by Conado Petrone in II Commercio, November, 1934, p. 718. 38 " Tariffe e prezzi in regime corporativo," by Conado Petrone in II Commercio, December, 1934, p. 819. 39II Sole, February 15, 1935. 40 Ibid.

EARLY

PRICE

MEASURES

27

1935 Carli praised the corporative attitude on prices. 41 H e said the Fascist regime was following the middle road between the Soviet system of fixing prices for long periods and the competitive régime of liberal economy. " T h e guild principle is that of the contract price or the coordination of prices."

42

In considering the viscosity of retail prices and rigid prices generally, he said, " T h e guilds (corporations) need to intervene in the adjustment

of the rigid components

of prices."

43

Further, Rosario Sottilaro quoted Carli as follows : " T h e corporative system is the only one that can logically realize in perfect harmony a theoretic system of equilibrium prices and just prices — in short, economic justice. The instruments of such justice are the Corporations."

44

" L . B . " comments that since the limitation on imports was restricting the supply, there should be control over their prices. 45 Switzerland and France recently acted to control prices, but in corporate and Fascist Italy where the whole organization is ready for control, the " free play of trade allows unrestrained speculation."

46

Such action as that of the Secretary of the

Fascist Party sending directions to the Intersyndical Committees " are but episodes. A complete, intensive and minute w o r k of

control and orientation is needed in all sectors of

the

national economy f o r the purpose o f avoiding any variation in prices that is not due to valid commercial reasons and that are not fully justified in their extent ( o f change). A n element that escapes every possibility of technical control is the psychological one. A t the center o f operations are the corporations and syndical organs; locally the Intersyndical Committees and the 41II Sole, March g, 193S. 42II Sole, March 9, 1935. 43 Ibid. The italics are Carli's. 44 " La formazione dei prezzi in regime corporativo," by Rosario Sottilaro in II Commercio, March, 1935, p. 173. 45II Sole, March 26, 1935. 46 Ibid.

28

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Provincial Councils of Corporative Economy are ready to carry out competent control without calling the citizen who protests (against overcharging) into the case." 47 Three days later " L . B . " was railing against the rise in import prices of raw materials. 48 He divided producers into two categories: i ) those who produce for ordinary profit and 2 ) those who speculate on the market. Lantini 4 9 defended the government policy. H e said, " T h e government desires to adopt in the least possible degree the weapon of control that has its inevitable and traditional inconveniences. Ordinarily the directive organs of the government reserve to themselves for every eventuality, the moment and the forms best adapted for intervening in and stabilizing the indispensable equilibrium between producers and consumers." 50 Carli wrote about protecting the consumer. 51 He said " consumer's risk " would be very small, if the supply of an article (such as wheat) is great; i.e., there would be little risk of the consumer not receiving sufficient wheat. Further, Carli claimed, it would be necessary to keep prices as near costs as possible and to cut down the difference between wholesale and retail prices. The difference between wholesale and retail food prices in a study made in 1932 was from 11.50 to 29.60% in Italy; the percentage was usually less than 20% and for clothing prices the difference was from 25 to 28%. 6 2 In the two countries reputed 63 to have the best distributive systems, the United States and Germany, the average range of difference for all types of goods was 28% in 1929. Thus Italy's record in this respect is not bad. 4 7 I I Sole, March 26, 1935. 4 8 I I Sole,

March 29, 1935.

49 Lantini later assumed control of all price fixing, as Minister of Corporations. 5 0 I I Sole, April 3, 1935.

51 " I Prezzi," by Filippo Carli in 52 Ibid.,

pp.

53 By Carli.

383-384-

II Commercio,

June, 1935, p. 380.

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MEASURES

29

In an interesting study of the viscosity of retail prices 54 by the Fascist Confederation of Merchants 55 under the direction of Ferruccio Lantini and Professor Filippo Carli from 1929 to 1934, Veronese reached the following conclusions: the viscosity of the price of flour made of s o f t wheat, bread in large loaves and sugar showed the lowest degree of " stickiness " — 6%. 5 6 Food pastes, eggs, olive oil, seed oil and butter prices showed a viscocity of 10 to 1 5 % ; potatoes and milk 25 to 30% ; 6 7 national wheat, canned tomatoes, and coffee 30 to 40% ; and small loaves of bread, rolls and wines over 50%. The greatest viscosity was discovered in prices of rolls and small loves of bread—63.75% and wines 53.60%. The least was revealed in sugar prices—4.09%. Evidently no risks were taken on sugar, while wines have a high degree of perishability. The chief influences on the viscosity of retail prices from 1929 to 1934 were the reductions in rents, electricity, and wages and the fact that taxes were not increased, while there were ample stocks of goods on hand. It is difficult to compare wholesale and retail price indices, since they are usually made up of different articles and different grades of goods. There is no homogeneity o f data. In the conclusions of this study Veronese stated : " It is clear that a discipline of political character to restrain wholesale prices is less necessary than that exercised by the Intersyndical Committees on retail prices. Circumstances of an economic nature of different character from political influences join to keep wholesale prices under a continuous indirect surveillance which usually maintains the market equilibrium and therefore the level of prices. T o enter into the problem of costs of production is not the job of the Intersyndical Committees . . . but 54 " Contributo allo studio della vischiosità dei prezzi delle merci," by Giacomo Veronese in II Commercio, June, 1935, p. 465. 55 Created October 26, 1926. 56 Veronese's study, p. 469. N o indication is giveni as to how the degree of viscosity was measured. 57 Ibid., p. 470.

30

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that of the Corporations. Therefore, the Corporations are the organs that should study costs for the purpose of stabilizing an economic equilibrium between the costs of raw materials, fabrication and distribution in the general picture of national production. If corporativism is in substance a régime of simultaneous prices, the intervention of the Corporation must come in the nature of things." 58 Meantime from October, 1934 to June, 1935 the wholesale price of flour rose from 139 to 161 lire per quintal, rice from 105 to 141 lire, and butter from 900 to 925 lire. W h a t caused these rises? The chief causes were the fact that the depression had already touched its lowest point, recovery had started, Germany decided to rearm, other countries followed her example, and speculation was rife in Italy due to the government policy in regard to A f r i c a and the fear of a scarcity of goods. 59 In July, 1935, Ettore Lolini said, " T h e problem of prices constitutes the central problem of the guild (corporative) economy." 60 Premonitions of the definite action taken by the government in October, 1935 are to be noted in September, 1935. General orders on restraint of speculation especially in wheat, coal and iron were issued by Racheli to the Federations of Merchants. There was fear of an exhaustion of supplies needed for the A f r i c a n campaign. " L . B . " definitely recommended: 1 ) avoiding a bad psychological upset on the market, 2) examining the entire internal market, and 3 ) revising control on a national corporative scale. In Turin the price of oranges was being fixed with no regard to their price in Palermo. " A n intense corporative vigilance over prices is needed " — n o t just persuasion and rhetoric. 61 " Every tendency to excessive speculation 58 Ibid., pp. 474-475. 59 " I prezzi al minuto," by C. Braidotti in II Commercio, June, 1935, p. 491. 60 " I prezzi in regime di economia corporativa," by Ettore Lolini in II Commercio, July, 1935, p. 504. 6 1 I I Sole, September 20, 1935.

EARLY

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MEASURES

and greedy hoarding must be halted. The corporate ship is in a troubled sea! It is time to act!" 62 Orders issued by the Secretary of the Fascist Party September 20, 1935 urged continued vigilance, issuance of maximum price lists every 15 days and the use of indicative lists, including more goods and qualities. 63 The latter lists should post the lowest prices practiced. The Intersyndical Committees were ordered to list the stores practicing indicative prices which were voluntary in every case. Each store so entitled was to display a card, indicating its adherence to indicative prices. The syndical and party organizations should punish infractions more rigorously. " L . B . " said in time of war price control is necessary, and that in Italy's case it would be even more necessary because of the probable economic sanctions against Italy to stop speculation and hoarding and to maintain needed supplies.64 The same correspondent wrote ten days later, " It is time to open our eyes to the perils of sanctions, rising prices, speculation and the needs of the A f r i c a n campaign. It is not enough to discipline retail prices locally ! W e must get to prices and costs of production goods and imports. Make examples of speculators! There is to be made up very soon under the direction of the Fascist Party a corporative committee to watch over prices." 65 October 12, 1935 the Secretary of the Fascist Party ordered the Intersyndical Committees to intensify their activities against hoarding and speculation. Starace also called a meeting for October 15, 1935 of the Federal Fascist Secretaries of Bari, Florence, Genoa, Palermo, Milan and Naples. 88 " L . B . " reported that the Party had changed its policy on control. The Secretary of the Party was to meet with the Ministers of 62 Ibid. 63II Sole, September 20, 1935. 64II Sole, October 2, 1935. 65 Ibid., October 12, 1935. 66 Ibid., October 13, 1935.

32

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Agriculture, of Corporations, other government representatives and the Federal Secretaries mentioned above. 67 Evidently central control was to be launched. " L . B . " called it control " in corporative fashion in the highest sense of the w o r d . " 8 8 There was to be " no despotic, bureaucratic or unexpected control, but a control-rational, technical, harmonious and complete, based on all the political and syndical organs, both central and local." 69 H e praised the placing of the Superintendent of Foreign Exchange on the committee to insure proper consideration of the importance of export and import price fluctuations.70 Various regional meetings to insure interprovincial cooperation were called for Turin, Catania, Padua and other centers. Finally the first meeting of the newly formed Permanent Committee for Control over Prices (Comitato permanente per la vigilanza sui prezzi) took place on October 16, 1935 with Starace, Secretary of the Fascist Party, presiding. The Party was to put the problem of prices at the center of its economic activities. 67 Ibid., October 14, 1935-

68 Ibid. 69 Ibid. TO Ibid.

CHAPTER II CENTRAL CONTROL BEGINS THE establishment of the Permanent Price Committee of the Party gave Italy its first central control over prices under Fascism. It came at a time of great national sacrifice during a period of intense patriotism. The efforts on the economic front were part of the so-called economic siege (I'assedio economico). Every national resource was employed to combat the sanctions declared by 52 nations against Italy on November 18, 1935 and to win the African campaign. It was vital to Italy's welfare to keep down the costs of products needed for the war, to stamp out speculation on the boom market, and to make sure that no scarcity of goods occurred. The new Central Price Committee 1 was formed to carry out these designs. No definite announcement was ever made as to the setting up of this committee. The first hint given was that several cabinet members and a few local Fascist Federal Secretaries were to meet with the Secretary of the Fascist Party in Rome.2 Then it was announced that a Permanent Price Committee was acting in the emergency of the moment. It was clearly a political move under the aegis of the Fascist Party. The Permanent Price Committee always met at the Palazzo del Littorio, which is the Fascist Party headquarters at Rome. Its membership included: representatives of the Ministries of the Interior, Agriculture and Forests, Finance, Communications, Press and Propaganda,3 the Under-secretary for Foreign Exchange and Foreign Trade,4 Central Institute of Statistics, and of each 1 Called interchangeably from its inception either the Central Price Committee (Comitato centrale per la vigilanza sui prezzi) or the Permanent Price Committee (Comitato permanente per la vigilanza sui prezzi). 2 " Party Orders " in II Sole, October 13, 1935. 3 N o w Public Culture. 4 Made Minister for Foreign Exchange and Foreign Trade in November, 1937. 33

34

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Fascist Federation of Employers and Employees, of the Agencies for Credit and Insurance, of the Professional Groups and Artists and of the National Commission of Cooperatives. The local price enforcement bodies continued to be the Intersyndical Committees, but now their work was to be coordinated. No longer were prices to be made up with concern only for local problems but with the interest of the whole peninsula in mind. It was clear to every student of the problem that local price control had been inefficient. It had suffered prices to rise without hindrance in the first nine months of 1935. Now control over prices became the center of Fascist Party activities. Evidently the government wanted quick deft action. The Party was the organ to supply such action, putting the whole problem of control on a patriotic political basis. A t first control was to be exercised over the 21 most commonly consumed provisions, but as time went on and the difficulties of control grew, supervision spread to many more articles and to more varieties of the same articles. The avowed purpose of the Permanent Price Committee was to avoid unjustified rises in the cost of living and to avoid great price variations on the national market during the period of the African War and the economic sanctions.5 Attention was centered on articles of great consumption and national importance. The prices of luxury goods were left to go their way. This policy has been maintained up to the present time. In fact it has been suggested that merchants be allowed to make greater profits on luxury goods to make up for the profit they sacrifice on more common articles.6 The Intersyndical Committees were made up as follows: the Federal Fascist Secretary, President; a delegate of the Prefect ( P r e f e t t o ) of the province; a delegate of the Provincial Office of Corporate 5 Bolle tino dei preszi, supplement to the Gassetta ufficiale del Regno dltalia, January 15, 1937, Appendix I, p. 1. 6 " Economía corporativa e controllo dei prezzi" by Franco Modigliani, in II Commercio, August-September, 1937, p. 28.

CENTRAL

CONTROL

BEGINS

35

Economy ( U f f i c i o provinciale dell'economia corporativa) ; and representatives of each of the local sindical organizations interested, including employers and workers. News of the first few months of the life of the Central Price Committee is scarce, since the government forbade publication of all statistics and enforced a rigid censorship. The economic life of the country was shrouded in mystery until the Ethiopian W a r proved successful. " L . B . " advised that price control be construed not just as " orders of the day " sent out by the Secretary-General of the Fascist Party, but as a more general fundamental problem. 7 Part of its function should be to protect the gold reserve. " It is a complex and delicate task." 8 Only unauthorized price rises should be checked. Account should be taken of imports needed for Italy's armed forces. " Fight speculation ruthlessly! Producers and distributors have a selfish interest in cooperating with the authorities to protect themselves against the menace of unfair tactics of hoarders and speculators." 9 The patriotic fervor of the times is reflected in " L.B.'s " conclusion: " 4 4 million Italians have but one heart and one desire! There lies the secret of success in the field of prices and consumption." 10 From November 5, 1935 on meatless days were inaugurated by closing all meat markets every Tuesday. Wednesdays the markets were permitted to sell all types of meat but ox, poultry and pork. Restaurants could not serve the proscribed meats on those days. 11 Fish production was encouraged. A f t e r sanctions were declared, imports were strongly discouraged. Licenses had to be obtained for all imports and the means of payment were strictly controlled. 7 I I Sole, October 18, 1935. 8 I I Sole, October 18, 1935. 9 Ibid.

10 Ibid. 11 These provisions were not the work of the Central Price Committee, but of the government in pursuit of its comprehensive war-time program.

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The Central Price Committee very seldom met in its entirety. For example, on November 28, 1935 Starace called a meeting of only the agricultural section of the Committee to fix the maximum price for corn. 12 A very active market had skyrocketed corn prices to 95 lire per quintal and more. The committee fixed a maximum price of 80 lire per quintal which was claimed to represent a fair price in relation to the supply available, the price of wheat, etc. O n March 7, 1936 the Central Price Committee stabilized wheat prices at 1 1 5 lire for soft wheat and 130 lire for hard. T h e wheat pools were made obligatory for foreign as well as domestic wheat except for small amounts for use of the farmer's household. This measure, put through on June 16, 1936, also provided that farmers be paid immediately for all wheat delivered to the pools. Previously the farmers had been compelled to wait for payment from the pools and the wheat market suffered from the practice of many farmers selling outside the pools at higher prices. Thus, although the " battle of the wheat " had started in 1925, the wheat market was not rigidly controlled until the middle of 1936. March 31, 1936 Under-secretary of Corporations Lantini claimed that the indices of prices in Italy had not undergone serious changes during the sanctions period, but he gave no figures.13 For the first time since sanctions went into effect, definite statistics were made public on May 19, 1936 by the Minister of Finance in the Chamber of Deputies." 14 In January, 1935, the wholesale price index ( 1 9 1 3 = 100) stood at 280.2; November, 1935 at 355-7 and April, 1936 at only 368.8. If we turn to foods, the rise from November, 1935 to April, 1936 was even less. Bachi supplies the following indices for wholesale food prices: January, 1935—373-5; November, 1935 12II Sole, November 28, 1935. 13II Sole, March 31. 1936. 14 Addis Abeba had been captured May 6, 1936.

CENTRAL

CONTROL

BEGINS

37

— 4 1 6 . 3 ; and April, 1 9 3 6 — 4 1 7 . 1 5 The reason for the small rise from November, 1935 to April, 1936 was the control and pressure on wholesale and retail markets. The greatest rises took place from January, 1935 to November, 193 5, the period immediately preceding the Ethiopian W a r ; in other words, the boom prices occurred while the country was preparing for the A f r i c a n campaign. The greatest rises occurred in textiles, metals, coal and military supplies. The Central Price Committee put the brakes on further rises when sanctions were imposed. B y July 15, 1936 the sanctions were lifted. August 14, 1936 wages were raised by agreement between workers' and employers' groups. It took more than a month for changes to be made in all sectors. " L . B . " commented that the Fascist Party had been able to keep " the rise of prices within limits closely corresponding to the causes of greater importance that have determined them step by step. All the Italian people have helped in this. The Italian workers who suffered from the economic siege and the rising cost of living are not forgotten." 18 They were given an average raise of 1 1 % in w a g e s . " " L . B . " pleads for control of the costs of production and all prices. He commented on reports of price control in France " copied from Fascism." " It is impossible," he said, " to do the job well in France, since there is not the Fascist base to start with." 18 Carlo Spantigati claimed that prices were determined not only for material reasons but for ethical purposes. 19 Proof of this was the spirit of the country during the economic siege and the Ethiopian W a r . " The cessation of most of Italy's foreign trade broke the equilibrium between demand and supply 1 5 " I prezzi delle merci in Italia nel sesto e settimo mese dell' assedio economico," by Riccardo Bachi in Rivista di politica economica, 1936, Fascicolo V I , Extract, p. 3. 16 " II Partito ed i prezzi " by " L. B." in II Sole, A u g u s t 25, 1936. 17 B y September 9, 1936, 4 million workers had received raises in wages. 18 " II Partito ed i p r e z z i " by " L. B." in II Sole, A u g u s t 25, 1936. 19II Sole, January 30, 1937.

38

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and might have led to exaltation of self-interest in cornering supplies and indulging in speculation. Instead prices were kept firm and steady. Internal distribution continued at normal rhythm and prices remained low. 20 Here Spantigati quoted A . E . Guillaume's study, " Les sanctions et le coût de la trie in Italie." 21 The French writer found that the cost of living remained almost stable in Italy, while the syndical organizations restrained every unjustified rise in price. The rise in the cost of raw materials was not carried over into retail prices in Italy. 22 From December, 1934 to September, 1935 wholesale prices rose 25.25% ( f r o m 313.98 to 3 9 3 . 1 0 — 1 9 1 3 = 100), the prices of principal foods rose 3.42%, and cost of living 2.42%. The retailers suffered most, since the prices they had to pay went up. From January, 1935 to the end of the war, wholesale prices went up 3 1 % ( f r o m 280.2 to 368.8); retail prices rose 1 1 . 7 % (373 to 4 1 7 ) , while wholesale food prices rose 10.85% and retail food prices 7.30%. 23 O f the detailed work of the Permanent Price Committee, there is little to tell. Official reports 24 list few details and the complete facts are not to be found elsewhere. In addition to the action of the committee on the prices of corn and wheat, the prices of corn flour were fixed at 97, 94 and 88 lire per quintal for the various grades in December, 1935. Various qualities of olive oil were clarified and prices fixed in December, 1935. Wheat flour prices were stabilized in July, 1936. The price of flour in provinces with enough wheat for their own use was used as a base, while provinces with insufficient 20 Ibid. 21 Bulletin

quotidien,

Supplément no. n , Paris, January 31, 1936.

22 Part of this w a s due to the viscosity of retail prices. 2 3 I I Sole, January 30, 1937. 24 Fascist Party Orders and the Appendices t o the Bollettino dei prezzi. T h e source of all the data on this page is the Bollettino dei prezzi, January 15, 1937, Appendix, pp. 1-3. T h u s material on these orders was not made public, until the publication of statistics was resumed after the sanctions had been lifted. In fact, no government statistics were issued f o r all of 1936.

CENTRAL

CONTROL

BEGINS

39

wheat paid slightly higher prices. The price of rice was fixed first at 1 2 6 then at 140 lire per quintal for the common variety. 25 Also the prices of beans, canned tomatoes, coffee, pork, salt pork, butter, cheese, eggs, dried fish, tuna fish, candles, copper sulphate, beet pulp, bran, soap, charcoal and coke were stabilized. 25 November 4, 1935.

CHAPTER III THE EFFECT OF THE DEVALUATION OF THE LIRA AFTER struggling for many years to maintain the gold standard, Italy devalued its currency October 5, 1936 by 40.94%, or fixed the lira at 92.46 per pound sterling and 18.99 per dollar, the same relationship that held prior to December 21, 1927. The value of the lira was lowered from 7.919 to 4.677 grams of fine gold for every 100 lire of value with discretionary power to lower its value another 10% if necessary. Italy revalued its gold reserve at the new rate, or raised its nominal value from 2.5 billion lire to about 4 billion lire. If at the time of devaluation the lira had been on a par with the leading international currencies, the devaluation should have led to a price rise of 69.3% to equalize the exchanges. In as much as Italian money was at a discount of about 1 2 % in terms of other currencies, a theoretical price rise of 5 2 % might be expected. The task of the Permanent Price Committee was to restrain the headlong march of prices upward. T h e same decree law that devalued the currency also blocked the prices of water, gas, electric and transportation rates and house rents for two years; hotel and pension rates were to remain unchanged until December 31, 1936. The chief purpose of the monetary reform was to better conditions of foreign trade: i. e., to increase exports of goods, tourist trade and freight income. A t the same time the government sought to restrain in the largest measure possible alterations in the distribution of incomes and private wealth. The progressive tax of from 5 % to 60% on dividends served to discourage speculation on the stock markets. Real estate owners were required to subscribe to a forced loan to the extent of 5 % of the value of their property, 1 October 5, 1936. 1 Property worth less than 10,000 lire was exempted. 40

EFFECT

OF

DEVALUATION

41

T o service this loan an extraordinary tax of 3.5 per thousand was levied on real estate. In the meantime price control which had " a clear-cut political character " 2 acted to prevent boom speculation and exaggeration of the monetary devaluation which might have led to a further 1 0 % revision in the value of the lira downward, a contingency for which the law of October 5, 1936 provided. A l l September, 1936 prices had to be reported to the Central Price Committee. These were treated as base prices and theoretically no rise was permitted over the September levels except in the case of imports or raw materials from other sources whose prices had gone up. A s to imports the committee was aided by the reduction of import duties. The wheat tariff was reduced in successive stages from 72 lire per quintal to 18 lire by January, 1937. The general ad valorem tax of 10 to 1 5 % was removed. Duties on meat were reduced 6 5 % , olive oil 40%, and eggs 64%. The duty on salt pork was abolished. The duty on coal was reduced from 10 to 5 lire per ton and that on coke from 42.50 lire to 30 lire per ton. The reduction in the wheat tariff was especially important, since Italy had to import huge quantities of wheat in the months following devaluation because of the poor crop in 1936. The reductions in tariffs tended to equalize internal and external prices for these articles. Control was spread to practically all prices instead of the 21 originally disciplined. A t no time have certain very variable prices, such as those of fresh fruit, wine for table use and green vegetables been centrally fixed. The purpose in blocking prices as of September, 1936 was to make sure that the stocks available be sold at pre-devaluation prices. Price rises were allowed only where the costs of raw materials, imports and 2 " Osservazioni sui prezzi e sull' oro nell'anniversario dell'allineamento " by P r o f e s s o r Gino Borgatta in Rassegna econotnica a monthly publication of the Bank of Naples, July-August, 1937, p. 326. It i s interesting to note that Italian writers never refer t o the " devaluation " of the lira, but always to the " realignment" of the lira.

42

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other costs had actually increased. Not only were prices to be kept down to those of September, 1936, but the same conditions of sale, contracts, discounts and terms were to be maintained.3 Professor Gino Borgatta says that while rents, gas, electric rates, etc. were completely blocked, the Central Price Committee stabilized the prices of food of large consumption, bread, flour, milk, etc.4 Greater variability was evident in the prices of leather, shoes, fur, paper, clothes, etc. The greatest variations were revealed in prices of luxury articles and articles having many different varieties. 5 The general price level was kept down in absolute terms and with respect to the devaluation of the lira. From September, 1936 to December, 1936 Bachi reports a rise of only 2.7% in wholesale prices.6 From September, 1936 to March, 1937 wholesale prices rose 10.9%, as compared with rises of 3 1 . 8 % in France, 8 . 1 % in England and 5.8% in the United States. This rise of 10.9% is far below the possible theoretical rise of 52%. Retail food prices rose 6.2% and the cost of living 5 . 1 % . The lag in retail prices was partly due to control and partly to their natural viscosity. The low rise in the cost of living was partly due to the blocking of rents, gas, electric rates, etc. for two years. However, there was a rise of 6.5% in wholesale prices from August to October, 1936, some part of which was undoubtedly due to the anticipated devaluation of the lira. Turning to imported articles, we find the price index rising from 54.4 to 85.8 or 57.7% from September, 1936 to March, 1937. For the same period world prices in terms of gold were rising 8%. Roughly that would make the rise in import prices 3 Price Orders, December 19, 1936. 4 " Osservazioni sui prezzi e sull'oro nell'anniversario dell'allineamento," by Professor Gino Borgatta in Rassegna economica, July-August, 1937, P- 330. 5 Ibid. 6 " I prezzi delle merci in Italia negli anni 1935-1936" by Riccardo Bachi in an extract from the Rivista di politica economica, 1937, Fascicolo IV, p. 3.

EFFECT

OF D E V A L U A T I O N

43

due to devaluation 49.7%, or almost the entire 52% which import prices reached in June, 1937. T o mitigate this rise in import prices, huge reductions in import duties were made, as we have said. The conditions of the commercial balance were aided, although it was heavily against Italy in 1 9 3 7 due to large imports of wheat,7 the need to replete stocks exhausted during sanctions, and the greater need for raw materials to make exports, satisfy internal consumption and fulfil the needs of national defense. " The definite policy of the state has been to reduce but not to eliminate the differences in wealth from class to class and to reduce in general fixed incomes in favor of variable incomes." 8 Professor Arias said that corporate economy " eliminates every extension of rents harmful to capital and labor." 9 The expenses of supplying gas, electricity, transportation, etc. went up, while their prices were blocked. This reduced the incomes of the owners of these concerns. The intensive campaign of price control in the first few months after devaluation was intended to work rather on the speculative tendencies and the psychological impulse to raise prices than on any modification of the conditions of monetary equilibrium. Not all economic observers in Italy greeted the devaluation of the lira in October, 1936 with paeans of praise. Professor Bachi deplored the introduction of managed currency into Italy. 10 " T h e chief purpose of managed currency," says Bachi, " is to facilitate exports and limit imports. The effect of managed currency now is different from the inflation during and after the World War, when its effects were felt internally, varying the purchasing powers of incomes, whereas recent 7 The increase was 1,188 million lire in the first 7 months of 1937. 8 " Osservazioni sui prezzi e sull'oro nell'anniversario dell'allineamento," by Professor Gino Borgatta in Rassegna economica, July-August, 1937, p. 333. 9 Economia corporativa, by Professor Gino Arias, p. 435. 10 " I prezzi delle merci nel mercato italiano durante l'Ottobre 1936," by Riccardo Bachi, in an extract from the Rivista di politica economica, 1936, Fase. XI, p. 3.

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manoeuvres act on foreign values — varying the relations between the costs of production and the conditions of development in international exchanges." 11 Desertion of the gold standard makes for uncertainty. There is no fixed definition of money parity, for in some countries the gold content remains undetermined or lies between wide limits. " Money management continues to be a complement or a substitute for tariff policy to gain given objectives in regard to foreign trade : it is a method for the exercise of a vast organized system of dumping." 12 The nature and purpose of managed money is to prevent a correspondence of price dynamics between foreign exchanges and prices on the internal markets. It tends to accentuate viscosity in some orders of prices, and to limit or retard the development of changes in the comparative positions of various groups of income receivers in the internal economy. Further, " t h e declaration made September 25, 1936 by the United States, France and Great Britain that ' no country should seek unjustified benefit from competition based on variations in exchanges,' does not conform with the monetary policy prevailing up to now !" 1 3 The Italian monetary reform of October 5, 1936 was inspired by " the urgent necessity to regulate the intrinsic value of Italian money in order better to protect it, also with regard to its effect on economic interrelations in respect to the value of the most important and widely used moneys in the world market." 14 On the other hand the announcement of the devaluation of the lira brought sighs of relief in most quarters. " L . B . " commented that " finally now there would be greater breathing space for the Italian economy " (Finalmente il più ampio 11 Ibid. 12 " I prezzi delle merci nel mercato italiano durante l'Ottobre 1936," by Riccardo Bachi, in an abstract from the Rivista di Politica economica, 1936, Fase. XI, p. 3. 13 Ibid. 14 Ibid., p. 4.

EFFECT

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DEVALUATION

45

The next day " L . B . " said that after ten years of deflation, prices and costs were to have some relation to international prices and costs. 16 He also urged that " now that the money has been realigned, it is necessary to make a psychological, structural and technical readjustment of the national economy. But in the shadow of the Central Committee on Prices everyone can sleep tranquilly, since the Party and the syndical organizations watch for a l l . " 1 7 He urged the party control of prices to leave no corner of the problem dead. 18 respiro

aU'economia

italiana).15

Almost immediately the Secretary of the Fascist Party sent out a rather detailed set of price orders (No. 644). 1 9 Control was extended to all prices, and no rise was permitted over the prices of September, 1936 except as allowed by the committee. A complete report of the prices current in September, 1936 was to be made at once. The syndical organizations were to get prices from every shop for all articles. Wholesalers had to report the prices at which they sold to retailers to the Syndical Committees, while industrialists were to report their prices charged to wholesalers to the proper Fascist Confederations, and they in turn must verify them for the Intersyndical Committees. The Confederations were ordered to see to it that the retailers were not handicapped by any hoarding of materials. All data were then to be submitted to the Central Price Committee. " L . B . " praised these orders highly. He said, " They will be famous in history — one of the most typical Fascist documents—exquisitely corporative, since the Party is to collaborate with the Confederation of Merchants to help in wholesale and retail markets, while the Confederations of Industrialists and Farmers are to help with prices at origin. 15II Sole, October 7, 1936. 16II Sole, October 8, 1936. 17 Ibid. 18II Sole, October 9, 1936. 19 Party Orders, reported in II Sole, October 10, 1936.

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In no country of the world 20 up to this day is the problem of control over prices and the cost of living being understood and resolved in such harmonious and complete manner as in Fascist and corporative Italy !" 21 In addition he asks that experts in every field help the committees in their work. An expert selected from a list made up by the Intersyndical Committees was to sit with and advise the judge (magistrato) in each case of price infraction. "Control will be truly efficacious, only if it results in totalitarian, just and inflexible action." 22 The practice of the " open price " in contracts, i. e., leaving the price clause blank to be arranged at a later date, should be discontinued. 23 Starace, Secretary of the Fascist Party, said, " The discipline of prices has not been and will not be action that will smother initiative, but will exercise a stimulating and educational effect on the various branches of production interested, leading to more effective cooperation." 24 He added, " The Fascist Party is the center of the spiritual, economic and social life of the country. Its password is 'to watch and watch again!' (vigilare! vigilare! vigilare!)." 25 " L. B." said, somewhat optimistically, that in ten days the Fascist Party and the Fascist Confederation of Merchants had accomplished " a work vast and delicate of harmonizing the relations between producers, transformers, distributors and consumers." For those " curious and benevolent observers beyond the Alps and the seas, let me say that we needed no small ' r ' (régime), but a large ' R ' to accomplish such a miracle of justice, simplicity and civil cooperation." 26 20 The italics are " L. B." 's. 21 II Soie, October 11, 1936. 22 Ibid. 23 Ibid. 24II Sole, October 25 Ibid. 26 Ibid.

17, 1936.

EFFECT

OF D E V A L U A T I O N

47

On the same date Dr. Racheli clarified the party orders sent out previously in a notice to all Italian merchants.27 He said the syndical organizations must gather and report prices at retail and wholesale for September, 1936, " control them scrupulously, take care of publicity and guard against the hoarding of merchandise or any action causing disturbance of the markets (all this in cooperation with the political administrative authorities), and verify cases of violation of price control." 28 Each organization was ordered to cooperate to the full with the Central Price Committee. In the provinces Technical Commissions on price control (Commissioni technici di vigilansa) must be set up, headed by the director of the syndicate itself and made up of members nominated by the president of the Unione, in such a way that " a l l the merchandising branches be represented and that there be equal numbers of representatives of wholesalers and retailers." 29 Experts should be included. These commissions should meet as frequently as possible. Also technical commissions should be set up in each municipality (commune) of the province. The presiding officer should be the head (fiduciario) of the union 30 or his representative and the commission should be made up as the president of the union decides, taking account of local circumstances. The work of the Technical Commissions was to: 1) control reporting of prices as of September, 1936, 2) cooperate with the Party and the local authorities in seeing that prices not be increased, and 3) check on reports of infractions of price discipline, especially concerning unwarranted increases and the hoarding of goods, " expressing judgment on each case within 48 hours." 31 The President of the Commission had power to act if there was no time to call a meeting. 27 Ibid. 28 Ibid. 2911 Sole, October 17, 1936. 30 Provincial Union, local branch of the Confederation of Merchants. 31II Sole, October 17, 1936.

48

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In reporting wholesale prices, each wholesaler had to report as promptly as possible to the Provincial Union ( Unione provinciate) prices charged to retailers in September, 1936. The report had to be specific item by item, but for articles having many varieties,32 it was enough to include one summary report for each group of articles, thereby giving an informative picture of the general situation of prices. No report needed to be given for the goods listed in the Maximum Price Lists, since they were well known, but wholesalers were advised to report conditions of sale practiced for these goods to avoid possible disputes in the future. The Technical Commissions should check on the exactness of the wholesalers' reports and then transmit them to the Intersyndical Committees. Similar orders were given to retailers for reporting their September prices to the Provincial Unions. For fruits and fish, retailers should keep prices within the maximum limit allowed by the percentages of increase. For these goods there should be very vigorous control of the quotations on the wholesale market. Reports of retail prices should likewise be checked by the Technical Commissions. Companies which quoted " sale " prices or any unusually low prices due to bankruptcies, fire sales, etc. in September, 1936 should in normal times practice prices corresponding to those of similar agencies. Copies of the report of retail prices had to be posted publicly in each shop. Price tags should be displayed clearly on every article in the shop window or on the shelves. This obligation was emphasized, since in some cities it was not being observed. In stores that included hand work done on the premises, as well as ordinary retail selling, a schedule of prices had to be made up according to the norms set up by the Intersyndical Committees. Hotel and pension rates were to remain as they were in September until December 31, 1936. 32 Such as hardware, expensive jewelry, furs, drugs, perfumes, etc.

EFFECT

OF

DEVALUATION

49

T h e Technical Commissions were ordered to maintain the necessary equilibrium between the wholesalers and the retailers. T h e y should especially guard against

" cornering"

in any

sector of production and any tendency to raise prices speculatively. A l s o they were to make lists of experts w h o were required to have the proper moral, political and technical requisites to advise the judges in cases of price infractions. These lists must be sent to the Intersyndical Committees for approval, before they are sent to the magistracy. T h e Provincial Unions were ordered to put these orders which were made up with the approval of the Fascist Party through promptly and to give them the greatest possible publicity. " Everyone should remember that it is not only against the law to sell above maximum prices, but that to buy at higher prices encourages speculation."

33

Such were the long detailed orders of Dr. Racheli to the Italian merchants through the Fascist Confederation of Merchants. Orders similar to the above, having to do with itinerant peddlers and the owners of pushcarts in the open-air markets, appeared on October 24, 1936. 34 T h e syndicates were instructed to name the best directors (fiduciari) they could find for markets where there were none, and to change those w h o had proved inefficient. 35 P r o f e s s o r Guglielmo Tagliacarne, a leading price specialist in Italy, wrote critically and thoughtfully about the new price measures on October 31, 1936. 36 H e said control must be extended to all prices and all stages o f production, since control over only 21 kinds of goods allowed other prices to go too high. T h e Fascist Party should delve deeply into the delicate problems of the market. 33II Sole, October 17, 1936. 34II Sole, October 24, 1936. 35 Ibid. 36II Sole, October 31, 1936.

Exports of goods needed in Italy

50

PRICE

CONTROL

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should be restrained, since the practice of sending these goods out of the country was leading to scarcity in Italy and was throwing the internal equilibrium out of line. " Fascist methods, tried unsuccessfully in price measures in France and Switzerland," says Tagliacarne, " are possible only in Fascist countries, where the economic life is regulated by high principles of social justice, such as those of the Labor Charter, and where the various branches of production are solidly aligned and disciplined in the ranks of the syndical organizations. Without these premises and these institutions every attempt to impose a discipline on the various branches of production is useless and every hope of being able to control prices is vain." 37 In the same vein Tomaso Napolitano said, " The decree of October 5, 1936, corporative in its economic essence, is exquisitely political by nature of its timeliness." 38 The Central Price Committee scheduled a group of meetings as follows: November 5, 1936 to study soap, oil and sulphur prices; November 9th, to consider import and export prices; and November 12th, to investigate the prices of food paste, corn flour and beans.39 November 9, 1936 exporters were told they had to send their prices to the Central Price Committee before raising them to the level of international prices.40 O n the same date the Fascist Confederation of Merchants asked the Provincial Unions to observe the following rules: 1 ) Technical Commissions should find out costs at origin and variations in the prices of food not nationally disciplined, of export goods, of goods having no great effect on internal consumption and the cost of living, and of goods imported from abroad whose prices had risen notably because of the devaluation of the lira and variations on foreign markets, 2 ) they should 37 Ibid. 38 " La tutela penale del prezzo," by T o m a s o Napolitano in II November-December, 1936, p. 609. 3 9 I I Sole, November 6, 1936. 4 0 I I Sole,

November 7, 1936.

Commercio,

EFFECT

OF

DEVALUATION

51

pass on their findings to the Federal Secretaries and 3) transmit price variations promptly from wholesale to retail sectors. 41 Regional meetings of the Federal Secretaries were called from time to time to deal with special price problems in their region. For instance, on November 14, 1936 the Federal Secretaries of Arezzo, Florence, Leghorn, Pisa and Siena met at the seat of the Federazione dci Fasci di Combattimento 42 in Florence to examine the equalization of the prices for dairy products, eggs and olive oil.43 November 19, 1936 the Federal Secretaries were instructed to include in provincial and municipal price lists the wholesale prices for exports and the rules for exports formulated by the Central Price Committee. 44 In reply to many requests as to how to secure new price schedules, it was stated that an investigation must be made by experts in the Confederation concerned and a very complete report sent to the Secretary of the Fascist Party. 4 5 Rises in the costs of raw materials and half-finished goods might be due to rises in import prices, caused by price rises at origin, higher freight rates, or the devaluation of the lira, where the prices had not been compensated for by lowering the tariffs. For goods of large export price changes presented a very delicate question. For goods of large export with no influence on internal consumption or the cost of living, prices should be equalized with foreign prices, but any rise must first be approved. 48 " L . B . " adds in the same issue that every firm that wants higher prices must make a request to the proper Technical Commission of Control set up under the Provincial Unions of Merchants. 47 A f t e r due examination the commis41 Ibid. 42 Headquarters of the Fascist Party at Florence. 4 3 I I Sole, November 15, 1936. 4 4 I I Sole,

November 19, 1936.

45 7/ Sole,

November 21, 1936.

46 Ibid. 47 Ibid.

52

PRICE

CONTROL

IN

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ITALY

sion may reject the request, if it is not properly founded, or send on the request to the central authorities, or authorize rises in prices in those cases and under those limits allowed by the Secretary of the Fascist Party. Requests forwarded to Rome should be examined exhaustively but quickly, coordinated by the competent national federation of that branch of production and sent to the Secretary of the Fascist Party for approval. Changes might be made as follows: i ) national prices subject to revision might be fixed, 2 ) general coefficients of increase might be allowed retailers in proportion to wholesale price rises, or 3 ) prices might be left free, if they had no practical influence on the cost of living. 48 In keeping with the evident practice of calling meetings of parts of the Central Price Committee, the so-called SubCommittee on Prices (Sottocomitato permanente di vigilanza sui prezzi) was scheduled to meet January 5, 1937 to examine the prices of hides and leather, and on January 12th to consider coffee prices. 49 O n the twenty-first day of January, 1937 the Secretary of the Fascist Party assigned the task of price discipline to ViceSecretary Dr. Dino Gardini. T h e same day " L . B . " wrote in praise of the work of the Party, saying, " The work of the Party in price discipline is direct and is done with extreme prudence, intelligent foresight, jealous equity and' realistic elasticity. But most of its work has been like that of a surgeon. T h e Party cuts a little here, a little there, restricts and checks a little in this sector, a little in that and . . . reduces the margin of profit of all and each." 50 The writer urged that price control not only combat every form of individual speculation, but that it should spread the national sacrifices equally in every economic sector. Carlo Spantigati claimed that price control is very important, since variations in the cost of living have grave social 48 Article by " L. B." in II Sole, November 21, 1936.

49II Sole, December 22, 1936. 50II Sole, January 21, 1937.

EFFECT

OF

DEVALUATION

53

consequences, and the fixing of prices is the banco di prova (the testing ground) of every economic system. 51 Therefore in the field of prices the corporative organization should give the clearest proof of its efficacy and of its constructive possibilities. The laws of supply and demand must be supplemented by the organic discipline of the various branches of economic life in the interest of general welfare. " One of the significant features of the Fascist revolution is that it has introduced spiritual and moral values in the economic field." 52 Spantigati claimed that the money realignment froze prices as of September, 1936, and stated this principle: " The law of supply and demand should therefore be controlled and regulated, following the higher aims and general interest of the state right down to the basic sector of production, if it is not otherwise desired to raise salaries and wages." 53 Also he claimed, " The essential difference between the Fascist state and others is that the Fascist economy leads to a social equilibrium." 54 O n the same day Mario F. Talamanca strove to explain the policy of the Party in controlling prices. 55 Price control, he claimed, is actually a very complex and difficult task. " Not just consumption prices are fixed, as some critics claim." 56 There are only two official sources of information: 1 ) the Fogli di disposizioni (Orders of the Secretary of the Fascist Party) and 2 ) the Bollettini Prezzi of the Intersyndical Committees. The Secretary of the Fascist Party does not fix all prices at one time, but proceeds in regular succession to the examination of various sectors and products one after another, whereas the provincial committees publish their price lists for 5 1 I I Sole, January 30, 1937. 52 Ibid. 53 Ibid. 54 Ibid. 5 5 " L ' A z i o n e del P a r t i t o " by Mario F. Talamanca in II Sole,

January

30, 1937. 5 6 " L ' A z i o n e del P a r t i t o " by Mario F. Talamanca in II Sole, 30, I937-

January

54

PRICE

CONTROL

IN

FASCIST

ITALY

all goods considered every fifteen days. The cheese market, for example, is examined every 2 or 3 months or on occasion of special economic events by the central authorities. They consider what increase has taken place in exportation or the reduction in demand on foreign markets, and then determine the general criteria for fixing prices which remain fixed until a new examination of the situation is made. On the other hand the provincial committee determines the price of cheese every 1S days within the limits fixed by the Central Price Committee in order to adapt its prices to the exigencies of the local market that vary more or less regularly than national exigencies. The chief task of the Central Price Committee is to fix wholesale prices (although they also fix some retail prices), and the chief job of the local committees is to fix retail prices in such a way that its products will not be attracted to nearby provinces because of more favorable prices.57 Food paste prices were fixed November 26, 1936 and had not been changed up to the date of Talamanca's article.58 The retail price paid for food paste is " not the fruit of one arithmetic operation marked in the ledger of a retail merchant, but is the necessary consequence of a whole series of prices." 58 First, the price of wheat was fixed nationally. Then the cost of making flour or otherwise processing the wheat had to be included. Local differences for transportation, taxes, etc. were added, until finally the food paste was priced at retail on the Maximum Price List in the local store. Dr. Fernucio Animali adds to Talamanca's argument by showing how food paste prices were fixed.60 The Naples quotation was taken as a base price for types: 0, 1, and 2. T o 57 Ibid. 58 " L'Azione del Partito" by Mario F. Talamanca in II Sole, 30, 1937. 59 Ibid.

January

60" Una visione panoramica dell'azione del Partito nel campo dell'andamento dei prezzi delle derrate" by Dr. Fernucio Animali in II Sole, February 6, 1937.

EFFECT

OF

DEVALUATION

55

this were added the costs of packing, transport and local taxes. Also a further increase of ten lire per quintal was allowed for packages of more than 500 grams, and fifteen lire per quintal for packages of less than 500 grams. For one type, pasta di semola, an increase of 2.50% was allowed in provinces not producing it. The margin of profit allowed for the retailer was 25 centesimi (about 1.25 cents) per kilogram for pasta di semola extra 00, 20 centesimi per kilogram for first quality of the same paste and 15 centesimi per kilogram for common or mixed paste. Party orders warned that corn not be sold at higher prices than those fixed, and that merchants should see to it that imports not pass through too many hands. 81 Otherwise the authorities would be forced to return to the blocked allowances of sanction days. Thaon di Revel, Minister of Finance, claimed that while wheat had increased in price, the price of bread was kept constant at 1.65 lire per kilogram, making a virtual reduction in the price of bread equal to the depreciation of the lira in terms of gold prices, while import duties on wheat had been successively lowered to 18 lire 6 2 per quintal. 63 Italy had at that time 64 the lowest price for bread in Europe except for Switzerland. Italy's prices for rice, olive oil and potatoes were the lowest in Europe. Before the realignment of the lira sugar cost four times as much in Italy as in England, now 65 it costs only three times as much! February 24, 1937 " L . B . " returns to the price wars with a brilliant broadside. 66 He said, " If anyone thinks that the Party will relax discipline after the trying period of the winter, 61II Sole, February 4, 1937. 62 B y January 27, 1937.

6311 Sole, February 6, 1937. 64 February 6, 1937.

65 Ibid. 66II Sole, February 24, 1937.

56

PRICE

CONTROL

IN

FASCIST

ITALY

he is very much mistaken." Price discipline is continuous. It is up to the sellers to keep informed and to cooperate with the authoritative organs in matters of discipline. T h e psychological stage of price control after devaluation of the lira is past. N o longer does the law of October 5, 1936 keep prices within limits, but rather the public conscience (la pubblica coscienza). N o w the aim is to attain maximum defense of purchasing power in wages, salaries and fixed incomes. The various productive sectors should strive for lower costs on their own initiative instead of holding themselves only to the restrictive measures of the central authorities. 67 Again on February 27, 1937 " L . B . " said that in various stages of the production of cheese from origin to consumption, " prices are quoted that sometimes exceed by 150 or 200 lire per quintal the maximum prices fixed by the Party. W h a t will happen to the whole program of price control and the purchasing power of the lira, if such practices persist?" 68 H o w could this happen? " L . B . " points out that in the general warehouses (magazzini generali) are certain accaparatori (speculative hoarders), often not included in any syndical organization and hence not subject to the usual discipline, who acquire huge stocks of cheese for speculative purposes, making prices higher than the unitary maximum prices of the Central Price Committee. Also certain producers, seasoners and distributors organize purchases, acting as opportune go-betweens, who are free to move outside of any control. It is difficult to search out individual transgressors and the poor " retailers take the ' rap ' to make expenses for all " (a fare le spese per tutti).*3 The Fascist Confederation of Merchants has been active in protecting prices by proceeding against two presidents of Provincial Syndicates who were removed from office. They caused the suspension of another. " T h e s e vigorous provisions have not failed to pro6 7 I I Sole, February 24, 1937. 68 " Vigilanza " by " L. B." in II Sole, February 27, 1937.

69 Ibid.

EFFECT

OF

DEVALUATION

57

duce a salutary effect. But it is not enough to strike down individual hoarders and speculators; in addition it is necessary to see to it that as far as materially possible they prevent banks and general warehouses from aiding them in good faith. The Provincial Councils of Corporative Economy who control the activities of the general warehouses should stabilize the value of gram cheese for 1935-1936, issue warrants on the basis of the official quotations of the Party and not on the eventual greater prices of the market. These warrants should not be renewable, nor should they be allowed to pass from hand to hand. Also the banking institutions should be made to apply rigorous restrictive criteria to the financing of private holders of gratia. In this way the authorities would strike at the very roots of speculation and ' c o r n e r i n g a n d an adequate supply of grana would be put on the market at reasonable prices. The Fascist Confederation of Merchants has done nobly! Now it is up to the Fascist Confederations of Farmers and Industrialists to get busy with the same vigor. There are little inevitable episodes due to backward ways to be liquidated with lightning rapidity, while the brave soldiers of the battaglia dei prezzi continue in their fight." 70 A t this point let us review the more important price orders of the Central Price Committee from October, 1936 on. The committee fixed the price of corn at 82 lire per quintal in October, 1936 and discouraged its use for feeding cattle. Rice was reduced 10 lire per quintal for the common variety. The tax on the processing of seed oil was lowered and its price fixed at 590 lire per quintal for first quality oil. In regard to cheese, butter and milk prices, the committee decided to extend its controls to the origin of the productive cycle, making the price of milk for industrial uses the base for all dairy product prices. In November, 1936 rules were sent out to the Fascist Federal Secretaries as to how to determine the prices of cheese, butter, milk, etc. by the careful study of the uses of a quintal 70 " V i g i l a n z a " by " L. B." in II Sole, February 27, 1937.

58

PRICE

CONTROL

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of milk. In October, 1936 the prices of retail and wholesale refrigerated eggs were stabilized for the whole autumn and winter period. A technical commission worked out a national standard terminology for cuts of meat in December, 1936, and each dealer was to send in reports on the number of cattle at his disposal, etc. In fixing the prices of non-foods, the Central Price Committee often cooperated with other control bodies. From December, 1936 on, coke and coal prices were to be sent out by the Monopoly on Fuels. The committee simply laid down general rules for the fuel monopoly to follow. To fix iron, steel and copper prices the committee worked in harmony with the Ministry of War. Some of the Central Price Committee's work went beyond mere price-fixing. In January, 1936 a general meeting of all the authorities interested studied the entire olive oil and seed oil market in order to find ways to assure the country of a normal and continuous supply of edible oils. Olive production fell off tremendously in Italy during the depression. In December, 1936 an export tax of 150 lire per quintal was levied to discourage the export of olive oil. The necessity of using seeds to make seed oil was causing a scarcity of seed cakes for feeding cattle. Liberty in the prices of olive oil was permitted only for bottles of oil up to one kilogram. The prices of olive oil in bulk were set at 800 lire per quintal for the best quality, 760 lire for fine quality and 740 lire for " ordinary ". Seed oil prices were set at 625 lire per quintal for not less than 200 kilograms, or 660 lire for smaller amounts. A maximum increase of 9% was allowed for transportation of seed oil over the basic prices. January 17, 1937 the price of crude rice was fixed at 84 lire per quintal with an upper limit of 90 lire, while the price of finished rice was fixed at 160 lire. Increases of only 5 centesimi per kilogram were allowed in retail prices of rice. The National Rice Commission had the right to buy up all old stocks of rice. Various other orders had to do with the prices of malt, cocoa, cheese, pigs, wool, sulphate of copper, shoes and leather.

EFFECT

OF

DEVALUATION

59

Definite price orders were sent out on lead, although the Guild Committee charged with fixing monthly prices of lead was authorized to make whatever changes it thought necessary for all provincial lists. This hints at the coming change in the spring of 1937, i. e., the shifting of price control to the guilds. Another regulation on January 15, 1937 limited increases in the charges for furnishing heat to 10%. Since the cost of central heating is not included in the rentals which were blocked for two years in October, 1936, landlords had started boosting charges for heating far beyond what was justified by the rise in the price of fuel. The various Federal Secretaries were to appoint Provincial Commissions to arbitrate disputes over heating contracts. Numerous regulations followed affecting the prices of olive oil, coffee, butter and dried fish. For the first time prices were fixed for Ethiopian coffee. Caffè Sidamo was to sell at 500 lire per quintal, and caffè Harrar at 600 lire per quintal. Increases were permitted in the prices of iron, steel, brass and earthenware. March 7, 1937 the price of cotton cloth was increased by 1 5 % over that of September 1936; a 10% rise was granted for rayon; 6 % for dyes; 9 % for cellulose, and rises of from 32 to 85 lire were granted for various types of paper and cardboard. 71 A s early as February 1937 " L . B . " was clamoring for another change in price control. 72 H e said the Italian economy takes three directions : 1 ) maximum autarchy, 2 ) maximum exportation and 3 ) close relationship between costs of production, distribution and prices. " T h e stage of psychological coer71 A l l the data in the p r e c e d i n g p a r a g r a p h s oni price c h a n g e s are d e r i v e d f r o m the " D i s p o s i z i o n i del C o m i t a t o p e r m a n e n t e di v i g i l a n z a sui prezzi ; " t h e first list o f o r d e r s appears in the Bollettino

dei prezzi,

J a n u a r y 15, 1937,

A p p e n d i x , pp. 1-3. T h i s g i v e s all i m p o r t a n t orders f r o m O c t o b e r , 1935 t o D e c e m b e r , 1936. L a t e r data w e r e f o u n d m o n t h by m o n t h in the s a m e source, Bollettino

dei prezzi,

72 " Prezzi, Sole,

f r o m F e b r u a r y 15, 1937 t o M a y 15, 1937.

Partito,

Confederazioni e

F e b r u a r y 28, 1937.

Corporazioni " by

" L. B." ini II

60

PRICE

CONTROL I N

FASCIST

ITALY

cion is past. Now more discriminating criteria are needed." 73 Prices are interrelated: cheese prices depend on milk prices; wheat, feed and milk prices are tied to meat prices; industrial prices are tied to those of national raw materials or those imported from abroad, and are influenced by the competition of other nations and protective tariffs. "The only body that can see a product in its price relationship through the whole cycle of production is the Corporation!" 74 It is true that the Corporations are young and inexperienced, but the Vice-Presidents of the Corporations " are all individuals who enjoy the maximum faith of the Fascist Party. In fact everyone who has syndical or corporative responsibilities has important party connections. The Corporations because of the complexity of the problem, should be invited, branch by branch, to explain their thought on the problem of prices.75 By using the Corporations for price control the setting up of a duplicate bureaucracy that is already ponderous enough would be avoided." " L. B." evidently wanted to be sure that the Fascist Party would still have a major hand in price control. Dr. Mario Racheli, President of the National Confederation of Merchants, urged the Technical Commissions on prices to prevent le vendite con premi alia mano (sales with added amounts in the hand), and to do missionary work among other merchants to persuade them not to buy at prices higher than those fixed by the Party. 78 They should notify the Party of infractions and insist on frequent meetings of the Intersyndical Committees. 77 In cases of price infractions the facts must be clearly substantiated. Luigi de Simone joined " L. B." in asking for corporate control of prices.78 He said, " The Corporations should have 7 3 " Prezzi, Partito, Confederazioni e Corporazioni" by " L. B." in II Sole, February 28, 1937. 74 Ibid. The italics are mine. 75 Ibid.

7611 Sole, March 8 and 9, 1937.

77 At least every 15 days.

78II Sole, April 7, 1937.

EFFECT

OF D E V A L U A T I O N

6l

the definite job of determining prices and costs instead of the vague duties they now have. The Fascist Party has initiated on a political plane, as is inherent in its function of instigator of social and economic changes, the investigation of costs of production and selling prices. Now is the time to transfer this work from the political plane to the corporative plane with unity of method and program." 79 " L. B." said on April 9, r 937> " The first phase of price discipline by the Fascist Party is over; now we need a more technical vision of the price problem, a more organic system of investigation on the progress of prices, a broader publicity on price quotations, and above all an organization more corporative in all the machinery of orientation and control." 80 " L. B." either had inside information or was an uncanny prophet, for he recommended that control be given to the Central Guild Committee and that the Provincial Councils of Corporate Economy take over the work of the Intersyndical Committees. The cabinet meeting ( C o n s i g l i o dei Ministri) held on April I 7> x937 proposed to hand over price control to the Central Guild Committee, or in case of emergency to the Minister of Corporations.81 The local committees were to be the Provincial Councils of Corporative Economy in revised form and with larger powers in the corporate scheme. Also Technical Commissions were to be appointed in each province to investigate the prices o f : 1) cereals, legumes, etc., 2) milk and dairy products, 3) meat, bacon and lard, 4) fish, 5) olive and seed oil, 6) sugar, coffee and soap, 7) fruits, potatoes and canned goods, and 8) coal, coke and alcohol. 79 Ibid. 80 II Sole, April 9, 1937. 81II Sole, April 18, 1937.

CHAPTER IV THE CORPORATIVE CONTROL OF PRICES THE actual transfer of control to the Central Guild Committee took place on April 28, 1937. Carlo Spantigati commented, " The discipline of prices passes then from an essentially political position to a position equally technical and political, a necessary and natural development from the law of October 5, 1936. Only the Party could handle the first or psychological stage that required quick action. . . . Thus Italy is today the only country that has succeeded in keeping the progress of prices within limits notably inferior to the amount of devaluation and inferior to those of all other countries." 1 But as the problem has become more and more technical, it has been found necessary to transfer control to the guilds (corporations). Control grows by what it feeds on. The tendency in a closed economy, such as Italy's, is toward ever greater control. O n April 30, 1937 a raise in industrial wages was announced to be effective May 9th, but was to carry with it no change in prices upward. 2 The Secretary of the Fascist Party announced the end of the Permanent Price Committee April 29, 1937. Lantini, Minister of Corporations, announced that there would be no change in the policy of price control. 3 The Technical Commissions were to go on as before. A t a meeting of the Central Guild Committee on April 30, 1937, Lantini reviewed the entire price program, dwelling on the rising costs of raw materials from abroad, the effects of sanctions and the devaluation of the 1II Sole, April 17, 1937. 2 The increase in wages also applied to 2,446,420 agricultural workers. The money part of contracts was increased by 12% and the wages of seasonal workers were raised 10%. Industrial workers totalled 6,100,000. 3 I I Sole, April 30, 1937. 62

CORPORATIVE

CONTROL

OF

PRICES

63

lira. 4 H e praised the Party for its severe control, especially on goods of large consumption. The Minister of Corporations noted that water, gas, and electricity rates, and rents had been blocked for two years, and that there had been no rises, or at least insignificant rises, in the prices of bread, flour, food pastes, corn, rice, cod-fish, tuna fish, sugar and canned tomatoes. Lamb, eggs and stockfish actually had decreased in price since October, 1936. Rises were noted in bacon, lard, olive oil, cheese, ham, sausage and legumes. Smaller rises took place in other meats, roasted coffee and milk for table use. The severe rises in the prices of clothing were due to rising costs of raw materials such as wool, cotton, cellulose, hides, etc. " T h e head of the government has said that prices and wages must be equilibrated. This will be the task of the Corporations!" 5 T h e make-up of the Central Guild Committee included representatives of the twenty-two guilds and many cabinet officers with Minister of Corporations Lantini presiding. The Provincial Councils o f Corporate Economy number 16 members each: the Prefect ( p r e f e t t o ) , appointed by the Minister of Corporations, acts as President; the Federal Fascist Secretary; one president and two vice-presidents of each of the three sections—the Fascist Federations of Agriculture, Commerce and Industry—making nine in all from this group; two representatives of the Credit and Insurance Federation — one a worker, the other an employer; and one representative of the Professional and Artists' Guild. T o return to the development of price policy, Lantini issued more explicit principles on M a y 5, 1937. 6 H e claimed that in their price studies the guilds will investigate costs but not industrial secrets. They would seek a " just price " and stop speculation. 7 Lantini's fourth price order said that the first 4II Sole, May I, 1937. 5 Ibid.

6II Sole, May 6, 1937. 7 Ibid.

64

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ITALY

Maximum Price Lists under the new regime would be issued May 15, 1937. For articles not controlled centrally, no rise over September, 1936 prices would be allowed, especially on the following export goods : lemons, oranges, dried fruit, flowers, orange extract, silk, silk remnants, rye, hay, straw, oats, broom plant, chicken feed, chickens, eggs, fish and wines. The Provincial Councils of Corporate Economy were to cooperate with experts, the Confederation of Merchants and the Technical Commissions of the Provincial Unions of Merchants. 8 For imported goods a price was to be established, including the costs of goods at origin, the expenses of transport, insurance, equitable profit, etc. These had to be vigorously controlled. Professor Filippo Carli commented on the transfer of control to the Central Guild Committee on M a y 8, 1937. 9 He asked, " Will control be on a primarily technical basis or on a predominately political basis ?" Price is not only an economic phenomenon, but also a political one. " The reason for control of prices, therefore, is a political reason." 10 H o w should we go about control of prices? O f course, articles destined for defense of the state are subject to a special regime. O n other prices should we commence at the base, the costs of production, or at the vertex, retail prices? But this is arguing in a circle, since costs of production equal a sum of other prices. A s for the Provincial Councils of Corporate Economy, " i t is well known that they can do nothing other than photograph phenomena already arrived at, so far as determining tendencies goes. The purpose of intervention is essentially political. The complete coordinated program of objectives for prices, profits, purchasing power, etc. must come only from the head of the government, because he alone has the possibility of evaluating the political utility involved, and the technical organs can do 8 Bollettino

dei preszi,

M a y 15, 1937, Appendix I, p. 1.

9 " Tecnica o politica dei prezzi " by Filippo Carli in II Sole, May 8, 1937. 10 Ibid.

CORPORATIVE

CONTROL

OF

PRICES

65

nothing other than move in the direction of these aims,11 otherwise they run the risk of making too technical (tecnicizzare) a sector in which techniques can only have a function subordinate to the political aims. The techniques should indicate the most scientific means to reach the political ends, and therefore the problem presents itself essentially as a political problem." 12 Carli answers those critics who clamor for a more technical system of control in no uncertain terms and seems to have the final answer as to whether control is political or not. 13 Franco Modigliani wrote on " The Evolution of Price Control in Italy." He said all price rises are not bad, some are economically necessary. The chief task in October, 1936 was to stop the psychological rise in prices. A s to the new control by the guilds, he said, " There is a tendency to afford control a use always more economic or politico-economico, a function, i. e., more purely corporative." 14 The former work of the Technical Commission whether provincial or municipal was to inform the pretore of violations of price control. Now they have a more economic use; namely, to help the Provincial Councils of Corporate Economy with information about the technical conditions of the market. There is an " organic formation of prices," 15 not a material use of the police, to prevent transgressions, but a constructive function to orient prices in the Italian economy and to harmonize it always with the needs of the nation. Price control now has a definite position in the economic system of Fascism." Carlo Spantigati said, " The Party has made ready the conditions necessary, in order that the Corporations might develop that action in the economic field for which they are basically 11 T h e italics are mine. 12 " Tecnica o politica dei p r e z z i " by Filippo Carli in II Sole, M a y 8, 1937. 13II Sole, M a y 22, 1937.

14 Ibid. 15 Ibid.

66

PRICE

CONTROL

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ITALY

adapted." 1 6 He reminds us that the Prefect has the same powers to make emergency price decisions on his own authority that the Minister of Corporations has at the center of things, and that the Prefect appoints the Technical Commissions. " All the national economy is therefore under the influence of the Party, and conforms to the fundamental principle of the corporative system, that the economic system should be subservient to the political system." 1 7 A t this point let us inquire into the course of Italian and international prices in the last half of 1937. From October, 1936 to September, 1 9 3 7 there was a rise of 19.25% in the national index of wholesale prices. International prices started downward in July and August, 1937, while internal prices in Italy were slowly rising. The aim of autarchy is " to impose a certain progress, largely independent of foreign markets," 1 8 says Bachi, " The scope of this action is of a predominantly political character, even if its manifestations are predominantly economic." 19 In the Fascist state there is the greatest possible control of gold to insure the maximum saleability of Italian goods on the international market. This policy has tremendous influence on the international exchange of goods, and on the financial and credit markets. " From this policy, as also from the other general aims of the corporative régime, derive the directions and course of new industrial initiative, regulation of distribution, use of savings, hand labor and other productive factors and their circulation. The control over prices has presumably become one of the instruments of the corporative system for the stable regulation of the national economic life. 16 " Il nuovo ordinamento délia disciplina dei prezzi," by Carlo Spangtigati in II Commercio, May, 1937, p. 8. 17 " II nuovo ordinamento délia disciplina dei prezzi " in II May, 1937, p. 8.

Commercio,

18 " I prezzi delle merci in Italia nel trimestre: Luglio-Settembre, 1937" by Riccardo Bachi, in Rivista di politico economica, November, 1937, Fasc. X I , p. 910. 19 Ibid.

CORPORATIVE

CONTROL

OF P R I C E S

67

In spite of the careful watchfulness over prices, in certain cases the formation of clandestine over-prices cannot be excluded. Furthermore, the stationary nature of obligatory prices for intervals of long duration goes to explain the characteristic development of the course of Italian prices compared with those on the world market. As prices were going down in the second half of 1937 on the international market, prices in Italy were slowly rising. The control in Italy is now concerned with not only food and the principal consumption items, but also with a great variety of goods in every stage of production. The specific and immediate aim is to avoid the formation of super-profits from an emergency in a market in which the supply is often rather rigidly maintained, especially in view of the scarcity of certain raw materials and other productive means. Notwithstanding the intimate contact between the corporate system and the productive organization, the concrete minute regulation is bound to meet difficulties of no light nature, due to the great variety of cases and especially to habitual insistence on a cost of production that can be said to be typical or normal (most frequent) in the market. There are, in fact, a great variety of costs, according to the companies concerned, the specific character of the products obtained from each, the size of its production, its peculiar set-up, processes and conditions of production." 20 Import and export prices show greater variation than internal prices, as one would expect. From September, 1936 to August, 1937 import prices rose 75% and export prices 24%. 2 1 On October 22, 1937, an unsigned article in II Sole reviewed the general policy of price discipline under the Ministry of Corporations for the last six months. The writer praised the control of the price structure through the whole production cycle from the factory through the wholesaler, to the retailer 20 " I prezzi delle merci in Italia nel trimestre: Luglio-Settembre 1937" by Riccardo Bachi in Rivista di politico economica, November, 1937, Fasc. X I , pp. 911-914. 21 Ibid.

68

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CONTROL

IN

FASCIST

ITALY

and consumer, " a method which Minister Lantini has applied with splendid economic judgment, with vigorous spirit of corporate justice, and with the constant vision of the necessity to realize, together with the maximum discipline of prices, the maximum stability o f the internal market."

22

T o carry out

this purpose wheat, rice and more recently olive oil prices are now fixed for the entire year f r o m harvest to harvest. T h e writer expresses a desire for the "development of a real policy on p r i c e s " (sviluppi dell'attnale

politica

dei pressi).23

A new

kind o f discipline is hoped f o r : that which, when there may be evident equilibrium between demand and supply, automatically springs f r o m the play o f commercial transactions, especially if such play develops also under the influence of

international

quotations, made sensitive to the internal market through the course of importation and exportation o f goods. " Moreover, in this case—need it be s a i d ? — t h e Minister would be able to renounce his precise duty of continuing to exercise a systematic control on the course of prices; but, there may be control limited to preventing the natural development of transactions

(contract prices)

commercial

f r o m being altered by man-

oeuvres capable of influencing the stability of prices, a control on the functioning of markets, rather than on prices."

24

This

would indicate a plea f o r a competitive market, controlled only in the sense that chiselers and unfair speculation may be ruled out. Some prices started downward in Italy October 20, 1937. T h i s does not mean that all or even a great many prices came down, for the indices were still rising. However, a f e w products were reduced in price. Olive oil prices were reduced by about 100 lire per quintal.

T h e price of table butter came

down, while coffee, cocoa and copper were quoted at lower figures because of lower international prices. A l l danger of 22II Sole, October 22, 1937. 23 Ibid. 24 7/ Sole, October 22, 1937.

CORPORATIVE

CONTROL

OF PRICES

69

speculation was considered past. A n article in II Sole, November 30, 1937, said, " Now control over prices assumes essentially technical characteristics." 25 Minister Lantini delayed the reductions in coffee prices for over a month, allowing time to use up stocks bought at higher prices. In December, 1937 many of the details of price control were entrusted to Dr. Renato Ricci, the new Under-secretary of Corporations. He issued warnings to the dairymen that prices over the maximums allowed for industrial milk would not be tolerated.26 In the olive oil market rumors of a change in prices by the Ministry of Corporations caused unjustified rises in the price of olive oil over and above the maximums allowed by law. " Olive oil prices have been fixed for the entire year, and will positively not be changed until November, 1938. He who breaks the law will be punished ! " 2 7 The olive oil production was adequate 28 and further supplies were expected from Spain. Virginio Gayda, who is often referred to as the official spokesman of the regime, said that a new rise in the price of milk would disturb and exhaust the patience of consumers and would be fatal to the interests of production as well.29 He warned against rumors of price rises in milk and cheese. Gayda observed that " the problem of prices dominates that of domestic balances, salaries, costs of production, and is the center of Italy's system of economic autarchy." 30 Well might these writers complain, since milk for industrial uses had risen from 30 lire per quintal in 1934 to 75 and 80 lire by December, 1937 8 1 —a rise of 150% in five years! The price of grana cheese had risen from 360 lire per quintal in 1934 to 900 lire 2511 Sole, November 30, 1937. 26II Sole, December 3, 1937. 27 Ibid. 28 About 2y* million hectolitres. 29 Giormle d'Italia, December 2, 1937. 30 Ibid. 31 Prices fixed by the Ministry of Corporations.

70

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ITALY

in 1937 and was selling illegally in December ( 1 9 3 7 ) for 1,000 lire in some quarters. Olive oil rose 6 % in price in five years, meats 100%. 32 " Those who push the prices of these goods beyond reasonable limits, compelling people with the least means to sacrifices and lower consumption standards that the official statistics of internal consumption already reflect, are shortsighted. They fail to realize that if the price of butter, for example, is unreasonably high, people with modest incomes are forced to use fat substiutes. Hence producers suffer from the fall in consumption. It is to the producer's interest to help stabilize prices, if he wants to keep his market. Rumors of price rises are especially inopportune at this time, since international prices are now going down." 33 Dr. Mario Racheli, head of the Fascist Confederation of Merchants, warned that the regulations of general nature 34 which had been forgotten by many producers and distributors must apply to all.35 Certain producers " follow only those orders that are convenient for them." 38 Racheli reviews the orders sent out: first, the law of October 5, 1936 itself; then order no. 697 which said, " For the purposes of orders on selling, it is not enough to leave unvaried the lists of charges, but dealers must also maintain the prices practically adopted, keeping all the discounts, reductions, various concessions and conditions of payment that held good up to September, 1936." 37 A n order issued January 23, 1937 ruled that expenses could not be added to prices, where the practice was not permitted before. A n d on June 23, 1937, a regulation read, " conditions of sale could not be altered without permission of the price 32 Even w i t h control, it w a s difficult to hold down the prices of milk, cheese, olive oil and meat. T h e use of industrial milk f o r making lanital trebled its price. 3 3 I I Sole, December 10, 1937. 34 Disposizioni

normative

di carattere

3511 Sole, December 15, 1937. 36 Ibid. 37 Ibid.

generate.

CORPORATIVE

CONTROL

OF

PRICES

71

38

authorities." The Confederation of Merchants in cooperation with the Ministry of Corporations gave out orders on the marketing of goods, September 4, 1937, and urged dealers to avoid disequilibrium in the normal course of trade and to avoid substituting grades. On September 26, 1936 the Secretary of the Party in Order no. 637 warned that it is not only a grave offense to sell, but also to buy at prices superior to the maximums determined in national and local lists. The discipline of prices is not limited to retailers. July 28, 1937 the Minister of Corporations ordered that " the Provincial Councils of Corporate Economy should, when information of price infractions come to their notice directly or indirectly, report these to the competent judicial authorities.39 ' When should new prices be enforced in contracts?' many dealers have asked. New prices should be enforced as soon as the price order has been given or on the date it is made effective regardless of the contract price.40 If a contract is made at a superior price, it is illegal. But if a contract was made at a lower price than those enforced by the authorities, it shall remain so until the termination of the contract," Racheli urges that these orders be respected— " each and everyone." 41 The climax of these diatribes was reached when Benito Mussolini declared in a meeting of the Central Guild Committee that " prices should not be left to the free play of economic forces, but should be controlled to avoid sudden changes (crolli) and to create a stable control of several products of popular consumption." 42 Retailers were praised for their resistance to speculation. The two main purposes of control are: 1 ) to protect the purchasing power of the masses and 2 ) to help the program of autarchy. The Central Guild Committee 38 Ibid. 39II Sole, December 15, 1937. 40 Orders of May ii, 1937 and July 22, 1937. 4 1 I I Sole, December 15, 1937. 42 Reported in II Sole, December 18, 1937.

72

PRICE

CONTROL

IN

FASCIST

ITALY

approved the following policies: I ) that prices, both retail and wholesale, should be held down as much as possible, 2 ) that prices be fixed for long periods (such as those of wheat, olive oil, etc.), and 3) that the vigorous control be continued to keep down the cost of living which is the lowest in Europe.' 13 January 3, 1938 Minister of Corporations Lantini sent out orders to the Provincial Councils of Corporate Economy that " no longer are price rises to be sanctioned, since world prices have reached their maximum and hence, no further rise is justified on the internal market." 44 Stability but not crystallization of prices is the aim, for " corporate economy guarantees the normal development of our economic system, avoiding the frequent and damaging crises found in other countries." 45 43 Ibid. The reason for this phenomenon is partly the blocking of rents, gas rates, etc. in October, 1936. Most authorities agree that Jugoslavia has the lowest cost of living in Europe. 44 Bollettino dei preset, January 15, 1938, Appendix I, p. 1. 45 Ibid.

CHAPTER V I.

THE AIMS AND THEORY OF PRICE CONTROL

PRICE control in a closed economy is a very differ,ent thing from price control in a liberal or competitive economy. However, the theorist would be compelled to hunt far and long to find even an approximation to perfect competition in the world to-day. There is government regulation to some degree in every nation, so that the working out of the market price through the free play of the traditional static laws of demand and supply is apt to occur only in the lectures of erudite economists. In the United States we see among other measures, government fixing of farm prices and " resale price maintenance", a practice which is held valid in the courts. In England there has been a distinct tendency, especially since 1931, to extend government controls over the economic life of the people. While we have a measure of regulation in liberal economies, the effectiveness of price control will be much greater in a closed economy such as Italy's. 1 F o r in a closed economy the government can control all the factors involved rather than a part of them. But even in a controlled state, the weather conditions, import prices (except for duties) and the effects of world conditions are beyond the control of the government.

The Italian government has linked its price policy to other controls. This is especially true in foreign trade and foreign exchanges. Through a series of restrictive laws, starting in 1934, the government has exercised effective control over the import and export of gold, the value of the lira, the circulation of banknotes in Italy, the import and export of Italian money from Italy and general protection of valute balances for the benefit of Italy. The use of licenses and quota restrictions for 1 There is much competitive business in Italy to-day.

73

74

PRICE

CONTROL

IN

FASCIST

ITALY

imports has kept down the amount of imports and compelled nations which have clearing agreements with Italy to buy Italian goods in exchange. During the sanctions period import licenses restricted imports to absolute necessities. Although import licenses are now no longer needed, the distribution of important imports is in the hands of government monopolies which distribute assigned quantities of raw materials to various manufacturers. All imports of metals are distributed by the Ministry of W a r . A l l imports of wheat are distributed by the Minister of Agriculture and Forests. General supervision over the entire problem is exercised by the Minister of Foreign Trade and Foreign Exchange. T h e actual prices paid for imports on the international market cannot be modified by the Italian government except through the levy of import duties. When important necessities must be imported, there is an attempt to equalize the internal and the external prices. For example the price of wheat within Italy has been more or less greater than the price of wheat on the international market, ever since the " battle of the wheat " began. W h e n the devaluation of the lira made the price of imported wheat higher, the import duty was reduced from 72 to 18 lire per quintal to make the total cost of imported wheat equivalent to the cost of domestic wheat. The state of world prices and the economic conditions in other lands are bound to affect the internal conditions of the most independent closed economy. This is especially true of Italy, since so many necessary raw materials must be imported. The prices of these imported goods are certain to be reflected in the internal price quotations and in the general indices of prices. In the practical administration of internal prices, the central price committees at Rome have kept close check on international prices, and the official in charge of foreign exchange and foreign trade (now the Minister of Foreign Trade and Foreign Exchange) has always served on the central price committees to organize internal price policies in harmony with the price fluctuations on the world market.

AIMS

AND

THEORY

OF

PRICE

CONTROL

75

In the following paragraphs are outlined the aims and theory of price control expressed somewhat sketchily by Italian theorists. The first phase of central price control, beginning in October, 1935 was almost exclusively political. Its scope was to prevent a scarcity of many goods 2 and to avoid too high prices and costs during the A f r i c a n campaign. A f t e r the realignment of the lira in October, 1936, the aims of control were to protect the purchasing power of the consumer against higher living costs, to protect increases in salaries and wages, 3 to guard against possible panic and economic confusion, and to gain an advantage in foreign trade, since exports would be sold at lower prices in terms of gold. The general aims of control have been to maintain the purchasing power of those least able to buy, to protect the lira, and to gain, if possible, an advantage in foreign trade by price manipulation. Professor Francesco V i t o maintains that the ultimate design of Italian price control is to change the distribution of wealth. 4 Mussolini said of price control, " Its aim is to realize the greatest possible social justice for the Italian people." 5 Professor Gino Borgatta of Bocconi University said, " The maintenance of internal price levels in Italy with respect to foreign prices has and will have a fundamental function in the defense and improvement of the equilibrium of our (Italy's) balance of payments." 6 In its third phase which began April 28, 1937, price control entered an economic-political stage, i. e., a stage " integrally corporative." 7 This change did not come at a 2 B y preventing hoarding and holding f o r higher prices. 3 Granted in A u g u s t and September, 1936. 4 In his article, " Politica economica sociale corporativa " in Rivista internazionale di scienze sociale, July, 1937, p. 182. V i t o does not indicate how this would be done. 5 II Commercio,

August, 1935, P- 566.

6 I I Sole, January 14, 1937. 7 " Economia corporativa e controllo dei prezzi " b y Franco Modigliani in II Commercio, August-September, 1937, p. 24.

j6

PRICE

CONTROL

IN

FASCIST

ITALY

time of emergency, but at a time of comparatively " normal " conditions. The ultimate purpose of control then became " the formation of a just corporative price.," (formazione di un giusto pre2so corporativo.y Prices were not to be fixed to the advantage of one class alone, but in the interests of all classes of the population. It is difficult to discover a clear-cut philosophy on the formation of prices in the corporative state. Professor Gino Arias speaks of a corporative price (prezzo corporativo) which he says is " an economic price, but that the corporative psychology is not individualistic." 9 A l s o " the corporative price is economic not political, and in a new sense of the word, it is economicopolitico, formed freely under corporative psychology and corporative conscience." 10 These statements are rather vague, and since they were written in 1934 help us little if any. In 1937 Arias wrote on " Prices and Costs of Production." 1 1 H e claimed that Cassel's law of international prices no longer was valid, and that internal monetary autonomy " can be secured and maintained, provided that the state have the will and the means to impose it, to attain it and to keep it." 12 Arias said the cost of living was being restrained in Italy " under rules of a corporative criterion of the justice of distribution. In short, in order to attain a completely corporative price, we must presuppose a corporative cost." 13 H e is especially bitter against Ricardian economics. F o r example, " Autonomy, that is to say autarchy in its Fascist significance, and comparative costs are in complete antithesis." 14 8 Ibid. 9Economia

corporativa

by Gino Arias, p. 422.

10 Ibid. 11 L'Indipendensa

economica

italiana

by several authors, pp. 67 et

12 " Prices and Costs of Production " in L'Indipendensa economica by Gino Arias, pp. 67-68. This statement is somewhat optimistic. 13 Ibid., p. 69. T h e italics are Arias's.

14 Ibid., p. 71.

seq. italiana

AIMS AND T H E O R Y

OF PRICE

CONTROL

77

W e have read much about basing prices on the costs of production in the preceding parts of this study. But how is the cost of production to be determined? Lantini tried to answer this question before he took over the direction of price control. H e said there are three methods of finding the real costs of production : 1 5 I ) the analytical method to discover the individual costs of every agency, 2 ) the empirical method—a study of one cost of production, the approximate average, derived f r o m the sum of the individual components of the normal productive process, and 3 ) the indicative method or yardstick device—ascertain a cost of production index, given by a typical agency that is subject to the latest innovations, technical and administrative discipline, and considered as best adapted to give the maximum return of utility. Lantini favors the last method. Professor Filippo Carli commented further on Lantini's three methods, saying that the third one reminded him strongly of Marshall's " representative firm." 18 He also said the whole problem of fixing costs is a very complex task, " but possible of solution under the Corporations." 17 Modigliani talks of a " just price " which brings to mind the just price of the middle ages. 18 H e defines it as a price that would return to each producer the expenses of production, interest on capital and a just profit for the producer's activity. L a V i a says a just price is one that does not weigh too heavily on the consumer, and guarantees to producers and distributors an equally honest profit. 19 T w o tests may be applied to see if the " natural price " 20 is also the " just price " : 1 ) that demand 15 Quoted by Antonio Arienti in Gerarchia, September, 1937, p. 33¡7 ; the original article appeared in Politica sociale, March, 1937. 16 " Il controllo corporativo dei costi " by Filippo Carli in II Sole, Aprii io, 1937. 17 Ibid. 18 " Economia corporativa e controllo dei prezzi " by Franco Modigliani in II Commercio, August-September, 1937, p. 24. 19 La Via, p. 58. 201. e., market price.

78

PRICE

CONTROL

IN

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ITALY

and supply are in perfect equilibrium and 2 ) that this equilibrium lasts indefinitely. It is very difficult to determine the just price. In determining the base cost, it is necessary to find out the cost of the article at its arrival at the stage of production under examination and the cost of transportation of the article in addition to a just profit. Prices should be fixed throughout the cycle of production, and the base price must equal the cost of raw materials plus additions allowed through the course of the productive cycle. But here we meet difficulties, for costs vary from factory to factory. Some variations are eliminated under the corporative system, such as wages which are invariable for the same type of work in the same district. Modigliani claims that it is impossible to reduce costs to unity, but it is possible to fix a minimum and a maximum price that will not harm any producer. Modigliani reaches the same conclusion as Lantini that usually the costs should be fixed on the base of costs in the factory best organized and best managed. 21 The people most technically able should fix prices for their particular branch of industry to insure justness and exactness of prices. It is sometimes impossible to fix national prices, because the producers and distributors concerned are too numerous and too widely diffused. These prices should be left to the local control bodies. " Prices may be fixed at other than their just level for reasons of political character." 22 For instance, 1 ) the state may want to regulate the effect of foreign trade and the influence of imports on the internal market, 2 ) the state may regulate internal prices to encourage exports and 3 ) the state may regulate prices in the interests of consumption, economic autarchy and the increment of national production. In the first case the state may augment or lower the amount of imports, affecting the supply and hence the price on the internal market. In the second instance, prices may be manipulated to aid exports 2 1 " Economia corporativa e controllo dei prezzi" by Franco Modigliani in II Commercio, August-September, 1937, p. 27. 22 Ibid., p. 28.

AIMS

AND

THEORY

OF

PRICE

CONTROL

79

and bounties may be paid to exporters who sell at lower prices abroad to meet foreign competition. Thirdly, to aid the program of autarchy and " home i n d u s t r y p r i c e s on the internal market may be fixed to guarantee a good profit to producers and hence to encourage increased home production. Modigliani suggests openly that in the policy of protecting the purchasing power of those least able to buy, profits on goods of common consumption be cut down, but that greater profits be allowed to producers and distributors on luxury goods to make up for this. 23 Extension of control to all prices would be much too costly and difficult. In some cases control would do more harm than good; for example, in the case of articles of dress where the style is of the utmost importance. However, any control that does not apply to all stages of production is unfair, since if one stage is neglected, prices there would have an advantage over prices in the other stages. Commence control at the beginning of the economic cycle and fix prices at all successive stages is Modigliani's advice. 24 In Germany where control began earlier than in Italy, control up to October, 1936 was limited to retail prices of prime necessities. This caused great confusion, since there was no curb on speculation before goods reached the retail market. Statistics showed that 60 to 7 0 % of the products so controlled left retailers no profit, or didn't even cover costs. A s a result 90% of the retailers entered the poorer classes.25 Lorenzo L a V i a says that a system of national prices and prices for large homogeneous sections will prevent the drift of goods to markets offering higher prices. 26 A l s o he maintains that price changes should be made in harmony with the phases of the business cycle and changing conditions of production with an eye to the modest family budget and the protection of 23 " Economia corporativa e controllo dei p r e z z i " by Franco Modigliani in II Comtnercio, August-September, 1937, p. 28. 24 Ibid. 25 Ibid.,

p. 30.

26 La Via, p. 61.

80

PRICE

CONTROL

IN

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ITALY

fixed incomes. The authorities should guard against sudden, abrupt and unexpected changes and should aim to smooth out the curves of business fluctuations.27 " In this way it is easy to avoid or at least greatly to attenuate the phenomena of business crises, often due fundamentally to a profound lack of adjustment of production and distribution to purchasing power." 28 T h e aim of control of wheat and flour prices should be to provide a constant wheat price for farmers on the one hand, and an unchanging price of bread to consumers on the other. " Only a continuous and methodical control can be effective." 29 Changes should be made gradually—neither too soon nor too late in adjusting sticky retail prices to rapidly changing internal wholesale or international prices.30 Other Italian writers could be quoted here, but the ideas of the theorists quoted in this chapter and in the preceding four chapters are merely reechoed by the others. Perhaps the time has been too short for the formulation of any satisfactory theoretical principles. Although the professors of economic theory in Italy are now called professors of corporate economy, they have failed to develop a consistent theory of prices in the corporate state. Their work has been almost wholly concerned with explaining the government economic policies in an institutional way. Where they have attempted to state theories the results have been vague and unsatisfactory. Thus, while the statements of the political purposes of price control have been fairly clear, it is impossible to discover any contribution to economic theory in the entire program. Lantini's own statement of the best means of finding a cost of production takes us back to Marshall, while V i t o and Arias take us nowhere. Modigliani and L a V i a are most helpful when they discuss the practical administration of control. The most we can say is that this study of price control in Italy explains how it works as part of a system of closed economy. 27 Ibid.

28 Ibid., p. 74.

29 Ibid., p. 63.

30 Ibid.

AIMS

II.

AND

THEORY

OF

PRICE

CONTROL

8l

THE ORIGIN OF THE CONTROL COMMITTEES

Thus far we have talked of the Intersyndical Committees, the Provincial Councils of Corporate Economy, the Corporations themselves and other bodies without explaining how or when they originated. T h e Labor Charter recommended by the Committee of Eighteen was put into effect April 21, 1927, while the law of April 3, 1926 established the Corporations, but only on paper. The law of February 5, 1934 gave the Corporations definite instead of the former vague powers and duties, and marks the beginning of the more effective organization of the Corporations. In this law the Corporations were first legally recognized as organs of the state. T h e present 22 Corporations were formed during 1934. Their life began with the convocation of the Meat and Fish Corporation (Corporazione della Zootecnica a della Pesca) January 8, 193 5.31 B y April 18, 1935 the Central Guild Committee had taken over the executive duties of its parent body, the unwieldy National Council of the Corporations (Consiglio Nazionale delle Corporazioni) ,32 It is made up as follows : the Minister of Corporations, the Minister of the Interior, the Minister of A g r i culture and Forests, the Secretary of the Fascist Party, the Undersecretaries of State for the Corporations, the presidents of the employers' organizations, the workers' organizations and the professional and artists' organizations, the President of the Cooperative Organization, the President of the Social Insurance Institute, the President of the Secretariat-General of the Council, the Minister of Justice, the Minister of Finance, the Minister of Education, the Minister of Public W o r k s and Communications, the Presidents of the Corporations, the Vice Secretaries and the Administrative Secretary of the Fascist 31 Lineamenti dell'ordine corporativo fascista by Professor Bruno Biagi, formerly Under-Secretary of Corporations, p. 173. 32 Established in 1926.

82

PRICE CONTROL I N

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ITALY

Party, representatives of the Fascist Party, serving on Corporations, and the Minister of Foreign Exchange and Foreign Trade. 83 The question may well be raised, " Why didn't the Corporations take over price control from the beginning ? " The obvious answer is that they were not well enough organized to do this work until 1937, and even then the main work was entrusted to the technical workers in the Ministry of Corporations, working under Lantini. The Corporations are still huge unwieldy bodies with vague ideas of just what they should do, even though by the spring of 1937, they had been given the broad powers of : 1 ) making wage adjustments, 2 ) controlling prices, 3) approving new industrial plants or expansions to old ones, and 4) making economic policies for national selfsufficiency. The Central Intersyndical Committee (Comitato Intersindacale centrale) formed in 1926 aided with the collective agreements, the stabilization of the money, etc. The Intersyndical Committees in each province were set up to watch over prices, costs of production, etc., but strangely enough the Communes were given the task of controlling local prices until 1930. The Central Intersyndical Committee was absorbed by the Central Guild Committee in 1930. As complementary organisms to the Intersyndical Committee the Provincial Councils of Corporate Economy (Consigli Provinciali dell'economia corporativa) were organized in 1926 to replace the old Chambers of Commerce. Originally they were responsible to the Minister of National Economy. By 1930 they contained representatives of labor and employers. In 1934 they were designated to coordinate the social and economic activity of the province, and were to be responsible to the Minister of Corporations. They were research consultants for the state and local administrations. Their general tasks before they were assigned to that of price control in April 1937, were to foster better and greater pro33 Added in February, 1938.

AIMS

AND

THEORY

OF

PRICE

CONTROL

83

duction, promote the economic life of the province, improve the curricula of the Institutes of Technical Education, and to propose to various ministers economic and social laws for the betterment of the country. Meantime the Provincial Offices of Corporative Economy had been set up under laws of 1927, 1 9 3 1 and 1934. They were to issue certificates as to the origin of goods, issue cards of identification for travelling salesmen and were to carry out in general the purposes and acts of the Minister of Corporations in the provinces.

III.

TRUSTS AND PRICES

Both in the field of distribution and production trusts have had a notable influence on costs and prices. Although Italy is often described as a country of many small enterprises, the drift toward large trusts and semi-public holding companies becomes more marked each year. Professor Francesco Vito claims that trusts with almost complete monopoly can, because of lower costs, offer goods at lower prices than smaller companies, and in spite of monopoly privileges create in this manner a consumer's surplus that would otherwise be lacking. 34 Caruso commented that " when a trust owes its origin not to a protective tariff or other privilege, but is born out of a physical necessity, arising out of the very conditions of production and the market, its interests can coincide with those of the general public." 35 He adds that trusts adapt themselves to the exigencies of the market to attain the greatest possible profits. In any event, " they reach a more or less qualified monopoly position." 36 There should be control of trusts, not externally as in liberal economies, but internally on a corporate plane, in 34 Referred to by La Via, p. 80 from I sindacali industriali-cartelli e gruppi by Professor Francesco Vito. 35 Quoted by La Via, p. 82. The original was an Extract from the Rivista del lavoro, 1935, no. 10, " I consorzi industriali nell'economia corporativa " by Caruso. 36 Ibid.

84

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the sense that " every trust whatever its nature, . . . be controlled and guided by the competent Corporation and that the Guild (Corporation) itself be at the center of the policy for industrial companies, in such a way that it becomes the moving power in forming such trusts as are beneficial to the national economy." 37 The royal decree law of June 16, 1932 regulated trusts in such a way that they had to be reorganized or liquidated, if their organization did not fit in with corporative ends. A second law, passed April 16, 1936 amplified the earlier measure and required complete reports from each trust to the competent Corporation, including valuation of the entire enterprise, price lists, amount of business done, etc. The proper Corporation could then take appropriate steps if the trust was operating against the law or the economic welfare of the country. These measures applied only to trusts, controlling 70% or more of national production. La Via concludes that " the existence of the trust, its completeness and the limitation placed upon equal division of production give place to a monopoly that evidently cannot operate without an adequate and efficient control tying it to the corporative organs that offer every necessary guarantee." 38 The law of February 5, 1934 gave the Corporations control over monopoly consumption prices, as we have said before. The tendency in Fascist Italy is to encourage the formation of semi-public trusts, such as the recently formed iron and steel trust, the Sinfider, the shipping trust, the Finmar, and the various trusts formed under corporative auspices for the economic development of Ethiopia. Fuels are administered under a governmental monopoly, as are copper, nickel, tin, salt, tobacco, tea and bananas. There are many large private companies that exercise virtual monopolistic control, such as Montecatini (chemicals), Snia Viscosa (rayon, etc.), Pirelli (rubber), etc. 37 Ibid,, p. 83.

38 La Via, p. 85.

AIMS

AND

THEORY

OF

PRICE

CONTROL

85

It is impossible to separate out the influence of these trusts on prices from the active government control. Theoretically it is a far easier task to control a few large companies than many smaller ones, so that the government is now encouraging the formation of trusts, some financed both by the state and private stockholders, especially in economic sectors where the interests of autarchy and national defense are best served. Thus the policies of the consorzi (trusts) aid in the formation of rigid prices for long periods of time.

CHAPTER VI THE METHODS AND EFFECTIVENESS OF LOCAL CONTROL THE chief instrument of local price control is the Maximum Price List (Listino Prezzi Massimi) which must be posted in each shop. This list contains the highest prices which may be charged at retail and wholesale for each article. When there is a consumption tax on an article, the amount of that tax is printed next to the wholesale price. The Maximum Price List is usually published every 15 days, but in Florence it has been published monthly since August 1, 1937. A t Turin the list for November 15, 1937 was not changed until January 1, 1938. These lists contained only 21 prices when control began, but now they contain about 30 quotations for retail goods, while on the back or at the bottom of the list may be found about the same number of wholesale prices. The Commission for Unification of the Intersyndical Price Lists recommended, April 15, 1937, that each list be clear and easily understood, that it should bear a number, or show in some other manner its relation to other former lists, and that brands and qualities of goods be uniform for all Italy in so far as was possible.1 In addition to the longer list which includes most stable foods and necessities, there appears at shorter intervals a list for fish and eggs. Every two weeks or oftener a list for fresh meat is published, although in some cities 2 fresh meat prices are included in the main list. The provinces have the privilege of publishing further price lists for items not included in the lists mentioned. The utmost publicity is given to these lists and all price changes through the radio and the press. 1 La Via, p. 67. 2 For example, Milan.

86

EFFECTIVENESS

OF L O C A L

CONTROL

87

Professor Bachi has been delighted with the publicity given prices through the published lists.3 He feels that these lists are the answer to a statistician's dreams, and that they will serve as the fundamental documents of the economic history of the country in a very important phase of its existence.4 This greater publicity, uniformity of nomenclature, brands, qualities, etc. and the machinery of control have made it possible for the first time to cut down the coefficient of variations in prices as between Italian cities to 4.02%. 5 Control of Italy's economy has made it possible for the Central Institute of Statistics to get accurate data on a wider base than ever before, since at the end of each month, every Provincial Council of Corporate Economy must report minimum, average and maximum prices in its province to the Institute at Rome. Under the Ministry of Guilds a price change is effected as follows: first, a request is received from a business for higher prices, since its costs of production have gone up. This request is investigated by the particular guild organization concerned. The investigation may take a few days or two weeks according to the nature of the article. If raw cotton is concerned, the change can be made rapidly, since only one cost is involved. But, for a chemical product into which many different costs may enter, it may take ten days or two weeks to complete the inquiry. A f t e r the investigation is completed, a report is made and changes recommended. These are acted upon by the Guild Committee. If the need is urgent, Minister Lantini can rush the change through on his own authority, although he usually follows the suggestions of the committee. Orders on price changes are sent out to the provinces by telegraph. The 3 " I prezzi delle merci in Italia nel secondo e nel terzo mese dell'assedio economica " by Riccardo Bachi, an extract from Rivista di politico economica, 1936, Fasc. II, p. 3. 4 Ibid. 5 This figure is supplied by Albino U g g e in " Prezzi, salari, costo della vita, e occupazione operaia" from the Rivista internazionale di science sociali, July, 1937, p. 147.

88

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ITALY

prefect in each province also has the power to make an emergency change for the province. T o lower prices no authorization is necessary, although the Ministry of Corporations can and does initiate the fixing of lower price quotations. The local bodies fix prices on the base of the national prices fixed at Rome. The Provincial Councils of Corporate Economy add transportation costs, local taxes, or make changes due to any peculiar local conditions. The list made by the Provincial Council becomes official for the center (capoluogo) of the province. Just as the prices fixed by the Central Committee in Rome are used as a base for the provincial price lists, so are the provincial lists in turn used as a base for the lists in each Commune. For example, in Florence, which is the center of the Province of Florence, the price lists in force are those of the province, but in all the other Communes there are local price boards, made up of the Mayor, the Fascist Secretary and representatives of the local organizations who fix lists subject to the approval of the Provincial Councils of Corporate Economy. In no case can they fix prices higher than those on the provincial lists. Recent price orders advised that caution be exercised by the Provincial Councils in watching over municipal lists, allowing variations in prices, only when it is absolutely necessary. 6 The Provincial Council of Corporate Economy meets two days before the end of each month or price period to vote on changes. Actually the whole Provincial Council practically never meets, but the Committee of its Presidents (Comitato di presidenza) does the work. Before this meeting, the provincial Technical Commissions have met, and various conferences between the head of the Statistical Office and the presidents and vice-presidents of the syndical organizations have taken place, so that armed with recommendations of the Commissions and telegraphed orders from the Minister of Corporations, the work of the Committee is soon done. In Florence the 6 Price orders in Bollettino

dei preszi, February 15, 1938, Appendix I, p. 1.

EFFECTIVENESS

OF

LOCAL

CONTROL

89

changes are made in red ink on the old list, and sent to the printer. If the Committee feels they should sanction a price radically different from that fixed in Rome, they must receive approval from the Ministry before they can publish it.7 There have been great changes in the methods of retail selling. Vegetables, fruits, eggs, etc. are usually sold by weight. Clear price signs must be prominently displayed in addition to the official price lists. Haggling has practically disappeared. In meat markets a colored chart of the various cuts of meat must be displayed. A t the bottom of the chart are listed in one column the national names for each cut of meat, and in the column to the right, left blank for the purpose, the butcher must write the corresponding local names that differ widely from province to province. This device protects the consumer, and insures greater uniformity throughout Italy. H o w effective is the control over prices? Many business firms like to have fixed prices, with the necessity of underselling competitors, etc. done away with. In the United States the N. I. R. A . was popular with many industrialists for the same reason. I asked a farmer at Capezzana how he liked the central pool system for wheat. H e said it suited him very well, since under the current system he was sure of a fixed price, whereas before, he would receive a very handsome price one year for his wheat and the next a very low price. This was the general reaction of practically all the farmers and storekeepers I talked with. There is a definite tendency in the shops to charge the maximum price. Ordinary citizens are advised to familiarize themselves with the price lists. October 6, 1936, the public was told that they should not " through love of quiet living submit to any unjustified increases in prices." 8 If a customer feels he has been overcharged, he may call the police, or report the 7 In Turin the list w a s being held up, w h e n I visited the Provincial Councial of Corporate E c o n o m y there, since approval had not yet been secured f r o m Rome for a particular price. 8 La Via, p. 96.

90

PRICE

CONTROL

IN

FASCIST

ITALY

case 9 to his Fascist Section ( R i u n e ) , where court and party action is instituted against the offender. Ordinary police (polissia ordinaria) or police of the Ministry of Finance (Gnardia di Finanza) or market police (polissia annonaria) are assigned to check prices in local stores and markets. In some cities 1 0 the police are changed about regularly to avoid their becoming too familiar with the locality and perhaps lax in price enforcement. For price surveillance at Rome there is a group of 60 special police who operate in plain clothes and are divided into 15 squads of 4 men each. The leader of each squad is a technical expert on prices. The police can arrest storekeepers, fine them on the spot (giving a receipt), or they may take the storekeeper to court where the offender may lose his license to do business. The Fascist Party may deprive him of party membership. Modigliani claims that with the change in control in April, 1937, the punishments became regulated more on the basis of the penal laws than on the basis of political discipline. 11 That is, instead of taking away the Fascist Party membership card, or closing the store, the penalty was more likely to be a fine or a period of imprisonment, meted out in the courts. In the earlier d a y s 1 2 the Fascist Confederation of Merchants and the Fascist Party punished offenders. T h e penalties fixed by the law of October 5, 1936 provided: 1 ) a fine of from 20 to 10,000 lire, or from 5 days to one year's imprisonment for charging prices above the maximums allowed, or for raising rents, gas, electric, water and transport rates, 13 or for raising hotel rates; 1 4 2 ) fines of from 50 to 10,000 lire or punishment of from 3 months to 2 years for hoarding goods beyond the normal exigencies of proper agricultural, industrial or com9 Properly documented.

10 For instance, Milan.

1 1 " Economia corporativa e controllo August-September, 1937, p. 24.

dei p r e z z i "

12 1934 and 1935-

13 F o r t w o years f r o m October 5, 1936. 14 F r o m October 5, 1936 t o December 31, 1936.

in II

Commercio,

EFFECTIVENESS

OF

LOCAL

CONTROL

91

mercial activity. Stores may still be closed for 15 or 30 days for disobeying price orders. Ordinarily it is expected that the patriotism of each citizen and the auto-disciplina of the Fascist system will supply the incentives to make control effective. Where these are lacking, Fascist discipline deals with the culprits. There is a small box in each market into which customers may drop complaints about over-charging; the local fascio opens the box. Each local Fascist section has control of retail price discipline in its locality. Fascist women meet each Sunday with their head (fiduciaria) to discuss prices. Five or six Fascist volunteers are selected in secret by the leader of each local Fascist section to watch over prices because of their integrity and ability to report price evasions. There is no evidence of rough force or rowdyism in price enforcement. Actually there are but few infractions of price discipline. Occasionally one sees in the newspapers that a merchant has been fined 200 lire for adulterating olive oil or milk. Carlo Spantigati reports that price infractions in Genoa numbered 0 . 5 1 % , and that out of 62,500 visits to stores in Milan, 49 (or . 0 7 8 % ) of the stores had to be closed. 15 In an earlier article about price infractions, the writer says, " But we treat of only sporadic cases, very few in number." 16 In Genoa from November, 1935 through September, 1936 out of 78,458 visits of investigators to stores, only 534 infractions were discovered. 17 Temporary closings of stores totalled 134 and expulsions from market stalls 59. 204 cases were thrown out because of insufficient evidence. In a period of ten months in Milan, from January to October, 1936, out of 62,500 visits to stores, infractions were found in 2 % of the visits, but only 49 serious cases were revealed. In the earlier days there were definite " strikes " against certain local prices by farmers who withheld the products concerned from the market. Buyers are often as guilty as sellers when they fail to report or resist price infractions. For, " Infractions in the discipline of prices become pos15 7/ Sole, January 30, 1937. 17.68%.

1 6 I I Sole, November 8, 1936.

92

PRICE

CONTROL

IN

FASCIST

ITALY

sible only when the buyer and the seller agree to elude and violate price regulations." 18 T h e greatest opportunity for f r a u d in retail stores presents itself in the practice of selling one quality in place of another. Some merchants have become " sleight-of-hand " artists in their ability to show the customer the better quality and then to wrap the poorer one f o r delivery under the very eyes of the buyer. The records of retail prices in the municipal statistical offices are of great aid in enforcement. W h e n the retail prices are reported on lists signed by the merchant, the statistical workers check doubtful prices with a " V ", 19 While the statistical office takes no part in enforcement, its records are available to the market police who investigate all questionable quotations so marked. Modigliani urges cooperation on the part of the consumer in checking prices. 20 There are posti near each market where a customer may confirm the price, quality and weight of the article purchased. These should be improved and extended. H e advises punishment only when the evidence is clear. The number of those who watch over prices should be strictly limited, and false reports of infractions should be avoided. Only people of absolute trust should have the task of supervision. Punishments should be in the hands of the judges, aided by technical experts. 21 Lorenzo L a Via sums up the problem of enforcement by saying: " T h e problem of markets loses, then, its character of a job f o r the police, and is transferred to the corporative plane. Every day guild government becomes more unified and articulate ; more profoundly colored with moral and political motives of national power and social justice." 22 18II Sole, November 9, 1937.

19 For

Visto—seen.

20 " Economia corporativa e controllo dei prezzi" by Franco Modigliani in II Commercio, August-September, 1937, p. 28. 21 Ibid.

22 La Via, p. 136.

CHAPTER VII THE STATISTICS OF ITALIAN PRICES IN this chapter an attempt is made to measure the efficacy of price control statistically. In Table I are listed the wholesale price indices, retail price indices and the cost of living indices from 1929 to 1937. TABLE I (1928 = 100)

Year

Wholesale price indices

Retail price indices

Cost of living

1929 1930 1931 1932 1933 1934 1935 1936 1937

95.4 85.4 74.5 69.6 63.4 62.0 68.2 76.4 89.3

105.4 96.4 83.1 79.7 75.5 71.0 73.4 80.9 90.4

101.15 97.73 88.26 84.10 80.50 76.39 77.48 83.52 98.22

Materials from the Bollettino dei prezzi, February 15, 1938, published by the Central Institute of Statistics, Rome.

In Table II are compared the cost of living, hourly industrial wage and real wage indices from 1929 to 1937, issued by the Labor Office of the League of Nations. T h e figures in Table II are based upon statistics supplied by the Italian government, and are not to be interpreted as figures independently determined. In Table III the monthly indices of wholesale prices, retail prices and the cost of living are listed from January, 1934 to February, 1938. For wholesale prices the National Index Number of Wholesale Prices is used. T h e retail price index used is that of 20 commonly consumed retail foods, made up by the Central Institute of Statistics. The Cost of Living index is the 93

94

PRICE

CONTROL

IN

FASCIST

ITALY

TABLE II (1929 = 100) Year

Cost of living

Money hourly wages

Real wages

1929 1930 1931 1932 1933 1934 1935 1936 1937

100 97 87 83 80 76 77 83 98

100 99 90 86 84 82 83 86

100 102 103 104 106 109 108 104

Materials from the Revue Internationale du travail, October, 1937, and the Bollettino dei prezzi, February 15, 1938.

official government set of figures. A l l are on the base of 1928 = 100, except that the base of the cost of living index is June, 1928 = 100. See Chart I for a graph of these statistics. In Table I V I have compared the progress of the cost of living index with that for hourly wages in industry, monthly from 1934 to 1937. Since these indices were on different bases, the cost of living figures were changed to the base of the hourly wage index (July 1928/June 1929 = 100) in order to make up an index of real wages. See Chart II for these figures in graph form. The hourly wage index for industry used in Tables II and I V is formed by the Central Institute of Statistics from data supplied by the Fascist Confederation of Industrialists (Confederazione Fascista degli Industriali). Since the reporting of hourly wages is not compulsory, the number of employers reporting each month varies greatly, and is practically never 100%, as is the case with the commercial daily wage index used in Table V . One month only 16.46% of the employers reported on the wages of 52.50% of the total industrial workers. 1 1 Bollettino

of June.

di notizie

economiche,

November

10, 1937, p. 1246, month

THE

STATISTICS

OF

ITALIAN

CHART

PRICES

I

G R A P H OF THE INDICES OF W H O L E S A L E PRICES, R E T A I L PRICES, AND COST OF L I V I N G , M O N T H L Y , J A N U A R Y , 1 9 3 4 TO F E B R U A R Y , 1 9 3 8 ( 1 9 2 8 = 100)

95

96

PRICE

CONTROL IN

FASCIST

ITALY

TABLE III (1928=100) Month

Year

Wholesale prices

Retail prices

Cost of living

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1934 " " " " " " " " " " "

62.8 62.0 62.2 62.1 61.2 60.8 605 61.0 61.7 62.2 62.5 62.2

75.7 74.0 73.2 73.1 69.7 68.8 68.8 68.6 68.9 69.4 70.7 71.1

80.56 79.79 79.51 79.43 75.21 74.39 74.33 74.10 74.29 74.53 75.15 75.35

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1935 " " " " " " " " " " "

62.0 62.7 64.6 65.7 66.4 67.4 685 69.3 71.4 72.6 74.0 74.3

70.5 70.2 69.8 71.0 71.3 72.3 72.5 72.0 74.2 77.1 79.4 80.2

75.14 75.28 75.39 76.32 76.74 77.28 77.52 77.23 77.47 79.38 80.51 81.52

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb.

1936 " " " " " " " " " " " 1937 "

74.3 74.5 75.4 75.9 75.6 75.8 74.7 75.9 76.9 77.1 77.8 79.0 81.6 83.3

81.0 80.0 79.7 79.7 80.6 80.6 80.2 80.3 81.1 82.0 82.4 82.9 84.3 85.6

82.05 81.84 81.94 82.20 83.50 83.84 83.55 83.11 83.54 85.23 85.51 85.98 86.40 86.90

THE

STATISTICS

OF

ITALIAN

PRICES

97

TABLE III (Continued) Month

Year

Wholesale prices

Retail prices

Cost of living

March April May June July Aug. Sept. Oct. Nov. Dec.

1937 " " " " " " " " "

85.1 86.1 87.8 89.6 90.3 91.2 91.7 93.0 95.1 96.4

86.5 87.0 88.1 89.1 91.2 92.4 93.4 94.1 95.8 97.0

87.18 87.77 90.22 91.02 92.86 93.26 94.17 95.95 96.93 98.29

Jan. Feb.

1938 "

95.2 93.7

97.6 96.6

99.14 9952

Materials from BoUettini dei prezzi up to and including the issue of March 15, 1938.

Evidently most large companies reported. The index is made up every 2 months by the chain method. 2 Since the same companies do not report every month, and the returns are always incomplete, it is difficult to rely on the resulting indices. If we examine Chart II, we find that the peaks, both in the money and real wage curves, occur in August. This is due to the method of making up the index by dividing the total wages paid by the hours actually worked. In as much as most vacations (paid) occur in August, the total money payments for that month, divided by the total number of hours actually worked yields a higher figure than the actual hourly pay for that month. The same is true in lesser degrees for the other summer months. Even a hasty examination of the wage indices in Table I V and Chart II reveals the shakiness of the data which appear 2 Specifically each 2 months are linked to the preceding month in the following manner: Let us suppose that the indices for January and February are 90 and 80 respectively. The March and April indices are found to be 85 and 80 respectively, using February = 1 0 0 . To find the index for March on the original base, multiply 80, the index for February by .85 which gives 68, the index for March, etc.

98

PRICE

CONTROL

IN

CHART

FASCIST

ITALY

II

G R A P H OF T H E INDICES OF COST OF L I V I N G , H O U R L Y INDUSTRIAL W A G E S AND R E A L W A G E S , M O N T H L Y , J A N U A R Y , 1 9 3 4 TO A U G U S T , (JULY,

1928/JUNE,

1929=100)

1937

THE

STATISTICS

OF I T A L I A N

99

PRICES

TABLE IV (July 1928 /June 1929 = 100) Month Year Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1934 . . . .

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1935 . . . .

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1936

Jan. Feb.

1937

U U H U u 11 u u tl

« it

it U u u u u u a a u u

«

It a

u tt

u 11 a u u

ii

Cost of living

Hourly wages

Real wages

79.94 79.17 78.89 78.82 74.63 73.81 73.75 73.53 73.71 73.95 74.57 74.77

84.46 84.46 83.96 84.97 83.46 82.96 82.45 85.47 82.96 81.95 81.45 82.96

105.65 106.68 106.43 107.80 111.83 112.39 111.79 116.24 112.55 110.81 109.23 110.95

74.56 74.69 74.81 75.73 76.15 76.68 76.92 76.63 76.87 78.77 79.89 80.89

81.45 81.95 82.45 82.45 83.46 83.96 84.97 87.48 84.46 83.96 84.46 84.97

109.24 109.72 11021 108.74 109.59 109.38 110.46 114.16 109.87 106.59 105.72 105.04

81.41 81.21 81.31 81.56 82.85 83.19 82.90 82.47 82.89 84.57 84.85 85.31

84.97 84.97 84.97 85.47 84.97 85.47 86.48 92.01 91.00 89.49 89.49 90.50

104.37 104.63 104.50 104.79 102.56 102.74 104.32 111.57 109.78 105.82 105.47 106.08

85.73 86.23

89.99 88.99

104.97 103.20

IOO

PRICE

CONTROL I N

FASCIST

ITALY

T A B L E IV ( C o n t i n u e d ) Month

Year

Cost of living

March April May June July Aug.

1937

86.51 87.09 89.52 90.32 92.14 92.54

"

a n " "

Hourly wages 88.99 88.99 94.52 103.07 103.57 108.09

Real wages 102.87 102.18 105.58 114.12 112.40 116.80

Materials from Bollettino dei prezzi, November 15, 1937. A note to Table X I X , p. 134 of the Bollettino dei prezzi, February 15, 1938 commented on the omission of national hourly industrial wage indices, and said that the system of making the indices was being changed. I have learned from the Ufficio Statistica della Conjederazione degli Industriali at Rome that the chain method of forming this index had led to serious cumulative errors. N o new method had been decided upon up to the end of March, 1938.

far too irregular for a country with fairly rigid wage rates. Evidently the Fascist statisticians have realized how poor this index is, for, as this is being written the whole system of ascertaining an industrial wage index is being revised—let us hope for the better ! A more reliable wage index than the one used in Tables II and IV is that for commercial workers. 3 This index gives a steadier picture of wage relationships in a country with rigid wage scales, because it is made up from data supplied by the National Sickness Administration (Cassa Nazionale Malattie) that requires reports on wages from every commercial concern. If no report is forthcoming, the insurance abruptly ceases to function. Thus practically ioo% of the wage data is reported monthly to the insurance people, and the Central Institute of Statistics makes up the index of daily wages in commerce from the figures. The daily average wage in commerce includes any extra payments, and allowance for board and lodging, if the workers are supported in this manner. Wages may be reported 3 Workers in commerce include 1,600,000 men and women, according to the 1936 census.

THE

STATISTICS

OF

ITALIAN

PRICES

IOI

as daily, weekly, fortnightly or monthly. 4 If the wage reported is a monthly one, it is divided by 30; if fortnightly, it is divided by 14; and if weekly, it is divided by 7. If the wage reported is a daily wage, it is multiplied by 6 and divided by 7. In this manner the average daily wage is made up for each branch of commerce. Then the wage index for all commercial workers is ascertained by using a weighted average, based upon the number of workers in each branch. The base used is December, 1930. In Table V the statistics are given yearly from 1930 to 1936, and monthly from January, 1936 to November, 1937. The cost of living indices are based upon December, 1 9 3 0 = 1 0 0 to make the statistics comparable. See Chart III for a graph of these figures. T h e resulting real wage indices seem to be a more reliable set of figures than the indices for real wages in industry. This is due to the greater reliability of the commercial wages indices. It is very difficult to arrive at the truth in any instance, and in Table V we seem nearer the true state of affairs than in Table I V . Chart I I I also shows a more sober picture of wage and cost of living relationships that we found in Chart II. Since the paragraphs above on industrial wages were written, the Central Institute of Statistics has issued its new revised set of hourly industrial wage indices, based on 1928 = 100.5 Although the new index appears to be a distinct improvement over the old one, the chain method is still retained. All that has been done was to change the base to 1928 and to iron out, by averaging, certain abrupt changes in the spring of 1928 that produced a serious cumulative mistake in the old series. 6 Valuable data have been added, however, in the form of a compilation of total hours worked per month which shows that industrial workers averaged 180 hours per month in 1928 and only 163 hours in 1937. 7 From these new figures and the new hourly 4 B0liettino

dei preset, November 15, 1937, p. 707.

SBollettino

dei pressi, March 15, 1938.

6 Ibid., Appendix II. 7 T h e introduction of the 40 hour week had much to do with this.

102

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ITALY

TABLE V (December, 1930 = 100) Daily commercial wages in lire

Commercial wage index

Cost of living

Real wages

Dec. 1930 1931 Ave 1932 " 1933 " 1934 " 1935 " 1936 "

15.01 14.75 13.43 13.10 12.84 12.58 12.98

100.0 98.3 89.5 87.3 85.5 83.8 86.5

100.0 94.6 90.1 86.3 81.9 83.1 89.5

100.0 103.9 99.0 101.2 104.4 100.8 96.6

Jan. 1936 Feb. " March " April " May " June " July " Aug. " Sept. " Oct. " Nov. " Dec. "

12.61 12.63 12.63 12.63 12.60 12.60 12.55 12.53 13.61 13.71 13.78 13.91

84.0 84.1 84.1 84.1 83.9 83.9 83.6 83.5 90.7 91.3 91.8 92.7

87.9 87.7 875 88.1 89.5 89.9 89.6 89.1 89.5 91.4 91.7 92.2

95.6 95.9 95.8 95.4 93.7 93.3 93.3 93.7 101.3 99.9 100.1 100.5

Jan. 1937 Feb. " March " April " May " June " July " Aug. " Sept. " Oct, " Nov. "

14.18 14.25 14.25 14.23 15.66 15.65 15.15 15.09 15.16 15.18 15.17

94.5 94.9 94.9 94.8 104.3 104.3 100.9 100.5 101.0 101.1 101.1

92.6 93.2 93.5 94.1 96.7 97.6 99.5 99.9 100.9 102.9 103.9

102.1 1015 101.5 100.7 107.9 106.9 101.4 100.6 100.1 98.3 97.3

Date

Materials from the Bollettino dei prezzi, January 15, 1938.

THE

STATISTICS

OF

C H A R T

ITALIAN

FRICES

III

G R A P H OF T H E INDICES OF C O S T OF L I V I N G , D A I L Y W A G E S I N AND

REAL

WAGES;

YEARLY

JANUARY,

FROM

1 9 3 0 TO 1 9 3 5 ,

1 9 3 6 TO N O V E M B E R ,

(JANUARY,

IO3

1930 =

COMMERCE

MONTHLY,

1937

100)

industrial wage series Dr. Benedetto Barberi has formed an index of monthly wages in industry on the base of 1928. A t best wage rates are of little help in determining how the purchasing power of the workers has been protected. A better method would be to obtain total wage disbursements in industry. But these are unavailable, and the monthly wage indices will prove more useful than the hourly wage figures. In Table V I I have listed the new hourly wage indices, the number of hours worked per month, and the indices of monthly industrial wages, the cost of living and real wages (based on the index of monthly industrial wages, divided by the cost of living). In Chart I V are plotted the courses of the indices of the

I04

PRICE

CONTROL IN

FASCIST

ITALY

T A B L E VI (1928 = 100) N E W INDUSTRIAL WAGE STATISTICS

Hourly wage index

No. of hours per month

Monthly wage index

Cost of living

Real wages

1928 Ave a 1929 ti 1930 it 1931 CC 1932 Ci 1933 cc 1934 a 1935 a 1936 a 1937

100.0 99.5 98.6 92.9 90.9 88.6 85.7 84.3 89.5 100.5

180 182 175 170 168 174 172 159 157 163

100.0 100.9 96.3 88.1 85.5 85.9 82.2 74.7 78.3 91.3

100.00 101.15 97.73 88.26 84.10 80.50 76.39 77.48 83.52 98.22

100.0 99.8 985 99.8 101.7 106.7 107.6 96.4 93.7 92.9

Jan. 1934 . . . . U Feb. March " .... April (( May- u June « July u Aug. Sept. a " Oct. Nov. u a Dec.

87.1 87.1 86.7 87.6 86.2 85.7 85.2 87.6 85.7 83.8 82.9 83.8

169 169 178 167 177 175 177 167 176 181 172 154

82.1 82.1 86.0 81.6 85.0 83.6 84.1 81.6 84.1 84.6 79.4 71.9

80.56 79.79 79.51 79.43 75.21 74.39 74.33 74.10 74.29 74.53 75.15 75.35

101.9 102.9 108.2 102.7 113.0 112.4 113.1 110.1 113.2 113.5 105.7 95.4

Jan. 1935 a Feb. March " April cc iC May cc June a July Aug. cc Sept. cc cc Oct. Nov. a it Dec.

82.4 82.4 82.9 82.9 83.8 84.3 85.2 88.1 852 84.8 852 85.6

157 151 158 160 164 156 167 155 162 165 158 152

72.1 69.3 73.0 73.9 76.6 73.3 79.4 76.1 77.0 78.0 75.1 72.6

75.14 75.28 75.39 76.32 76.74 7728 77.52 77.23 77.47 79.38 80.51 81.52

95.9 92.1 96.8 96.6 99.8 94.8 102.4 98.5 99.3 98.3 93.3 89.1

Year

THE STATISTICS

OF I T A L I A N

PRICES

IC>5

TABLE VI (Continued)

Year Jan. 1936 . . . . u Feb. March l( April a " May June a " July Aug. u Sept. u u Oct. Nov. " u Dec. Jan. 1937 u Feb. u March April u May a June a a July Aug. u Sept. u " Oct. Nov. a u Dec.

Hourly wage index

No. of hours per month

Monthly wage index

Cost of living

Real wages

85.7 85.7 85.7 86.7 86.7 87.6 89.0 94.8 93.8 93.3 93.3 94.8

156 155 158 154 160 155 163 146 160 160 155 157

74.5 74.1 75.5 74.4 77.3 75.7 80.9 77.1 83.7 83.2 80.6 82.9

82.05 81.84 81.94 82.20 83.50 83.84 83.55 83.11 83.54 85.23 85.51 85.98

90.8 90.5 92.1 90.5 92.6 90.3 96.8 92.8 100.2 97.6 94.3 96.4

94.3 94.3 94.3 94.3 100.5 103.3 104.3 108.6 103.3 103.3 102.9 103.8

151 157 163 164 164 167 174 158 171 165 159 162

79.4 82.5 85.7 86 2 91.9 96.2 101.2 95.6 98.5 95.0 91.2 93.7

86.40 86.90 87.18 87.77 90.22 91.02 92.86 93.26 94.17 95.95 96.93 98.29

91.9 94.9 98.3 98.2 101.9 105.7 108.9 105.6 104.6 99.0 94.1 95.3

Materials from Bollettino dei prezzi, March 15, 1938, regular tables and Appendix II. cost of living, monthly industrial w a g e s and real wages, yearly from

1928

to

1937,

and monthly

from January,

1934

to

December, 1 9 3 7 . T h e resulting set of figures gives a less optimistic picture of real wages f o r this period than did Chart I I . M a n y extraneous factors influence the new real w a g e curve, since the total number of hours worked is taken into consideration; these are

THE

STATISTICS

OF

ITALIAN

PRICES

IO7

the efforts to spread work during the depression, the many old and new holidays in Italy, the 40 hour week law, the rate of industrial output, and the seasonal trends of work. Although the statistics are still far from satisfactory, the new figures are an improvement on the old. A s to the remuneration of agricultural labor, it is difficult if not impossible to attain an exact statistical view because of the complex form of payment. Usually some part of wages is paid in kind. A n index number of the cost of living of the rural population that would permit the calculation of the course of real agricultural wages does not exist. 8 U g g e says that " if we limit ourselves to observing the nominal hourly wage for day laborers in agriculture that had fallen in 1934 and 1935 to about three-fourths of the 1930 level, the published data show in 1936 a sensible tendency to rise that might be assumed to be an index of an improvement in agricultural wages in toto." 9 In general U g g e praises the maintenance of the purchasing power of the workers. H e claims, " The Corporative organization has assured through pacific means and according to unified criteria, the solidarity within broad limits, between the general course of prices and costs, and of the incomes of the laboring class, not permitting a permanent lowering of real wages." 15 Thus U g g e ' s conclusions and my own coincide to this extent that the purchasing power of the workers in industry and commerce has been fairly well maintained. The statistics reveal this more reliably in the case of commerce than in industry, while in the case of agriculture where money wages are always lower than in industry or commerce, what little evidence there is indicates that money wages have kept up with costs of living which are also lower in country districts than in city districts. 11 8 " Prezzi, salari, costo della vita e occupazione operaia " by Albino U g g e in Rivista intermsionale di sciense sociali, July, 1937, p. 157. 9 Ibid., pp. 157-158. 10 Ibid., p. 157. The italics are mine. 11 Farm workers shared in wage increases, in August and September, 1936, and in May, 1937.

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The actual statistics for agricultural wages are very unsatisfactory, since most of the agricultural workers are

mezzadri,

i. e., they are share-croppers, receiving half the produce grown in return for their labors, while the owner receives the other half. However, in Table V I I I have assembled incomplete statistics on the wages of farm laborers from 1 9 3 0 to 1 9 3 5 . TABLE V I I 1 2 (February, 1930=100) Hourly wages of agricultural laborers in lire Workers

1930

31

32

33

34

Index numbers 35

1931 32 33 34 35

Max.

1.77

1.53 1.39 1.32 1.29 1.25

86

79 75 73 71

Min.

1.29

1.12 1.05 1.02 1.00

.97

87

81 79 78 75

Max.

1.02

.91

.86

.78

.75

.76

89

84 76 74 75

Min.

.67

.58

.60

.58

.57

.54

87

90 87 85 81

Max. Children Min.

1.03

.92

.74

.76

.73

89

79 72 74 71

.63

.60

.56

.56

.55

95

94 89 89 87

Men

Women

.59

Material from the Bollettino dei prezzi, October 10, 1935, Table XXI, p. 582. Lorenzo L a V i a comes to this conclusion about wages: " The real industrial wages have the same index for 1 9 3 4 ( 1 0 8 ) as for 1 9 3 5 , and real agricultural wages from 1 9 3 0 to 1 9 3 4 show 12 La Via (pp. 115-116) gives the following indices for average hourly wages of agricultural laborers, using 1929=100: Year Index of agricultural wages for men 1930 1931 1932 1933 1934 1935 (ist 6 mo's)

96 84 77 75 73 72.8

THE

STATISTICS

OF I T A L I A N

PRICES

IO9

13

only the slight diminution of 2 . 7 % . " He explains his method of arriving at a real agricultural wage rather vaguely, basing it upon a comparison of " nominal wages and the price of goods for which they are exchanged." 1 4 He mentions in another place 1 5 the use of the cost of living index and the prices of 2 1 foods, but these are not applicable to farm wages, since they represent the expenses of a workingman's family and the prices of common foods in cities, not in country districts where prices are much lower. Therefore, we must conclude that there is no way of telling whether real agricultural incomes have been maintained or not. The general conditions of employment are revealed in the unemployment figures up to the fall of 1935 when these data were no longer made public. The number of unemployed increased from 250,000 in 1930 to a peak of 1,000,000 at the end of 1932 and by the fall of 1935, the number had been reduced to 700,000. 16 The index of industrial employment ( 1 9 2 9 = 100) rose from 72.40 in January, 1933 to 109.18 in November, 1937. 1 7 Meantime the general index of industrial production ( 1 9 2 9 = 100) rose from 66.9 in 1932 to 93.8 in 1935, slid back to 87.5 in 1936, and recovered to 99.6 in 1937. In February, 1938 the index stood at 103.0. 1 8 Control over prices does not seem to have influenced greatly the amount of production. More important factors in 1935 and 1936 were the increased armament program and the depressing effect of the sanctions. Let us examine the course of the various indices during the several periods of price control. For the period from June, 13 Lo Via, p. 117. 14 La Via, p. 117. 15 La Via, p. 116. 16 " Prezzi, salari, costo della vita e occupazione operaia " by Albino U g g è in Rivista internazionale di scienze sociali, July, 1937, p. 152. 17 Bollettino mensile di statistica, March, 1938. 18 Monthly Bulletin of Statistics, League of Nations, May, 1938, p. 220.

110

PRICE

CONTROL

IN

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ITALY

1934 to October, 1935, when prices were controlled only locally by the Intersyndical Committees, the wholesale price index rose from 60.8 to 72.6 or 19.4%. The retail price index rose from 68.8 to 77.1 or 12.07%. The cost of living index rose from 74.39 to 79.38 or 6 . 7 1 % , while real wages in industry declined from 111.52 to 105.77 o r S ^ S ^ - This period includes the boom brought on by the anticipated Ethiopian conflict. The statistics reveal that local control was not effective in restraining prices during this period. Let us consider next the period from October, 1935 to October, 1936, i. e., from the time central control by the Fascist Party began until the devaluation of the lira. Wholesale prices increased from 72.6 to 77.1 or 6 . 1 9 % . The retail price index rose from 77.1 to 82.0 or 6.28%. The cost of living index rose from 79.38 to 85.23 or 7 . 3 7 % , while the index of real wages in industry declined from 105.77 t o io 4-99> or 0.74% in spite of a general increase in money wages in August and September of 8 to 10%. In France during the same period wholesale prices rose 37.8% and the cost of living rose 1 5 % . T h e rises in Italy are not very great in view of the trying period of the sanctions and the war, and it is evident that central control was much more effective than the former local control in keeping price levels and the cost of living down. The rise in wholesale prices from September, 1936 to September, 1937 was from 76.9 to 91.7 or 19.2%. The rise in the cost of living index was from 83.51 to 94.17 or 12.7%. B y comparison, in France wholesale prices had increased 3 2 % and the cost of living 21.8%. The rise in Italian retail prices was 1 4 % . The rise in wholesale prices from September, 1936 to January, 1938 was 2 3 . 8 % ; retail prices 30.8%. Wholesale prices in France rose 33.2% during the same period. Economic conditions in France and Italy during these times are fairly comparable. Although France has tried price control of a sort during this period, the effectiveness of control in Italy's closed economy appears to be much greater than that of France's liberal economy. For Italy the theoretical possible rise was com-

THE STATISTICS OF ITALIAN TABLE

PRICES

III

VIII

(1928 = 100) T W E N T Y R E T A I L FOOD P R I C E S

Food

Am't.

Price Dec. 1, 1935

Index number

Price Dec. 1, 1936

Index number

Change in %

1.66 1.73 1.15 150 2.06 2.33 .56 8.17 8.90 14.62

91.7 90.1 81.6 80.2 86.6 88.9 62.2 100.1 82.4 70.5

+85% +7.4% +1.9% —3.8% -6.3% +4.5% —125% +15.6% +14.6% +0.9%

4.02 7.11 7.54 10.00 6.97 12.56 6.78 6.18 31.79 1.05

89.5 100.1 80.4 54.2 83.3 71.5 74.2 89.3 108.2 74.3

+1.7% +32% +5.7% +3.6% +3.6% +1.6% +11.7%

Bread per kg. Wheat flour " Corn flour " Rice Dried beans " Food paste " Potatoes " Ox meat " Fresh pork " Sausage "

2.23 .64 7.07 7.77 14.49

84.5 83.9 80.1 83.4 92.4 85.1 71.1 86.6 91.9 69.9

Dried cod fish " Eggs per doz. Salt pork per kg. Cheese Lard Butter Olive oil per litre Sugar per kg. Roasted coffee " Milk per litre

3.95 6.89 7.14 9.66 6.73 12.37 6.07 6.18 30.17 1.04

88.0 97.0 76.1 52 3 80.4 70.4 66.4 89.3 102.7 73.2

1.53 1.61 1.13 1.56 220

+5.4% +1.0%

Prices in lire. Materials from the Bollettino dei prezzi, January 15, 1937. puted to be about 5 2 % . It is clear that control has constrained the rise in prices after the devaluation of the lira. Meanwhile, wages were raised in 1 9 3 7 by 8 to 1 0 % more, bringing the total rise in money wages in industry from July, 1 9 3 6 to June, 1 9 3 7 to 1 9 . 2 % . Real wages in industry rose 7 - 7 % from July, 1 9 3 6 to July, 1 9 3 7

(new figures show a rise of 1 2 . 5 % ) , while real

wages in commerce rose 8 . 7 % . This indicates that wages have been stepped up to meet the rising cost of living, although we must remember that all but the new industrial monthly wage

112

PRICE

CONTROL

IN

FASCIST

ITALY

statistics are based on wage rates. However, many professional people received no increase in income. Every indication points to still higher prices in Italy for the next few months, although the prices of imports must soon reflect the lower prices on international markets. The average prices of twenty common foods used to make up the index of retail prices are tabulated in Tables V I I I and I X . In Table V I I I , the retail prices for December i , 1936 are compared with those of December 1, 1935, while in Table I X the retail prices of October 1, 1937 are compared with those of October 1, 1936. The rise in retail prices from December 1, 1935 to the same date in 1936, a period which includes the sanctions and the first two months after the devaluation of the lira, was not very great. The most notable rises occurred in meats and olive oil prices, while bread, flour, food pastes and sugar showed only moderate price rises. The prices of potatoes, rice and dried beans went down. Table I X compares these changes for the period of a year after the devaluation of the lira. The increases in this period are much greater and more irregular than those in Table V I I I . Meats, lard, butter and cheese show sharp increases, while bread, flour, food paste and milk prices rose more moderately. T h e price of corn flour went down slightly, and the price of dried cod fish remained the same. It is important to note, even in the study of as few as twenty retail prices, how differently various retail prices behaved. It is well to keep this in mind, when we think in terms of general indices of prices. W e have seen how the prices of 20 foods at retail have varied during the period under observation. It should prove valuable at this point to study in detail the progress of five selected wholesale prices, and to trace the influence of central control on them. I have selected the prices of soft wheat, Westphalian anthracite, virgin superfine olive oil, naturale steel and first quality rayon—all quoted on the Milan market. The monthly prices of each from July, 1935 to December, 1937 are listed in Table X .

THE

STATISTICS

OF I T A L I A N

TABLE

PRICES

II3

IX

(1928=100) T W E N T Y R E T A I L FOOD P R I C E S

Price Oct. 1, 1936

Index number

Price Oct. 1, 1937

Index number

Change in %

Wheat bread per kg. " Wheat flour " Corn flour it Rice a Dried beans " Food paste a Potatoes " Ox meat " Fresh pork Sausage

1.66 1.72 1.17 1.58 2.05 2.32 0.54 8.06 8.86 14.45

91.7 89.6 83.0 84.5 86.1 88.5 60.0 98.8 82.0 70.2

1.81 1.91 1.16 1.66 2.13 2.59 0.55 10.03 12.04 17.38

100.0 99.5 82.3 88.8 89.5 98.9 61.1 122.9 111.5 83.8

+9% +11.0% —0.8% +5.1% +3.9% +11.8%

Dried cod fish " per doz. Eggs per kg. Salt pork u Cheese " Lard Butter per litre Olive oil Sugar per kg. Roasted coffee " per litre Milk

4.06 5.96 7.51 9.88 6.99 12.31 6.62 6.18 31.94 1.04

90.4 83.9 80.1 53.5 83.5 70.1 72.4 89.3 108.7 73.2

4.06 6.23 10.85 11.75 10.16 15.73 8.32 6.19 33.56 1.14

90.4 87.7 115.7 63.7 121.4 89.6 91.0 89.5 114.2 80.3

Food

Amt.

+18% +24.4% +36.0% +19.4%

+4.5% +44.4% +19.1% +45.4% +27.8% -+25.7% +0.2% +5.1% +9.7%

Prices in lire. Materials from the Bollettino dei prezzi, November 15, 1937, p. 696. A t least four of the five series of wholesale price quotations in Table X present a picture of rigid prices, i. e., prices fixed for long periods of time, a phenomenon we should expect to find in Italy. The price of soft wheat was fixed by the Central Price Committee at 1 1 5 lire per quintal in March, 1 9 3 6 . The difference between this figure and the one in the table is accounted for by local differences—transportation costs, taxes, etc. The price of soft wheat at Milan was fixed at 1 2 4 lire per quintal in November, 1 9 3 6 . National soft wheat prices were

114

PRICE CONTROL I N TABLE

FASCIST

ITALY

X

F I V E WHOLESALE PRICES

Soft wheat per quintal

Olive oil per quintal

Rayon per kg.

Anthracite per ton

Steel per quintal

Month

Year

July Aug. Sept. Oct. Nov. Dec.

1935 ... il U U u u

97 113 111.50 114.50 114.50 114.50

595 620 670 670 650 655

21 21 21 21 21 21

209 209 229 229 229 229

112.50 112.50 112.50 112.50 112.50 120

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1936 . . . U u

117.50 121.50 121.50 121.50 121.50 121.50 121.50 121.50 123 123 124 124

652.50 645 650 662.50 675 675 690 730 730 651 651 651

21 21 21 21 21 21 21 21 21 21 21 21

237.50 237.50 237.50 237.50 237.50 234.50 206 206 206 206 235 235

140 147.50 140 140 140 140 140 140 140 140 146 146

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1937 . . . U it u u u il a

124 124 124 124 124 138 138 138 138 138 138 138

651 800 800 800 800 800 800 800 800 700 700 700

21 21 23.10 23.10 23.10 23.10 23.10 23.10 23.10 23.10 23.10 23.10

265 265 265 291.50 291.50 310.50 314.50 343¿60 343.60 347.60 347.60 347.60

157 157 157 157 157 207 207 207 207 207 207 207

«

u a u u tt u it u

«

u u u

Materials from tables prepared by Riccardo Rachi in the Rivista di politica economica, Extract, Fase. IV, pp. 10-13; July-August, 1937, pp. 660662; February, 1938, pp. 198-199. Prices quoted are in lire.

THE

STATISTICS

OF

ITALIAN

PRICES

115

stabilized for the entire wheat year at 125 lire per quintal in June, 1937. Olive oil prices caused the price committees much more trouble than wheat prices. A f t e r various orders in the early part of control, the prices of olive oil were fixed for the entire olive oil year in October, 1937. The quotation given in the table was to remain at 700 lire until February, 1938. F r o m March to M a y the price was to be 735 lire, June to August 725 lire and September to November 735 lire. The story of the prices for rayon is soon told. A 10% rise was granted in March, 1937 due to the rise in the costs of coal, woods, cellulose and other materials used. Rayon prices the world over are stable unvarying prices, because of the " big company " or trust control which is also present in Italy. The price of anthracite coal is determined by the Fuel Monopoly which is administered by the State Railway System. The Fuel Monopoly gives out no information as to why changes in price are made; they simply issue orders on fuel prices. A s for steel the General Commission for the Materials of W a r (Commisariato-Generale per le Fabbricazioni di Guerra) controls the entire market. This body decided on general rises in December, 1936, and again in June, 1937, as reflected in Table X . N o information is available on price changes determined by them during the Ethiopian conflict. In these five typical wholesale prices of vitally important products, in addition to their rigidity, we see more or less what the general indices led us to expect—general rises throughout; the only decrease was in olive oil prices. Such is the general statistical picture. Practically all the statistics used are those of the Italian government and its agencies. In drawing conclusions from them one must be careful to keep this in mind. Until the last few years Italian statistics have been few and of doubtful reliability. Ernesto Cianci writes, " The raw materials of statistics in Italy are full of errors. Statistics were reported in the past by the Chambers of Commerce and In-

Il6

PRICE

CONTROL

IN

FASCIST

ITALY

dustry, more because of the orders of the law than by reason of the utility of the collected data. T h e errors reveal themselves immediately, more in the crude make-up of the figures, than for the limited comparative investigation it is possible to make from them. It is easy to cite series of figures which remained rigid for several months and sometimes for years in one position, that present at one blow very great variations, and quotations notably diverse in markets that are in continuous commercial contact with one another. There are many errors of simple transcription." 19 Cianci had the task of making up as reliable indices of prices as he could for the years from 1870 to 1929, and he found it a very difficult task indeed. He says, " In the face of these gaps in the crude material, there is much doubt about the usefulness of disputing questions of method, or arguing about the choice of various indices to use, when the data on which to work are so unreliable and full of errors." 20 The Bollettino dei prezzi, the fount of recent statistics on prices, was not published until July 22, 1927. The first Italian statistician we know anything about was Gian Rinaldo Carli who was very much interested in the effect of the discovery of America with its attendant flow of gold and silver into Europe on the economic and financial institutions of Europe. In 1764 he collected and published data on the prices of wheat, wine and olive oil in a few Italian cities over several years, thus setting forth the first comparative system of prices that we know of. 21 In modern times Professor Riccardo Bachi was the pioneer statistician in Italy. He started the Bachi Index (Indice Bachi) of wholesale prices in 1915 on the base of 1901 to 1905. The first index included 40 prices and was formed by using the arithmetic mean. Later he employed 76, then 100, 120 and 19 Dinamica dei pressi delle merci in Italia dal 1870 al 1929, by Ernesto Cianci, being one of the volumes of Annali di Statistica, Volume X X , p. 5. 20 Ibid. 21 Dinamica dei pressi delle merci in Italia dal 1870 al 1929, by Ernesto Cianci, p. 58.

THE

STATISTICS

OF I T A L I A N

PRICES

117

finally to-day he uses 1 5 0 quotations. Now his index is formed by using the geometric mean and the base has been changed to 1928. The early base was 1901-1905, and later 1 9 1 3 . He used the prices reported by the Councils of Provincial Economy at Milan, Genoa and Rome. Wheat was given a weight of 4 by using 4 quotations. Professor Bachi used the chain method, basing each month's index on that of the preceding December. The Provincial Council of Corporate Economy at Milan began its famous series of wholesale price indices in 1 9 2 1 , using the fixed base of 1 9 1 3 , and the simple geometric mean. Weights were assigned by using several qualities of the same article. 1 2 5 quotations for 98 goods (all in Milan) are employed. A s time went on, new items have been substituted for those no longer economically important. Although this has been done with great care, it has ruined the index for comparative purposes. The weighting was poorly done and the fact that only Milan prices are included makes it a poor index for all Italy. In 1934 and 1935 the Central Institute of Statistics formed the National Index of Wholesale Prices. The first figures were on the base of 1932, but this was changed to 1928 to make the index comparable with world figures.22 The new index, using a base not too far removed, was very carefully made up. It is based on the prices of 125 articles, divided up into raw materials ( 4 2 ) , half-finished goods (40) and finished products ( 4 3 ) . 293 different qualities are used and the total quotations 22 The change from the 1932 base to the 1928 base was made in the following manner: N e w series ( 1 9 2 8 = 1 0 0 ) Old series (1932 = 100)

1928 100

1931 Ii —

1932 I2 100

1933 11 I3

1934 IÍ I.

The 13, I* indices were linked to the 1928 base from 1932 figures in the following proportion: I 3 : 100 = 1*: I. and I 4 : 100 = i : : I 2 , etc. Indice nazionale dei preszi all'ingrosso, Central Institute of P- 13-

Statistics,

Il8

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IN

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from 73 population centers amount to 1,610. Prices are also divided as to origin (mineral, vegetable or animal) and to use ( f o r industry or for consumption). Professor Libero Lenti calls it a fairly stable index, especially since the monetary factor did not influence it until October, 1936. 23 The weighting is done by using the quantity of goods produced and imported, subtracting duplications—i. e., for the same goods in various stages of production. The first figures are computed by using a weighted arithmetic mean for each series of prices. Then they are combined into groups and the complete index by using the weighted geometric mean. A basis of comparison of the three wholesale indices is supplied by Bachi. 24 He compares their variations for the period from January, 1935 to December, 1936. The National Index ( 1 9 2 8 = 1 0 0 ) indicated a rise of 27.4%, Bachi's index ( 1 9 2 8 = 100) indicated a rise of 29.8% and the Milan index ( 1 9 1 3 = 100) indicated a rise of 38.9%. The range of dispersion was greater in 1935 than in 1936. The differences are due to the way the indices are made up. The Milan index shows the greater difference, since certain items have been changed from time to time, and the base year is farther away than in the case of the other two indices. Professor Tenderini says that " as you increase the distance from the base, wholesale price indices keep losing their significance." 25 Not to overburden our account with too long a discussion of statistical history and techniques, although it is essential to know the methods employed in forming the indices in order to form any judgment as to their efficacy, it is useful to give brief explanations of the other indices used in the tables above. In 1927 the Central Institute of Statistics standardized the procedure for ascertaining cost of living indices in 47 cities 23 Statistica economica, by Libero Lenti, p. 87. 24 " I prezzi delle Merci in Italia negli anni 1935-1936" by Riccardo Bachi in Rivista di politico economica, Fasc. IV, 1937, pp. 14-15. 25 Analisi sui prezsi in Italia dal 1901 al 1932 by Dionisio Tenderini, p. 46.

THE

STATISTICS

OF

ITALIAN

PRICES

II9

(capoluoghi of provinces). 26 A t first it was based on costs of living in June, 1927. Later the index was extended to all capoluoghi and the base was changed to June, 1928. The index is based on the cost of living of a workingman's family of 5 persons: 2 adults and 3 children under 10 years of age. Food costs are ascertained for a week, whereas clothing, rent, heat, light and miscellaneous expenses are figured on a yearly basis. They are then divided by 52 to get the weekly cost. T h e foods used are 18 varieties of the 20 used for the retail price index. 27 Weighting here is effected by using the quantity needed by each family. Clothing needs include 5 types of cloth, 2 men's suits, 2 dresses and 8 pairs of shoes. Fuel needs include gas (or wood or charcoal or coke) for cooking. Expenses for coke and electricity are included in each schedule. Miscellaneous expenses include: tram fares, newspapers, insurance, union dues, school books and supplies, china, doctor's fees and iodine. Total items number 45. The resulting weights given to each class of expense for June, 1937 amounted to 55.5% for food, 1 4 . 1 % for clothing, 14.7% for housing, 5.9% for fuel and light, and 9.8% for miscellaneous items.28 The percentage for food appears too great even for a workingman's family, and the weighting for housing appears too low. 29 In determining the index, the arithmetic mean is used, weighted according to the proportion of total expenses each of the five categories occupied on the first of June, 1928. 30 Then the Central Institute of Statistics takes all the various city indices, weighted according to the proportion of the working population to the entire population of each city in the census of 1927, and combines them by using the arithmetic mean to get the national cost of living index. The result26 T h e Commune of Milan formed the first cost of living index in Italy. M a n y other municipalities followed Milan's lead. 27 Lard and fresh pork prices are not used in the cost of living index. 2&Statistica

economic a, by Libero Lenti, p. 130.

29 It must be remembered that rents are very l o w in I t a l y ; further, the government policy has been to keep them low. 30 Formerly the first of June, 1927 was used.

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ing set of figures forms one of the most carefully calculated indices. There are two current series of index numbers of retail prices in Italy. Properly speaking they are both indices of retail food prices. The one used in Tables I and I I I is computed by the Central Institute of Statistics. This is a continuation with some improvement of the work of the Labor Office {Ufficio del lavoro) and of the Minister of Economy, first published in the Bollettino del lavoro, then in the Bollettino mensile dell' Istituto Centrale di Statistica. Its base was 1913 and it included 21 items, 20 food prices and the price of charcoal for kitchen use. In 1937 the base was changed to 1928, and the price of charcoal was eliminated from the index. On the last day of every month, from 84 principal Italian Communes, are sent the prices of 20 foods at retail; one list by the Ufficio di Commune and the other by the Provincial Council of Corporate Economy to the Central Institute of Statistics at Rome. There a simple average is taken of the respective items on the two lists, and a national index number is calculated on a base of 1928 by using the simple arithmetic mean. Lenti criticises this index number by saying that the qualities reported from province to province were not similar, and that there is no weighting for different populations of the centers reporting. 31 Since 1928 there has been much greater uniformity. The system of price control now assures the country of more accurate statistics on retail prices, since each price list must be sent to the Central Institute of Statistics regularly. In Milan two clerks are sent out every fifteen days to cover a group of over 1,000 retail shops, selected according to population districts, importance, etc. They report prices from each store on a list which must be signed by the storekeeper.3,2 These prices include many more than are needed for the reports on retail prices and 31 Statistica

economica by Libero Lenti, p. 121.

32 These clerks and the office ( U f f i c i Studi di Commune di Milano) to which they report exercise no control. However, their records are always available to the market police.

THE

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121

the cost of living which are sent to Rome. The municipal statistical office also supplies all retail price data to the Provincial Council of Corporate Economy at Milan, while the latter body has its own staff handle all wholesale price statistics.33 The other retail price index, the Veronese Index (Indice Veronese), named for its originator, is made up under the guidance of the Fascist Confederation of Merchants. The wholesale and retail prices of 25 foods are collected every 1 5 days from the Provincial Unions of the Confederation of Merchants in each provincial center. Where no comparative retail price exists, the nearest thing to it is selected. For instance, the price of bread at retail is paired with the price of wheat at wholesale, roasted coffee with crude coffee, etc. Its base is the first 1 5 days of January, 1929 and it is computed by using the simple arithmetic mean. Weighting for population has been tried, but seemed to make little difference in the figures. This index is very useful for comparing the trends of wholesale and retail prices of the same or quite similar foods. Both retail price indices have grave weaknesses. They are based on very few prices and all of these are food prices. They are probably the worst indices we have encountered in our study. A further test of government policy on prices lies in an examination of foreign trade statistics. The period from October, 1935 to the present does not afford any ready measure of the efficacy of foreign trade policies, since the sanctions cut down all foreign trade tremendously and in 1937 huge imports of wheat and of needed stocks of raw materials exhausted during the sanctions created a heavy foreign trade deficit that was not covered by tourist expenditures, emigrant remittances, freights and other " unseen " items. 33 On a visit to the Municipal Statistical Offices in Milan, I discovered that they were excellently equipped for all types of statistical work—prices, census computations, population, etc. The equipment includes " punch-card" machines for rapid sorting. Elaborate graphs are maintained of all retail prices.

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In Table X I the total value of exported and imported articles is compared. TABLE

XI

V A L U E OP IMPORTS AND EXPORTS

(In million lire) Year 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937

Imports 22,313 21,665 17,347 11,643 8,268 7,413 7,582 * 7,662 5,883 13,489

Exports 15,999 15,236 12,119 10,210 6,812 5,980 4,965 * 4,489 3,830 7,849

Trade deficit 6,314 6,429 5,228 1,433 1,456 1,433 2,617 3,173 2,053 5,640

* From 1934 on the figures do not include trade with Italian colonies. Materials from Statistica del commercio speciale di importazione e di esportazione dal Gen. 1 al SI Die. 1937, p. 7.

The trade deficit for 1937 amounted to 5.6 billion lire. It is estimated that tourist receipts amounted to 2 billion lire, emigrants' remittances to billion lire, and freights and shipping to another Yz billion.34 How the remaining 2.6 billion lire have been met is a deep mystery, since information on the amount of the gold reserve is no longer made public. The presumption is that the gold reserve has been materially depleted in spite of all efforts to protect it. Table X I I and Chart V portray the course of export and import prices from January, 1934 to July, 1937. The rise in the prices of imports from October, 1935 to October, 1936 was probably due to rises in the world markets, while the striking rise after October, 1936 was due primarily to the devalua34 The amount of tourist expenditures, emigrant remittances and freight receipts are not made public by the Italian government. The estimates given here are unofficial.

THE

STATISTICS

OF I T A L I A N

TABLE

PRICES

I23

XII

(Original base, 1925= 100; transferred to 1928=100) I N D I C E S OP I M P O R T AND E X P O R T P R I C E S

Month

Year

Import price indices

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1934 " " " " " " " " " " "

47.1 46.6 46.5 45.2 46.6 45.4 445 43.0 44.3 44.3 44.9 43.1

445 43.7 44.2 42.6 43.6 44.2 43.4 40.7 41.3 40.8 41.9 40.0

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1935 " " " " " " " " " " "

44.7 44.0 45.1 44.9 45.5 46.4 46.9 48.8 48.4 51.0 52.8 52.8

41.0 40.1 41.4 41.0 43.0 43.6 40.7 45.2 422 44.2 44.0 44.4

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1936 " " " " " " " " " " "

51.2 52.0 53.3 53.1 54.9 54.4 54.4 53.6 54.3 62.9 71.4 752

43.5 42.9 43.0 44.3 42.4 US 45.4 492 47.9 52.0 58.0 52.9

.'

Export price indices

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T A B L E X I I (Continued) Month

Year

Import price indices

Jan. Feb. March April May June July

1937 " " " " " "

78.5 81.3 85.8 89.6 93.4 91.2 97.1

Export price indices 57.5 58.9 60.2 60.8 61.5 60.8 61.0

Materials from the La vita economica italiana, Trimestre I 1935 through Trimestre III 1937. These indices are made up by the Generate Confederazione Fascista dell' Industria. Price indices for imports and exports are calculated on the basis of the following formula: T ip

_

—

2

Pi qi

i qo pi

tion of the lira in addition to rises on the international market. There is a notable difference in the behavior of import prices for this period as compared with export prices. The rise in import prices from September, 1936 to July, 1937 was from 54.3 to 97.1 or 78.8%, while export prices rose from 47.9 to 61.0 or 27.3%. The influence of control over internal prices is clearly evident. But it is another question whether government control policies have helped Italy's trade balance. For the quantities of goods exported and imported were following contrary courses to those of prices. In Table X I I I are compared the index numbers of the quantities of imports and exports in the last few years. While the prices of imports were rising rapidly in 1937, the quantities of exports increased by about 7 5 % . The low export prices do not seem to help the trade balance as long as Italy must pay high prices for her imports. This becomes more evident when we consider the nature of Italian imports and exports. In 1937 most of the imports were raw materials (44.74%), whereas most exports were finished goods ( 4 2 . 0 7 % ) . Only 13.60% of imports were finished goods, while

THE

STATISTICS

OF

CHART

ITALIAN

PRICES

V

G R A P H OF THE INDICES OF IMPORT AND EXPORT PRICES, J A N U A R Y , 1 9 3 4 TO J U L Y , ( 1 9 2 8 = 100)

1937

MONTHLY,

I25

PRICE

I2Ó

CONTROL

IN

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ITALY

TABLE XIII (1929=100) QUANTITIES OF EXPORTS AND IMPORTS Year

Imports

Exports

1929 1934 1935 1936 1937

100.00 75.54 73.11 45.98 67.95

100.00 73.10 65.92 49.31 80.42

Data from " Scambio intemazionale e prezzi" by Libero Lenti, in II Sole, March 4, 1938.

a bare 9 . 2 9 % of exports were raw materials. Finished goods exported consist largely of textiles sold at low prices, whereas the needed imports of raw materials are mostly mineral products bought at high prices. In Table X I V are listed the price indices of various classes of imports and exports in 1937. TABLE XIV (1929 =

100)

PRICE INDICES OP VARIOUS IMPORTS AND EXPORTS IN 1937 Types of articles

Prices—Imports

Prices—Exports

FOODS

79.93

70.80

RAW MATERIALS HALF-FINISHED GOODS

88.48 89.99

77.85 59.53

FINISHED GOODS

99.94

60.61

Data from " Scambio intemazionale e prezzi" by Libero Lenti in II March 4, 1938.

Sole,

There appears to be no great disparity in the prices of foods and raw materials, but in half-finished goods and

finished

goods, export prices are very much lower. Since most exports are of finished goods, these figures would serve to explain in part w h y the 1937 balance was so unfavorable to Italy. E v i dently it would aid Italy's foreign trade position to raise the prices of exported goods, if this could be done without reducing

THE

STATISTICS

OF

ITALIAN

PRICES

\2J

the quantities exported. This comparison also raises the question as to whether low export prices are of any great advantage to Italy. The fact that the new National Index Number of Wholesale Prices is divided into the indices of the prices for raw materials, half-finished goods and finished goods affords a basis of comparison of the movements of these three indices. In Table X V and Chart V I I have traced the course of the 3 indices from January, 1929 to January, 1938. The curve of raw materials acts more or less as one would expect it to act, going to its lowest point in August, 1934 and rising rapidly thereafter. The course of the index of prices for finished goods shows the expected lag behind that of the raw materials index, both on the downswing and the upswing of the cycle. However, the behavior of the half-finished goods curve is most unorthodox. From 1929 to 1934 the prices of semi-finished goods went down 3 3 % , while the prices of finished goods went down 3 8 % . Pietro Balbi ventures the opinion that the prices of half-finished goods behaved this way, because " they are more easily submitted to control on the part of trusts and powerful companies." 35 The course of the half-finished goods curve in the last half of 1935, is probably due to the great demand for war materials in that form and the fact that these materials were, as frequently happens, controlled by trusts. Balbi explains another phenomenon that doesn't appear on our chart. He compares the course of the prices of finished goods, food, with non- foods. The food index stood at 100 in 1928, 64.9 in 1934 and at 73.50 in 1 9 3 6 ; non-foods at 100 in 1928, 57.2 in 1934 and 7 1 . 3 in 1936. " This lack of harmony between the behavior of food and non-food prices finds its explanation in the policy of the support of prices by the Fascist government all during the crisis." 36 3 5 " L a dinamica dei prezzi in Italia dal 1928 al 1937," by P i e t r o Balbi in Rivista italiana di scienze commerciale, M a r c h - A p r i l , 1937, p. 231. 36 " L a dinamica dei prezzi in Italia dal 1928 al 1937," by P i e t r o Balbi in the Rivista italiana di scicnse commerciale, M a r c h - A p r i l , 1937, p. 233.

128

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X V

(1928 = 100) T H E NATIONAL I N D E X OP W H O L E S A L E P R I C E S

Month

Year

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1929 . . . .

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1930 . . . .

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1931 . . . .

a a a a

u u u u a u u

it

a a u a a a

u u u a

tt tt it tt tt it tt tt tt tt tt

General index

Raw materials

Halffinished goods

Finished goods

99.8 100.7 101.1 98.4 97.7 95.5 92.9 92.6 92.2 93.4 93.7 92.7

102.8 105.7 105.6 100.9 98.5 94.4 90.0 89.3 89.4 91.9 93.0 92.4

99.4 98.7 99.2 98.7 97.6 97.0 96.5 96.1 96.2 96.6 96.1 95.6

96.5 96.2 96.9 96.4 95.6 94.9 93.7 93.1 92.1 92.5 92.1 91.5

90.6 88.9 88.0 86.3 86.7 85.7 84.5 84.7 84.7 83.3 82.8 79.4

90.5 87.0 85.5 84.3 86.0 84.8 82.3 82.8 82.0 79.6 79.2 74.2

94.8 94.0 925 92.0 91.3 89.8 88.6 88.2 86.9 84.7 84.1 82.1

89.3 88.7 87.7 86.4 85.0 85.0 83.6 84.2 84.6 83.0 81.0 78.0

76.9 76.2 77.4 77.5 76.5 73.2 72.7 71.0 71.9 72.0 71.9 71.9

73.0 73.1 75.0 75.2 74.4 69.2 68.2 65.6 68.1 67.9 69.8 70.5

79.7 79.3 79.5 78.0 76.2 74.8 74.9 73.9 73.1 74.9 74.3 73.8

74.9 74.3 74.5 75.0 75.5 74.3 72.5 71.4 72.2 71.5 71.0 70.7

T H E S T A T I S T I C S OF I T A L I A N P R I C E S

Month Year Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1932 . . . .

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1933 . . . .

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.

1934 . . . .

Jan. Feb.

1935 . . . .

i(

({

(I l( a u u ((

u u a

if

(I u a

« (