Was Mussolini’s 1931 Policy on the Banking Crash Better than Britain’s 2008 Bail-Out?

Here’s another interesting question posed by the changing policies of the Italian Fascist state towards industry and the financial sector. Fascism celebrated and defended private industry as the essential basis of the Italian economy and society. When Mussolini first took power in the early 1920s, he declared that Fascism stood for ‘Manchester School’ capitalism – privatisation, cuts to public services and expenditure and the lowering of wages and welfare benefits. But this changed with the development of the Fascist state through the establishment of the corporations – industrial organisations combining the employers’ organisations and the trade unions, which were supposed to take over the management of industry – autarky, which aimed to make Italy self-sufficient and the movement to a centrally planned economy.

This was partly achieved in the early 1930s when Mussolini set up two state institutions to buy out the Italian banks following the Wall Street crash of 1929 and the ensuing depression. These not only bought out the banks, but also the industries these banks owned and controlled, so that the Italian state ended up owning just under a fifth of the Italian economy.

This is described in a passage in the article ‘Industry’ in Philip V. Cannistraro’s Historical Dictionary of Fascist Italy (Westport, Connecticut: Greenwood Press 1982). This runs

Two public agencies were created to save banks and crucially affected industries: the Istituto Mobiliare Italiano (IMI) on November 13, 1931, which was to control credit; and the Istituto per la Ricostruzione Industriale (IRI) on January 23, 1933. IRI was by far the more radical solution, for it purchased all the shares of stock in industrial, agricultural, and real estate companies previously held by banks. (The banking law of 1936 prohibited banks from extending long-term credit to industrial concerns). Although the industrialists fully expected a return to “normalcy” and to private enterprise after the crisis had passed, Mussolini had successfully created an instrument for the permanent intervention of government in the economy. By 1939 IRI controlled a series of firms representing 44.15 percent of the capital of Italian stock values and 17.80 percent of the total capital of the country – hence, the Fascist government controlled a proportionately larger section of national industry than any other government in Europe except the Soviet Union. (p. 278).

This allowed the government to interfere and restructure the Italian economy leading to the expansion of the manufacturing economy and a reduction in imports. On the other hand, poor government planning and an inefficient bureaucracy meant that Italian domestic manufactures were frequently inferior and the country had a lower growth rate than many other western European countries.

But this contrasts very strongly with policy of Britain and America to the financial sector after the 2008. The banks were bailed out with public money, but were not nationalised and the government has continued with its ‘light touch’ approach to regulation. Meaning that the banks have been free to carry on pretty much as before. Public spending, especially on welfare, has been drastically cut. Despite the Tories claiming that this would boost the economy and they’d pay of the debt within a couple of years or so, this has very definitely not happened. In fact, the debt has massively increased.

This has added to the long term problems of Britain’s manufacturing industry. Left-wing economists have pointed out that Britain’s domestic industries suffer from a lack of capital because the financial sector is geared towards overseas investment. A situation that has no doubt got worse due to globalisation and the personal investment of many Tory and New Labour MPs in foreign industry and their savings in offshore tax havens. British industry has also suffered from the ignorance and neglect of successive prime ministers from Maggie Thatcher onwards. Thatcher couldn’t understand that her policy of keeping the Pound strong would damage British exports, and in any case did not want to rescue failing British industries. They were either to be allowed to go under, or else sold to foreign companies and governments. Tony Blair went further, and believed that manufacturing industry’s place in the British economy could be successfully taken over by the financial sector and the service industries.

But this has also been a failure. Ha-Joon Chang in his 23 Things They Don’t Tell You About Capitalism has pointed out that manufacturing industry is still very much of vital importance. It’s just that it has grown at a slower rate than the other sectors.

Fascist Italy was a totalitarian dictatorship where Mussolini ruled by fear and violence. There was no freedom of speech or conscience in a system that aimed at the total subordination of the individual, economy and society. Mussolini collaborated with Hitler in the persecution of the Jews, although mercifully this wasn’t quite so extreme so that 80 per cent of Italian Jews survived. The regime was aggressively militaristic aiming at the restoration of a new, Roman-style empire in the Mediterranean. Albania, Greece and Ethiopia were invaded along with Tripoli in Libya and Fascist forces were responsible for horrific atrocities as well as the passage of race laws forbidding racial intermixture with Black Africans.

It was a grotesque, murderous regime which was properly brought to an end by the Allied victory of the Second World War. It must never be revived and Fascism must be fought every where. But it does appear that Mussolini’s policy towards the banks and industry was better than that pursued by our supposedly liberal democracies. But the governments of our own time are also becoming increasingly intolerant and authoritarian. The danger of our country becoming similar repressive dictatorship under Boris and the Tories is very real.

We desperately need the return to power of a genuinely socialist Labour government, committed to investment in the welfare state and public services with a nationalised NHS, a mixed economy and positive commitment to democracy and freedom of speech rather than the illusion maintained by the mainstream media and Tory press.

And that will mean overturning over three decades of Thatcherite orthodoxy on the banks and financial sector, just as Mussolini changed his policies towards them with the aim of restoring and expanding Italian industry.

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3 Responses to “Was Mussolini’s 1931 Policy on the Banking Crash Better than Britain’s 2008 Bail-Out?”

  1. trev Says:

    50 – 60 years ago successive British Governments allowed the British motorcycle industry to collapse, whilst Honda benefited from decades of massive State financial support from the Japanese government allowing them to get ahead and dominate the industry. More recently George Osborne championed the revived Norton company but didn’t underwrite them and now they have gone bust, though I’m not surprised given the price of their hand-built bikes that were definitely not aimed at the common man. Many books have been written about the demise of the British motorcycle industry, the poor management decisions, the outdated product designs, the Strikes, etc. but ultimately they could not compete against the massive State sponsorship of the Japanese.

    • beastrabban Says:

      That’ interesting, Trev. I know that the Japanese economy is very protectionst, but didn’t realise their industries were also supported financially by the Japanese state.

      • trev Says:

        I don’t know about today but in the past Honda had significant long-term financial support, probably equivalent to Billions £s in today’s currency. The old Triumph company by comparison was temporarily bailed out with a Government loan (I think it was about 1 or 2 Million £s) which Thatcher suddenly recalled in full and sunk them, probably because by then it had become a Workers Co-Operative. The name and Rights were bought by a Businessman and so was successfully reborn in the 1990s, still going to this day but has nothing really to do with the original company.

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