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The New International, November 1946


Jack Armor

Report on Italy

Two Years After “Liberation”


From New International, Vol. XII No. 9, November 1946, pp. 282–284.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Cooling their heels in the corridors of the Palais du Luxembourg in Paris, Italian bourgeois leaders are waiting to hear the Peace Conference confirm the proposed draft peace treaty which though unsigned has produced serious repercussions in Italy.

Already food prices have risen still further: the masses are paying for the treaty. Olive oil, chief index of how food prices are moving, was selling in Rome’s black market for 600 lire a liter, 100 lire more than in June. Potatoes, cheese and coffee all rose. When UNRRA’s small aid ends in December there is no known way to pay for sufficient food imports to maintain the sub-existence level of 1,700 calories daily. The American dollar and even the lowly French franc have doubled in value on the black market.

Anxious to pin the blame for the heavy peace terms on the Western imperialists, the Communist Party Unità declared: “If the economic clauses of the draft treaty are endorsed, Italy will be for many years wholly at the mercy of the United States and Britain without hope of recovery,” and, praises Russia for helping (!) Italy. Doubtless the CP is motivated by the desire to avoid being a party to accepting openly the treaty agreed to by its Stalinist masters in Moscow. But even if they and the rest of the Italian government, of which they are a decisive part (in winning mass support), do not sign the treaty, it goes into effect when the Big Four sign.

The battle of propaganda over Trieste would make Goebbels green with envy. British-American propaganda against Stalinist support of Yugoslav claims in the Istrian peninsula (Venezia Giulia and the port of Trieste, principal opening for Central Europe on the Adriatic and to the Mediterranean) is an outright farce. Italians and others who read the full text of the voluminous treaty (it covers 78 pages) can see for themselves the territorial provisions Britain, France, Greece, China and the U.S. have insisted on. Lost are: Albania, the frontiers, power plants and areas of Brenda and Tiga, all the colonies in Africa (Libya, Ethiopia, Eritrea and others), islands in the Mediterranean and three concessions in China (Tientsin, Amoy and Shanghai parts of international settlements). Both U.S.-British imperialists and the Stalinists have joined hands to have a nice ripping party. With the exception possibly of Hunlgary, not even the former Nazi Balkan satellites are getting rougher treatment. None of the big powers is interested in what the inhabitants of the disputed areas might think.

Bad as is the Russian reparations demand for $100,000,000, the Stalinists offer to export raw materials to Italy and to collect the reparations out of current production. This is actually far less of a drain than the many financial claims of the British, French and Americans, plus the provisions that Italy has to pay for all Allied requisitions in Italy and to pay or back up all Allied military currency issued in Italy (estimated as in excess of 100 billion lire). The Stalinist plan is shrewder than that of the U.S.-British imperialists, for the Stalinists hope to make Italy dependent on the Soviet Union for raw material imports, thereby tying the country to Soviet economy. How important raw materials are for Italian economy can be seen by examining its structure.

Raw Materials and Foreign Credit

The peculiar nature of Italian economy stems from the fact that its entire existence depends on foreign trade. Of total imports for 1938, raw materials accounted for 74.5 per cent. Using raw materials in a broad sense, except for sulphur and mercury, Italy has no coal, iron, tin, nickel, oil and little grain – not enough to feed its own population. Even Mussolini’s “battle of wheat” was won at the expense of reduction of other crop acreage and production. Without the import of coal, Italian economy is bloodless. Without iron imports, it has no backbone. Without food imports, it is near death. Agricultural production is low, not so much because of wartime destruction and lack of agricultural machinery and implements but from lack of imported fertilizers.

Worse still is the lack of foreign credits for obtaining raw materials. Italy needs markets and with the loss of the German market, which took from 30 to 60 per cent of Italian exports for the last ten years, Italy can only grow weaker. Under Mussolini’s attempts to achieve economic self-sufficiency (autarchy), Italian exports remained far short of imports. Balance of payments was made from proceeds of tourist industry (of decisive significance for economy), merchant marine and emigrant remittances. Where imports in 1938 reached $800,000,000, In 1946 for reconstruction and replacement at least $1,200,000,000 will be needed and will have to continue for many years.

When UNRRA shipments of coal and grain cease in December, Italian reconstruction will be retarded still more. Though imports for 1947 (including freight and other invisible imports) are estimated by UNRRA experts to be able to come to $1 billion, exports will not exceed $540,000,000, leaving an unfavorable balance of approximately $460,000,000 (these figures are given at current valuations on the international monetary market and are roughly comparative to between one-half and five-eighths of the 1938 valuation). Unless some means is found to make up this unfavorable balance by increased production, Italy will flounder further. Without assistance from UNRRA or other sources, Italy will be unable to pay the $200–$250,000,000 required for fuel and industrial materials. Instead she will have to spend available funds for food imports. Italian economy increasingly runs deeper into what UNRRA experts call a “dangerous vacuum.”

Effects of Wartime Destruction

Raw materials imports at such extraordinary high levels (comparable only to Japan of pre-Manchuria days) were largely exhausted at the time of the German surrender in May, 1945.

Ninety per cent of the merchant marine is sunk, seized by the Allies or missing. Railroad transportation was reduced by 38 per cent, a most serious matter for a country with long north to south rail communications. It is estimated that even ten per cent destruction is enough to paralyze a rail network; in Italy, communication between the industrial north and the agricultural south was ruptured.

Two million five hundred thousand single-room units of housing were demolished, 500,000 more than the total number built after 1931, or seven per cent of the pre-1939 total. In all of France during the war years, 1,500,000 comparable housing units were shattered. Thirty per cent of the livestock is destroyed. Total damage to agriculture is placed at 312 billion lire (current rate).

Bank note issues have risen from 22,496 billion lire in 1938 to 300 billion in 1946, plus the close to 100 billion in Allied military currency which is a terrible drain on the economy and a most vicious form of “invisible” reparations. National income has dropped from the 116 billion lire of 1938 to less than 70 billion in 1945 (at 1938 valuation).

Government debt is 630 billion lire out of a total public debt of 970 billions, and the tax-paying ability of the country is falling. To slow the increase of paper currency, the government floated a special loan by bank borrowings and sale of government bonds but this is not based on industrial revival and raw material imports.

When the Allies landed in September 1943, the exchange rate was set at 100 lire to the dollar and 400 to the British pound sterling, a rate so high it could not reflect real purchasing power of the lire. Adding Allied military currency to the economy has further weakened the lire. As prices rose rapidly Italian exports could not compete in foreign markets. In January 1946, the government devalued the lire to 225 to the dollar and 900 to the pound sterling, but prices were still too high to permit competition in the international market. Now Italian regulations (designed to aid the big capitalists) permit exporters to sell on the free market at rates higher than the, official rate fifty per cent of foreign currency gained from their sales. Thus the government legalizes the black market as the only way to “get rid of it.” The other fifty per cent must be sold to the central bank at the official rate, and buyers of foreign currency are required to use it within ninety days for purchase of essential industrial imports. But the way is wide open for wholesale speculation in lire exchange.

Snarl in Production

With swift ending of the war in the North and rapid reconstruction, productive capacity in the North reached almost 90 per cent of the pre-war level, but total production has remained very low. One index is artificial textile fibers, which fell from 145,500 tons in 1939 to 3,612 tons in 1945 – almost complete paralysis. There is a slight general industrial revival, most of it based on UNRRA importation of coal and raw materials. When UNRRA aid ceases in December overall production is estimated to be able to reach only 30 per cent of prewar levels.

Government reconstruction has been concentrated shrewdly on power and transportation. Total point production of the larger power plants (comprising 89 per cent of national power production) was 3,244 billion kilowatt hours for the first three months of 1946 (almost 13 billion average for the year, if the rate of production is maintained). This compares favorably with 13,143 billion in 1938, 17,734 billion in 1941, 11,795 in 1944 and 11,289 in 1945. But these figures are meaningless unless it is understood that electric power expansion is only a small part of total power production and that without coal and oil as power, total power production is still low.

Railroad reconstruction is growing: Single and double-track line mileage, which had fallen from 16,582 kilometers in March 1943 to 11,659 kilometers in July 1945, had risen to 14,210 kilometer by January 1946. Available locomotives, which had fallen from 4,971 in March 1943 to 2,825 in July 1945, had risen to 3,081 in January 1945 (an increase of 251). Decisive element is the total for train mileage, which fell from 14,030,443 kilometers in February 1943 to 3,585,305 in June 1945, and by December 1945 had risen only to 5,266,710.

In merchant shipping, which had been practically annihilated, 124,797 tons were launched or repaired from May 1945 to February 1946.

It is clear that even this partial recovery is largely concentrated in transport and power. Other basic industries are dragging behind.

Agricultural production is very low, even with UNRRA aid. Wheat production in 1945 fell 38 per cent below the 1940–43 average as drought was added to war destruction, and 34.1 per cent below 1944. The 1946 wheat harvest is expected to yield 60,000,000 quintals (6,600,000 tons), compared to 1936–39 average of 70,000,000 quintals. But that is the expectation and not the reality; meanwhile statistics of future production cannot be eaten by starving workers. Bean production fell 68 per cent compared to 1940–43 and 51.1 per cent compared to 1944; potatoes 49.8 and 35.4 per cent for these comparable years. The land problem is considerable. The huge latifundias in the South with peasants in virtual serfdom, have to be seized to smash the existing breach between industrial North and agricultural South, a breach carefully maintained by the landowners. A big landowner is the Catholic Church. In the center and North, land holdings are small and, unprofitable. Lack of imported fertilizers, agricultural machinery and destruction create insuperable obstacles.

Living Costs Rise

In the general breakdown of government controls as the German armies were defeated, the black market, which had been considered a necessity to show opposition to German occupation and to the fascist regime, grew into an enormous government-backed monster. Only the grain capitalists and financiers could gain from it.

It was based on the food shortage and private capitalist control of food production, of course. In 1945 grain production was 50 per cent below normal, oil 25 per cent below and sugar 90 per cent below. Farmers hoarded products instead of bringing them to government pools, thus starving the workers. Much of their production found its way to the black market. As UNRRA food and coal and credits from the American FEA; vanish, there is no chance of raising the present average food ration of 1,700 calories to the 2,000 calories essential daily minimum for an adult (set by the Emergency Economic Committee for Europe).

In January, 1946, the cost of living had risen twenty times the pre-war level, while salaries and wages were only five to ten times higher. By summer 1946 the cost of living had risen more than thirty times, while salaries and wages were between ten and fifteen times higher. Unable to buy the insufficient food available, the masses are reduced to a pitiful condition.

CP and SP representatives in the capitalist government reached a silent agreement against raising salaries and wages, but huge strikes swept the peninsula. Wages were forced up a little. Large trade unions which had sprung up after the German fall came under CP-SP domination.

Italy’s 5,000,000 industrial workers forming 29 per cent of her total labor force are concentrated heavily in the northern industrial regions. Cut off from the food producing South by smashing of rail and sea communications, the workers began to starve. Production fell as raw materials on hand were used up and raw material imports fell near zero. The government could not release industrial workers from the plants where they had been employed up to the time of the surrender, but under pressure from the capitalists who refused to pay wages without getting production in return in January the government permitted dismissals. Its public works program had little effect.

Unemployment accelerated like a snowball, reaching 2,000,000 by June and 2,500,000 by mid-July. As an enormous number of soldiers were hurled into the unemployed, a new type of organized unemployed came into existence. These are the fighting, organized unemployed, who, with tommy-guns, military formations and mass strategy, are behind the well organized demonstrations, strikes, temporary seizures of plants and areas, and of wars against the police.

Jack Armor

Paris, August 2, 1946

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