Week 26

 

On April 5^th economist Luigi Einaudi published on the Corriere della Sera a first overview of the results of the taxation over the extra-profits of war. i.e. those profits that exceeded the estimated net income during the pre war years and were therefore subject to a special taxation regime (the obvious geographical unbalance of the industrial output during war years being reason enough for such reallocative measures).

There were of course a few technical issues, as the author explained, with the estimation – that I will ignore here – taking Einaudi's data as provided and focusing on a few significant regions.

Region	Net income 1913 (million lire)	taxes collected extra profit aug. 1914 – dec. 1915	ratio
Liguria	80.5	70.8	0.87
Piemonte	159.6	86.1	0.63
Campania + Molise	47.9	17.9	0.30
Lombardia	89.1	28.6	0.29
Sicilia	28.0	7.2	0.26
Veneto	87.4	22.6	0.26
Toscana	72.5	12.1	0.16
Lazio	93.0	5.3	0.06
Sardegna	8.0	0.5	0.06
Calabria	6.5	5.2	0.04

There is an obvious tendency for the more industrialized regions of the north to display larger profits during war years, also thanks to their closer and more substantial infrastructural ties with the areas at war. There is also the legitimate suspicion that some discrepancy existed between the methods to ascertain the profits in various regions – notably Lazio with its measly 5.3 millions despite the large number of businesses operating in the Capital.

One thing that catches the eye though is the large share of estimated extra-profits in Liguria and Piedmont. There the lion's share went to the Genoa based Ansaldo.

 

The history of Ansaldo is emblematic of the relations between the heavy industry groups and the Italian establishment – and in a way perhaps even more during the fascist Regime, since the turns and events, sometimes dramatic, involving the Genoese group tended to coincide with key decisions of the fascist industrial policy. The two major crisis of the Ansaldo taking place in the 1921-22 and 1929-33; which is to say just before Mussolini's rise to Prime Minister and then in the years of the “dirigist turn” of the fascist economical policy.

The society Gio.Ansaldo & C. had been constituted in 1853 (over the ashes of the Taylor and Prandl which had failed to meet the requirements set eight years before when the Piedmontese Kingdom had provided the capital for opening a large workshop in Sampierdarena) under management of eng. Giovanni Ansaldo – partners being Raffaele Rubattino (whose commercial navigation society would soon begin the exploration of the Somalian coast) and Carlo Bombrini (Head of the National Bank within the Kingdom – not “of the Kingdom” as there were other sort of national banks – from 1862 to 1882), with the State again providing the largest capital share. At the time the Piedmontese Kingdom was developing its railroad network and there were expectations that significant state expenditure could flow towards the railroad business. Piedmontese Prime Minister, the Count of Cavour, also looked at the opportunity to position the small (but ambitious) Kingdom among the major European powers; it was natural to develop the axis connecting Turin and Genoa (not incidentally the railroad connecting the two cities had begun construction in 1845) – later to become the Italian industrial triangle of Turin, Genoa and Milan – where Genoa could serve not only as a production center but also as a large commercial hub (Genoa being the largest port in Italy).

Despite the original hopes, the slow economical growth of post unitary Italy and the competition with other railroad suppliers, both international and national – oversimplifying a bit Italy had inherited a regional redundancy of “national interest” business, with each former state having its privileged industrial pole and its connected banking system, whose ultimate fate had often to be argued within the political system of which those groups were interested “shareholders” - the first twenty years of Ansaldo were marked by a consistent negative performance. The society survived (the 800-1,000 employees were not that small a workforce for Italian standards but certainly not what you would expect from a major heavy industry business) thanks to the capital influx from Bombrini's bank and the state orders, that served to compensate the insufficient demands from the internal market and the inadequate competitiveness (the low cost of work force could not make up for the inefficient organization and heavy reliance on imports of raw materials). Two things that would become a constant of Italian heavy industry: ties – often of questionable nature – with the credit system and the absolute need to acquire and sustain a political influence.

In 1882 Bombrini died and his two sons, Carlo Marcello and Giovanni, purchased the society opening a new expansion era. During the previous decade Italy had begun a phase of enlargement of the Navy – especially with the construction of large battleships (well, ironclads), according to the plan devised by Admirals Saint-Bon and Brin – and the Ansaldo adapted accordingly by shifting its production towards ships and big guns. The company leadership begun to look at the possibility to develop a vertically integrated system, controlling the various phases of the production process. One central issue with their was the production of armored plates – something that at the time was almost a monopoly of one of the Ansaldo's competitors: the Terni Steelworks (the Government had subsidized the creation of a large industrial pole in the area in 1886, after approval of the Navy commission led by Brin) soon under control of Vincenzo Breda – the production of steel saw a remarkable increase (over barely anything though) going from from around 3,000 tonnes in 1880-85 to a peak of 157,899 in 1889. It was obvious that providing good quality armor was a key step in securing orders from the Ministry (or at least it should be...) and, as ships were built on the sea, steel production showed a tendency to move towards the most active shipbuilding area, with Liguria soon gaining leadership in production, despite the competition of the Terni Steelworks, based in central Italy and Tuscany.

As a consequence, and thanks to the positive economical phase of the Giolitti era (estimates for 1900-13 show a per year growth somewhere between 4% and 7% - steel production reached 933,500 tonnes in 1913; but for reference Germany produced 17 million tonnes, the US 31, GB 7 and Austria-Hungary 2) the Ansaldo could expand its facilities and capital. It also increased the state's commitment to its barely-competitive steel production. The tariffs, privileges and various protection measures of 1878-87 (and those ad hoc in 1885: tax exemption for shipbuilding facilities and a prize for companies taking up coal importation), while they may have appeared necessary once approved the expansion of the Navy, arguably had a negative effect on the industry by keeping prices artificially high and restraining the Italian production on the internal market. Notably the tariffs also constituted an unbalanced system with certain fields enjoying larger protection measures, while others (like mechanics and machinery) suffering instead the artificially high prices of raw materials. Comparartively large industrial blocks, like the Società di Navigazione Generale Italiana - heir of the companies Rubattino and Florio, that had merged with the good offices of the institute of Credito Mobiliare - became the largest recipients of those prizes and favors. Despite that, over 90% of the 183,793 tonnes of steam-powered ships in service in 1890 had been manufactured in Great Britain (and British ships would still be 2/3 in 1913).