Italy Economy and Finance from 1949 to 1953 Part 3
The domestic production recovery and the very sustained trend in foreign demand, especially for mechanical industry products, caused the volume of foreign trade to increase significantly in 1953, in both directions of exchange. In terms of value, the relatively greater drop in import prices led to a slight improvement in the trade balance; the import surplus, however, remained substantial and required an outlay of currency equal to 740 million dollars. The other items in the balance of payments largely offset this difference, limiting the decline in foreign exchange reserves to $ 57 million.
The money market presented in 1953 characteristics of greater equilibrium due to the reconstituted parallelism between monetary and credit expansion and that of production. The formation of cash holdings barely exceeded the level of the previous year; the collection of credit companies marked a slight decline, while that on the financial market increased significantly; loans in favor of the treasury decreased to about one third of the total (compared to 50% in 1950) and correspondingly those in favor of the economy increased, especially by special institutions; the loan-to-deposit ratio of credit companies increased further, reaching 73.7% at the end of the year; the ratio of primary liquidity reserves to deposits, which had already fallen to 9.5 per cent by the end of 1952,
According to TOPSCHOOLSOFLAW, the progress made by the Italian economy in the first five years after the regained monetary stability can be summarized in the following figures: increase in national income by 5.7% per year in real terms; development of industrial production at a rate of 10% per year with average annual increases of 13.2% in the auxiliary materials sector, 11.3% in the capital goods sector and 7.6% in the goods sector of consumption; average annual increase of 6.3% in agriculture. On average in 1953, the Istat wholesale price index recorded a decrease of 3.5% compared to 1948 and an increase of 52.5 times compared to 1938. The cost of living index instead showed an increase of 17% over 1948 and almost 57 times compared to 1938, with a maximum of 67 times for food and a minimum of 18 times for the housing section. In the field of wages, wages had made further progress in real terms: wages of agricultural workers exceeded the figure of 1948 by 8% and by 50% that of 1938, while in the industrial sector the increases rose to 22 and 35%.
The development of foreign trade in the five-year period is documented by a quantitative increase of 85% on the import side and 138% on the export side. In value, imports amounted to 1,513 billion in 1953 and were made up of 19% of foodstuffs, 58% of raw materials and industrial semi-finished products and 22% of finished industrial products. Compared to 1948 there was a significant decrease in the participation of foodstuffs, to the advantage of the other two categories of products. In turn, exports amounted to 942 billion, made up of 24% of foodstuffs, 29% of raw materials and industrial semi-finished products and 47% of industrial finished products. Compared to 1948, there was an increase in the participation of foodstuffs to the detriment of that of raw materials and industrial semi-finished products. As far as geographic distribution is concerned, Europe’s participation in our overall trade had increased considerably, albeit without reaching the level of 1938, while that of America had more than halved. 48% of imports and 58% of exports concerned European countries; 22% of imports and 18% of exports concerned countries on the American continent. America had more than halved. 48% of imports and 58% of exports concerned European countries; 22% of imports and 18% of exports concerned countries on the American continent. America had more than halved. 48% of imports and 58% of exports concerned European countries; 22% of imports and 18% of exports concerned countries on the American continent.
In the monetary and banking sector, total means of payment showed, on the average in 1953, an 81-fold increase compared to 1938, against a 73-fold increase in gross national income. The multiplication coefficients of the various means of payment were 66 times for notes and coins, 72 times for money orders and checks and 98 times for the current accounts of credit companies. Once the process of reconstituting the monetary signs was completed, that trend began to manifest itself, clearly outlined in the following years, towards an increase in bank money relatively greater than that of fiduciary money. Savings deposits showed a slower pace of development, even lower, in real terms, than the consistency of 1938. At the end of 1953 the lending of credit companies in favor of the economy marked an increase of 173% over 1948. A significantly greater increase (from 210 to 921 billion between 1948 and 1953) recorded the loans of credit institutions to the industry and public works, in charge of financing the reconstruction effort first and then the work of developing infrastructures and upgrading production equipment. The activity of agricultural credit institutions and land and building credit institutions also developed considerably, but the consistency of the uses of these institutions was at the end of 1953 in currency with constant purchasing power, still significantly lower than the pre-war level.
The state budget recorded a significant improvement in the five-year period. Between 1948-49 and 1953-54, actual revenues increased by 76%, reaching 2001 billion and expenses increased by 42%, passing to 2326 billion; in turn, the part of the expenses covered by the income went from 70 to 86%. The sharp increase in revenue derived mainly from the development of revenue from customs and consumption taxes, indirect taxes and duties on business and non-tax revenues; on the other hand, the contribution of American aid, which in the years from 1948-49 to 1952-53 had determined revenues for a total of 836 billion, almost ran out. In its new structure, the revenue part had the following characteristics: direct taxes provided 18% of the total, taxes and indirect taxes on business 35%, customs and consumption taxes 23%; monopolies, lotto and lotteries 16% and other taxes 8%. On the expenditure side, there was a significant increase in disbursements for military defense, for social purposes, for public education, for public debt interests and for local finance, while expenses for works were decreasing. and those dependent on political prices. Roughly speaking, in the 1953-54 budget, out of 100 lire of expenditure, 27 concerned internal and international security, 20 economic and productive charges, 24 social expenditures, including public education, 8 interest on public debt, 6 local finance, 3 charges depending on political prices and the remaining 12 lire charges of various kinds. At the end of 1953 the internal public debt amounted to 3635 billion, marking an increase of 83% compared to the internal public debt recorded at the end of 1948 and 26 times compared to the end of 1938. 69% of it was made up of floating debt.