Austerity sucked, ‘Il Duce’ edition
@BrankoMilan leads us to Clara Elisabetti Mattei who writes about austerity and Il Duce (Italy in the twenties). Very brief: after World War I there was a short but highly important phase in European history when people got voting rights, 8 hour working days and comparable welfare enhancing amenities. Also in Italy. In quite some countries this led to a backlash, in Italy in 1922 to Mussolini’s ‘March on Rome’ which pretty much ended the democratic phase and led to Mussolini assuming dictatorial powers in 1925. Mussolini surrounded himself with proudly neoclassical, ‘marginal’ thinkers. These imposed austerity (even the phrase was already used). And it’s all there: privatization, ‘sound’ money policies, the laments about lack of discipline and profligate spending by the state and labor, the importance of saving, the idea of a virtuous elite which has to lead the irresponsible people. And of course the moral and economic virtues of low wages.Troika speak avant la lettre (except for the high exchange rate which Mussolini sanctified). The question is: did it work?
No, it didn’t.Not by a long shot. Absolutely not. It was a disaster. An unmitigated disaster.
Mattei does not provide economic data, the Maddison data base does, (see the graph). Italian economic development during the fascist period sucked. Italy did, despite all the low hanging fruit (electricity, telephones, cars, radio) ‘despite’ its dictator much worse than Finland, with its twenty governments between 1918 and 1939. And very much worse than social democratic Sweden – a clear Italian authoritarian disaster. But it did as bad as Spain and Portugal, which had authoritarian governments and pursued Churchill style ‘sound’ money policies, too. Importantly, the swift recovery after WW II shows that stagnation was not any kind of cultural Italian trait or a supply side problem – it was a problem of wealth, gold and low wages centered policies instead of income, production and high wage centered policies. The same kind of deflationary austerity policies which in the UK led to lower wages, low growth, high unemployment – and not even a decline of the government debt/GDP ratio… . Italian growth only resumed when democracy was restored, after WW II… The dip in Spain in the thirties was of course due to the Spanish civil war – note that there was no real spanish post WW II recovery. Democratic Italy quickly surpassed fascist Spain, after WW II.