UPTURN italian economy: Less than a year ago, the American magazine Time described Italy, to which it had accorded the honor of a cover story, as a country in its death agony. A few weeks ago, David Rockefeller, the president of the Chase Manhattan Bank, joined the chorus of local big industrialists and government functionaries, speaking of a "new Italian miracle, " a reference to the rapidity with which Italy has allegedly extracted itself from a most difficult situation. This latter assertion - apart from being equally as exaggerated as the former, if not more so — was clearly a reflection of the atmosphere of the electoral campaign going on in Italy at the time. In a word, the uncle from America was doing a little advertising for his Christian Democratic nephews in difficulty. Nevertheless, beyond the conjunctural variations, i* seems useful to analyze on the basis of objective criteria the economy of a country that has been the subject of such contradictory judgments within such a brief span of time. Especially since it is the country that has had the longest "May '68" in the world, a country in which the mass movement has pressed on for years, showing no signs of lasting exhaustion and experiencing no important period of retreat. 8 by ETTORE SALVINI| To understand the origins, development, and prospects of the present economic crisis, it is necessary to review the stages of the preceding economic development, even if only briefly. Features of postwar development During the postwar period Italy experienced an intense process of industrialization that transformed it into one of the major economic powers of the capitalist world and considerably increased the structural strength of the working class. This industrialization process had peculiar features, which we will try to outline synthetically. First, it was based primarily on "labor intensive" Industrial sectors that were able to use cheap labor (automobiles, electrical appliances, cloth and clothing, etc.). Nevertheless, there was also notable expansion, due in large measure to state intervention, in the steel and basic chemical industries. In addition, the industrial sectors that led the way were those linked to export. The expansion of the domestic market was much less important, and it continues to remain limited. In practically all industrial sectors, development occurred
through the adoption of technology imported from abroad. There was no independent research effort. In fact, precisely the sectors that would have required such an efFort were left to their fate (electronics, nuclear power). After the agrarian reform at the beginning of the 1950s, agriculture became oriented more toward electoral operations than toward investment and now finds itself in a totally deplorable condition. The EEC agricultural system has made a significant contribution to creating this situation. In conclusion, Italy, an importer of raw materials and technology, is an exporter of labor power and capital, in addition to manufactured goods. Between 1950 and 1970 some 2 million Italian workers emigrated. "Clandestine" capital exports from Italy during the past ten years amount to some 10 million million lire (about $15,000 million). Italy is extremely sensitive to variotions in the world market, which immediately affect the balance of payments. The Italian economy exhibits greater structural weakness than the economies of the other advanced capitalist countries. The 1964 crisis and the upturn At the beginning of the 1960s, the increased structural strength of the Italion working class asserted itself in a series of struggles that resulted in positive gains on the wage front, This was added to a certain overheating of the economy, which was in a boom phase. The inevitable results were inflation and balance of payments deficits. Monetary authorities strongly tightened credit, thus precipitating the conjunctural crisis that had been building up. In terms of overall industrial production, the effects of this crisis were minimal; there was simply a slowdown in growth, which did not exceed 2% in 1964. An upturn began in 1965 and continued until the hot autumn of 1969. The consequences on investment and employment were greater, although varied. Investment in absolute terms diminished in 1964 and 1965 and increased only slowly during succeeding years. By 1969 expenditures on plant and equipment (in constant prices) had barely reached their 1963 levels. Employment continued to decline until the first quarter of 1966; then there was a faint upturn. But on the eve of the hot autumn of 1969 total employment in industry was only slightly higher than it had been at the beginning of 1964. What all this means is that the ascending phase of the cycle was realized thanks to a brutal intensification of the exploitation of the workers, while on the other hand, when the long postwar boom ended in the late 1960s, Italy entered this new phase for world capitalism structurally weak and with an industrial apporatus that was rapidly becoming obsolete.
The hot autumn and the 1970-72 crisis The heavy increase in exploitation was one of the factors that created the objective conditions for the prerevolutionary situation that erupted in Italy during autumn 1969. Of course, it was not the only factor; in general, for reasons of space and of choice of theme, in this article we will have to neglect the social and political elements without which the overall framework remains large ly incomplete. But if is perhaps opportune to recall that the crisis that rocked Italian society in 1969 was not exclusively economic; it was an overall crisis - political, ideological, and social, as well as economic — the various aspects actively meshing. It is obvious that the results of the hot autumn on wages and work rules made inroads on the rate of profit; this requires no particular demonstration. Rather, it must be noted that the above-mentioned decrease in unemployment acted in the some direction, unemployment having resulted in a strong drop in real wages under the contracts signed before the autumn struggles.* In a peof this kind, a phenomenon like clandestine export of capital receives an added impetus of a political character (in addition to the economic impetus, which we have already menfioned). After a brief "physiological" recovery at the beginning of 1970, Industrial production practically stagnated during the whole year. In 1971 there was a general decline, which was reflected in overall production figures (-0.5% in comparison with the preceding year); an upturn began only ar the end of 1972. The monetary authorities followed substantially the same policy as in 1964. But the effects on employment were different; in fact, the rate of unemployment did not worsen, except for a brief period of the end of 1972, when the upturn that was to reabsorb the new unemployed was about to begin. The effects on wages were also different. Wage increases had been very much slowed down during the 1964 crisis and had not been especially strong in the succeeding period, because of the influence of unemployment. The basic reasons for the differences in the effects of the 1964 and 1970-72 crises on both wages and employment must be sought in the persistent workers combativity of the 1970s. The "drugged" upturn of 1973-74 At the end of 1972 the general lines of the upturn that was to be consolidated (after some uncertainty) at the beginning of 1973 began to emerge. The worldwide upturn had already been under way for some time, at least a year. Thus, for a whole period Italy found itself out *In reality, the demand for labor was centered on the so-called strong layers: men between the ages of 20 and 40, of which there was a shortage. On the other hand, unemployment persisted for women and older men - the "weak loyers."
ITALY of phase with the cycle. When it finally joined the upturn that had been going on in the rest of the industrialized countries, inflation had already become rampant on a world scale and the spectacular increase in the prices of raw materials had begun, the increase that culminated one year later in the leap in the price of oil. Thus, when the upturn came, Italy imported not only raw materials and investment goods, but inflation as well, But the upturn itself was in very large measure due to a consciously inflationary policy that boosted expenditures on public administration, fostered price increases, and stimulated exports through easing credit. A crucial point was the February 1973 decision to float the lira, a decision that amounted to a devaluation of about 20% and permitted the unbridled rise of domestic prices and thus the reconstitution of profit margins without endangering the competitiveness of Italian products. abroad. It is precisely in this sense that there was talk, and still is, of a "drugged" upturn. Without the drug of inflation, solely on the strength of the market, even the belated upturn that did occur would very likely not have taken place. But the effects on the balance of payments were disastrous - a result of the so-called "bad effects" of the devaluation, which were especially serious for the structure of Italian foreign trade (the rigidity of imports is much greater than that of exports). All this was added to the inflationery impulses long since present in the Italian economy because of structural factors (the backwardness of the trade sector, which is extremely dispersed, and the backwardness of construction, which is linked to land speculation). The result was that the inflation rate hit double figures (10.2%) as early as 1973. But gross domestic product at constant prices increased 6.3% (3.2% in 1972) and industrial activity jumped 8.9%.
Compelled to grant rather substantial wage increases because of the vigorous workers struggles of the first several months of 1973, the bourgeoisie tried to nullify these increases through inflation. In addition, the upturn in industrial production, which permitted more efficient utilization of plant and equipment, led to productivity increases that reconstituted profit margins.
These some tendencies continued in exacerbated form during the first half of 1974, by which time the major capitalist economies had already gone into crisis. The first and most obvious result of this (immediately attributed by bourgeois propaganda solely to the increases in oil prices, which were, however, only one component factor) was a frightful deterioration in the trade balance and an even more serious deterioration of the current balance of payments. Monetary authorities looked abroad for large loans, which by March 1974 began to become difficult to obtain. The International Monetary
Fund demanded political conditions (wage freezes) before granting loans to Italy.
The government inaugurated a policy of draconian credit restrictions. The trade unions granted a de facto truce that lasted nearly until the end of September.
10
Chronicle of the crisis Throughout this period, the indices of productivity continued to improve as a result of both inventory speculation and the implementation of investment decisions that had been made earlier, in short, as a result of the classic features of the final phase of a boom. In June 1974 industrial production was still 6.5% higher than in June 1973, and even in September it was 2.6% higher than in September of the preceding year. But the break occurred between June and September: bankruptcies mounted, a series of small and medium-sized factories taking advantage of the August holidays to close down. In October the indices of industrial production began to turn negative and have continued to remain so until today. (See table.) The crisis has struck all industrial branches, even those that had seemed set for indefinite expansion, like the chemical industry. But the branches most seriously hit were textiles (-17.4% compared with the first quarter of 1974), means of transport (-15.8%), mechanics (-11.3%), and metallurgy (-8.4%). The Italian trade balance during the final months of 1974 had clearly improved since the catastrophic situation of the first half of the year. The improvement was achieved by a slump in imports provoked by the slump in industrial production and by a slight decrease in consumption as a result of price increases, tax increases on the workers, and increases in utility rates (electricity, telephones, etc.). Nevertheless, the 1974 trade deficit, which amounted to 6,920 thousand million lire (about USS2,000 million), was the highest ever in absolute figures, more than double that of 1973, which had already been high. It only need be added that in mid-1974 the debt was expected to be 50% higher than what it actually was. In any case, the tendency toward improvement of the trade balance was consolidated during the first several months of 1975. The deficit for the first quarter stood at 606,000 million lire, compared with 1, 955, 000 million during the corresponding period of 1974. Imports declined 3.8% compared with the first quarter of 1974, while the value of exports increased 27.9%, which, taking account of inflation, represents a slight increase in exports and a very severe decline in imports. The figures for April 1975 (the latest ones available) confirm this tendency: a trade deficit of 109,000 million lire, compared with 815,000 million for April 1974. These figures, which permitted bankers throughout the world to take Italy off the blacklist of "dangerous risks, " are what permitted the top representatives of the Italian bourgeoisie to heave a sigh of relief and enabled Rockefeller to speak, with remarkable superficiality, of a new Italian miracle. Very simply, what this means is that one year ago they thought Italy was going bankrupt, but now they think the country will squeak by this time.
But no more than that.
1974 June Sept. Oct. Variation in % +6.5 42.6 -4.5 -12.1 Seasonally adjusted index (1970=100) 125.2 123.3 116.6 Short-term prospects "The year 1975 will be the worst year since the end of the war. " That was the conclusion of a study conducted by ISPE and recently presented to the TechnicalScientific Committee for Planning. All predictions agree in estimating that for the first time since the end of the war there will be a decline in gross domestic product, the expected decrease being variously set between l and 4%. Investment declines are expected to be especially serious: between 15 and 20% in the industrial sector and between 4 and 7% in construction, while agricultural investment is expected to register a moderate expansion and a 4-5% increase in investment in the tertiary sector is anticipated. The balance of payments (excluding capital movements) should close out the year with a deficit of 1, 500-2, 000 thousand million lire, which, all things considered, remains rather substantial. Given the stagnation of world demand, the volume of experts will probably not increase more than 3%, while imports will fall by about 10%. The most optimistic economic observers consider it possible that there will be an upturn in production toward the end of the year, but such forecasts are closely linked to prospects for a worldwide uptum, which, like a mirage, seems to move further away every day. Furthermore, the depth of the Italian crisis is such that it is probable that Italy will enter the upturn later than most capitalist countries. At present, the most likely variant seems to be a purely technical upfurn during the next several months based on the need to renew inventories. The elements capable of transforming this technical upturn into a real upturn are not yet in sight. If and when such an upturn takes place (and sooner or later it will take place because of the intrinsic laws of the capitalist economy), it is expected that it will rapidly lead to a new explosion of inflation, in part owing to the insufficient investment mode over the past ten years or more. In fact, we are now witnessing the first, still timid attempts to stimulate an upturn through injections of inflation. In the absence of any coherent government economic policy, this seems especially to be the direction of the measures taken in recent months (eased credit terms for exports, financing of agriculture
Industrial Production
1975 Nov. Dec. Jan. Feb. March
-8.5 -14.8 -7.3 1-14.3 110:3 105.3 109.3 111.6 107.6 and public works, etc.). The narrowing of supply will only increase inflation, which will be the cause and not the effect of the upturn. In addition, it must not be forgotten that today, in the midst of an economic crisis, consumer price increases are running at an annual rate of about 15%. But it is precisely in this situation that the dose of inflation needed to stimulate an upturn not only goes beyond "decent" levels - surpassed by now in any case — but also beyond the bourgeoisie's ability to control it and thus to take odvantage of it. Conjunctural crisis and structural crisis As during the crisis of 1970-72, it is now being debated in Italy whether the current crisis should be defined as structural or conjunctural. The love of eclecticism that culturally characterizes Italians has led them to find a formula that satisfies everybody: The crisis is simultaneously conjunctural and structural. But this is not sufficient for defining the precise character and features of the crisis or for drawing out the elements needed to predict future developments. The crisis is structural in that what has come to the surface are the accumulated contradictions - in the economic, social, and state structures - of twenty-five years of tumultuous capitalist development, contradictions that have characterized the specific mode of being of Italian capitalism ever since its origin. The conjunctural crisis (and now, the conjunctural crises) falls within this fromework of structural crisis. All this is true enough, but it does not explain why the structural crisis has broken ouf precisely now. Some semi-Marxist theoreticians of the for left attribute this solely to workers struggles, And this does approach a solution to the problem; but it is not sufficient. The fact is that the structural character of the crisis must be seen in the context of the more general inversion of the tendency of the international capitalist economy, in which, moreover, on important element (although not the only element) has been workers struggles (and not only Italian workers struggles). The inversion of the tendency has been the acid test that has brought to light the basic structural contradictions of the Italian capitalist economy.
ITALY In addition, the weakness of Italian capitalism has resulted in the inversion of the tendency being manifested in Italy earlier and in a much deeper way than in other countries, In this framework, the conjunctural crises are longer, more serious, and more frequent than they were during the period of the long postwar boom. The 1970-72 crisis and the present crisis have demonstrated the correctness of this prediction, mode by the Fourth International. The shift from the so-called economic miracle to the structural crisis has resulted in the emergence of a series of modifications in the internal balance of Italian capitalism that had been established during the preceding phase. Such modifications are still far from having assumed a clear and defined character. It is nevertheless useful to try to sketch out some of the main lines of the tendency. First, finance capital is being strengthened to the detriment of industrial capital. The historic tendency of imperialism, defined by Lenin as the dominance of finance capital (a tendency that seemed to have been contradicted by postwar developments), is being strongly reaffirmed during this phase of crisis. Corporate debt was already rising sharply during the 1960s and has become extremely heavy in recent years: The debt level is so high that the banks have become de facto (even if they cannot be so by Italian law) the "employers" of the majority of companies. This explains the proposal of Guido Carli, governor of the Bank of Italy, to reform Italian bank laws to allow the banks to actually control and direct industry and to become employers. Although there is not much chance of this proposal being adopted in full, there is no doubt that the importance of the banks in the Italian economic system will continue to increase. It is also significant that the role of most Italian financial corporations (Edison, Bastogi, etc.), which at the beginning of the 1960s seemed to have received a very hard blow with the nationalization of the electrical energy industry, has turned out to be considerable in recent years. This is an important aspect of the obscure power struggle that went on around Montedison, whose actual management today is in the hands of the purest representatives of Italian finance capital.
State capitalism is expanding its role qualitatively and quantitatively. This has been true especially during periods of conjunctural crises with anticyclical functions: public (state) investment rose from 40% of total investment in 1970 to 48% in 1972. But while in 1973
(with the uptorn in private investment) the share of public investment fell to 38%, the many factories that had come under state control during these years were not returned to private capitalists. Further, during the past decade the financial market in Italy has passed almost completely under the control of state capitalism.
Naturally, this does not mean that private capitalism is dying out, and still less that its profits are disappearing. It does mean that state capitalism is ever more extensively taking on the function of a basic prop of pri-
12 vate profits. But this is not without consequences for the internal line up of the bourgeoisie. Finally, Italy's dependence on the world market has increased. This phenomenon has had two quite distinct manifestations. On the one side, Italy's dependence on foreign trade has increased. Today Italy imports not only industrial raw materials and advanced technological goods (machinery), but is also large ly dependent on foreign supplies of food products (especially, but not solely, meat and milk). Some important industrial sectors, like machine tools, in which Italy occupies one of the leading positions in the world, have been based largely on export during the past ten years, particularly because of a scarcity of domestic demand owing to the slow progress of investment. The rate of increase of exports in 1973 was 8%, while national income grew only 4%. On the other hand, in most recent years, especially during the 1970-72 crisis, a significant number of companies were taken over by foreign corporations. According to some estimates, one-fourth of all large and medium-sized Italian companies are owned by foreign companies. Naturally, this is not to say that both tendencies are developing concurrently, as was the case until the very recent past. A deepening of the crisis could lead to a weakening of the first aspect and a strengthening of the second. It is estimated that the increase in the volume of exports this year will not exceed 2,5% (according to the OECD); exports will thus suffer a notable decline, in harmony with the situation of the world economy. It is certain that national income will also go down. The industries that have led the way in Italian industrial development (electrical appliances, automobiles, chemicals) and even industries like shoes, are tending to move to countries with lower labor costs or more abundant raw materials. In addition, Italy has not made sufficient investment in research to allow for the development of technologically advanced sectors; moreover, the development of these sectors, where it has been possible, has not been sufficient to absorb all the workers expelled from sectors that are in crisis. Thus, Italy's situation will become exceptionally difficult in the medium term: with labor costs too high to continue expansion of the sectors that have supported overall development up to now, but with a technological capital insufficient to fully break into the specialized division of labor that might be established among the advanced capitalist countries, although not without hard struggles.
For the moment, the Italian bourgeoisie does not seem to have confronted this problem in the slightest, or rather, it seems to be trying to resolve it in practice through a reduction in wages that would allow for a return to the "fabulous" years of the 1950s. But this objective seems difficult to achieve and in any case would require big conflicts with the working class.
For their part, the reformist organizations are discussing "new models of development" under which it is not known how to reconcile what are irreconcilable - at
least in the present phase of Italian society - namely, the expansion of advanced technological sectors and the development of employment. Consequences for the working class In 1974, for the first time in recent yeors, official figures indicoted a decline in living standards for the working class, although a limited one. In fact, while there was a 27.4% increase in consumer prices, wages increased only 23,2% in industry, 22.7% In trade, and 24.8% in transport. (If the salaries of white-collar employees are included, there was an increase in wages of 28.1%, that is, slightly more than the rise in the cost of living.) As for unemployment, despite the confusion and imprecision of Italian statistics, which vary as much as 100% according to what criteria are used, the following dynamic can be outlined: During the first half of 1974 there was a slight decrease in unemployment in consonance with the last phase of the boom. Between July and August 1974 a series of small and middle-sized factories began to close down or lay off workers. Since then the number of unemployed has risen continuously and is still rising today. Nevertheless, the increase in the number unemployed (which is difficult to establish exactly, for the reasons mentioned above) has not been completely proportional to the decrease in production during the same period. And this is not simply a question of a pure and simply time gap. The fact is that instead of layoffs, which would have been "justified" by the situation according to the viewpoint of capitalist logic, there has been wide recourse to the "Casso Integrazione" (the partial-unemployment compensation system), that is, to a system that allows Italian capitalism to strongly reduce production (to thirty-six, twenty-four, twelve, or even zero hours) with a wage compensation from 60 to 90% of normal wages, according to the given case. The funds for the Cassa Integrazione are furnished by compulsory contributions from the workers and employers, In 1974 recourse to the Cossa Integrazione was already 23% higher than it had been in 1973. But during the first quarter of 1975, according to trade union statistics, there was an increase of 800% in the number of hours covered by the Cassa Integrazione compared with the same period of the preceding year. The Cassa Integrazione was used especially by the big corporations, while in the smaller firms, where the working class is weaker, layoffs were more numerous. For the bourgeoisie, the Cassa Integrazione is a means of avoiding a head-on clash with the working class, which would be very probable in the event of massive layoffs by the big companies. In fact, it is clear that the reaction of the workers to a reduction of the workweek under which they retain 90% of their wages is rather different from their reaction to layoffs.
But the number of unemployed seems to have increased more as a result of the de facto freeze on hiring than as a result of layoffs. In addition, as always, the poorest and least developed regions have been hardest hit by the crisis, the South especially. This is another reason why the crisis has been especially severe in sectors like construction, which are especially widespread and important in the South. Nevertheless, in spite of this difficult situation, which threatens to divide the working class by striking at one sector after another beginning with the weakest, workers struggles have been intense ever since autumn 1974. The number of hours lost in strikes through the whole of 1974 was 18.3% less than in 1973, because, as we have already mentioned, the trade unions had declared a de facto truce throughout the first half of the year. But during the last quarter of 1974 the number of strike hours stood at 66.3 million, as compared with 19.3 million during the corresponding period of 1973; for the first two months of 1975 the figure was about 49 million hours, as compared with 18.4 million during the same period of 1974. This shows that workers combativity has risen even higher. The use of the Cassa Integrazione has enabled the bourgeoisie to attenuate the intensity of social conflict. But the Cassa Integrazione is only a palliative, a short-term remedy workable only if the crisis is a passing phenomenon and if an upturn occurs rapidly. We have seen that the upturn is not at all just around the corner. The most likely variant, then, is that the deep crisis will persist at least throughout 1975. Furthermore, this crisis means not only a fall in the levels of production but above all a slump in investment. Which mears that even during a phase of upturn new job positions will not be available, because the preconditions will not have been created. It is thus likely that the job situation will become critical beginning in autumn. If at that time the struggles of the working class do not succeed in blocking the wave of layoffs that the capita lists will in all probability demand, the working class will not only suffer a serious political defeat, its structural strength will also be weakened. On the other hand, a workers victory would provide the basis for a massive new rise of struggle. If is clear, however, as we have pointed out above, that in a situation like the Italian one, in which the economic crisis is closely linked to a deep political crisis, the political situation in coming months will exert on influence on the outcome of the autumn struggles that may be decisive.
an open letter
ДА З ДРАВІТВЕТ
ПРОЛЕТАРИАТА
ЗАФРАХ А КА ДЕЛЕ, eft Oppositionists at exile colony in Siberia demonstrate on anniversary of Bolshevik revolution. The year is ap arently 1928. Banner at right, with portraits of Lenin and Trotsky, procloimi, Long Live the Dictatorship of the
Proletariat:
from