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Financing Industrialization in Italy, 1894–1914: The Partial Transformation of a Late-Comer

Published online by Cambridge University Press:  03 February 2011

Jon S. Cohen
Jon S. Cohen
Affiliation:
Yale University
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Extract

Italy's rapid industrial growth, which began in the mid-1890's, was preceded and accompanied by important developments in her financial institutions, including in particular the establishment of several industrial credit banks on the German model. The role of such banks in French and German industrial growth before 1914 has been the subject of considerable study. It is the purpose of this article to examine the effects of these banks on the rate and direction of Italian development between 1894 and 1914, and to consider the relation between their near-monopoly of industrial credit and the emergence of concentration of ownership and control in the new and rapidly growing sectors of the industrial structure.

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Articles
Information
The Journal of Economic History , Volume 27 , Issue 3 , September 1967 , pp. 363 - 382
Copyright
Copyright © The Economic History Association 1967

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References

1 Cameron, R., in France and the Economic Development of Europe 1806–1914 (Princeton: Princeton University Press, 1961)Google Scholar, refers repeatedly to the “critical revision” which German bankers made on the innovation of the Pereire brothers in industrial finance. Gerschenkron similarly makes much of these modifications, especially with regard to their effects on Italian growth. In no instance, however, are these differences between the French and German banking practices specifically detailed. Both types of banks were joint-stock but the German banks, particularly after 1870, raised increasing percentages of their funds through savings and demand deposits. Deposits with the French investment banks could not exceed twice the value of equity capital outstanding. On this see Cameron, R., Banking in the Early Stages of Industrialization (New York: Oxford University Press, 1967), p. 108Google Scholar. The German banks were much more “universal” banks than their French counterparts. At the same time the German banks took a more active part in the affairs of financed firms, to insure their own hegemony and to provide the firms with needed technical and entrepreneurial assistance. These differences were significant, and it was the German “department store” banking practices which appeared in Italy after 1894.

2 The cases of France and Germany are well documented. See, for example, Cameron, France and the Economic Development of Europe; Cameron, Banking in the Early Stages of Industrialization, ch. iv; Gerschenkron, A., Economic Backwardness in Historical Perspective: A Book of Essays (Cambridge: Harvard University Press, 1962), ch. iGoogle Scholar ; and Riesser, J., The German Great Banks and Their Concentration (3d rev. ed.; Washington, D.C.: U.S. Government Printing Office, 1911)Google Scholar.

3 , Gerschenkron, Economic Backwardness in Historical Perspective, p. 77.Google Scholar

4 Paretti, V. and Block, G., “La Production Industrielle en Europe Occidentale et aux Etats Unis de 1901 a 1955,” in Moneta e Credito, IX (12 1956), p. 269.Google Scholar

5 Kuznets, S., “Quantitative Aspects of the Economic Growth of Nations: 1. Levels and Variability of Rates of Growth,” Economic Development and Cultural Change, V (10 1956), 77.Google Scholar

6 Caracciolo, A., “Industria,” in Facolta di Economia, Ancona, Ricerche Sullo Svi-luppo economico italiano, 1861-1964 (unpublished) p. 9.Google Scholar

7 , Paretti and , Block, “La Production Industrielle,” p. 269.Google Scholar

8 Mortara, G., “Lo sviluppo dell'industria elettrica in Italia,” in Edison, Societa, Nel cinquantenario della Societd Edison, 1884-1934 (Milano: 1st. grafico R. Bertieri, 1934), II, 113.Google Scholar

9 A modem steel industry was started in 1886 through the joint effort of the Credito Mobiliare, the Banca Generale, and the government.

10 Ilva, Societa, Ilva, alti forni e acciaierie d'ltalia, 1897-1947 (Bergamo: 1st. ital. d'arti grafiche, 1948), p. 67.Google Scholar

11 The following six German banks each held 2,628,000 lire worth of the original stock issue of the Banca Commerciale: Handels-Gesellschaft, Deutsche Bank, Bank Fur Handel und Industrie, Ditta S. Bleichroder, Disconto Gesellschaft, and the Dresdener Bank. These figures were taken from the Banca Commerciale Italiana, Relazione Annuale, 1895.

12 On this see Feis, H., Europe: The Worlds Banker: 1870-1914 (New York: W. W. Norton and Co., 1965) pp. 238–39Google Scholar.

13 Bava, U., I quattro maggiori istituti italiani di credito (Genoa: Societa Anonima Vulganie C, 1926)Google Scholar, Appendix. This appendix contains the balance sheets of the bank-from 1894 to 1925.

14 “Ordinary credit” bank is a direct translation from the Italian credito ordinario. All joint-stock and private commercial and investment banks were considered ordinary credit banks.

15 Bava, I quattro maggiori istituti italiani di credito, Appendix.

16 Ibid.

17 Ibid.

18 It is possible to speculate that the concentration of financial capital was inevitable; the size of the industrial sector in Italy was too small to support a large number of industrial credit banks, especially in the beginning, and once a few banks had established connections with industry, they were able to control subsequent expansion. This explains not only the inveterate weakness of the Societa Bancaria Italiana but also the penchant on the part of the Banco di Roma to seek investment opportunities outside Italy.

19 The best discussion of the note-issuing banks in Italy before 1893 is Nardi, G. Di, he banche di emissione in Italia nel secolo XIX (Torino: Utet, 1953)Google Scholar.

20 The bank assumed such an active part in the affairs of the nation not because its creators had conceived the bank in this way, but because Bonaldo Stringher, who became director general after 1900, saw the need of such a bank for Italy and worked closely with Giovanni Giolitti, the prime minister during most of the years between 1900 and 1914, to achieve such an institution. On the relations of the two men see Carocci, G., ed., Dalle Carte di Giovanni Giolitti: Quarant'anni di politica italiana (Milano: Feltrinelli, 1962), Vol. IIGoogle Scholar.

21 To receive authorization from the government to operate as a savings bank, the proposed institution was expected to reveal in its statutes the maximum percentage of its assets that it would hold in various types of commercial paper. Many savings banks held only government securities.

22 Conti, E., Dal taccuino di un borghese (Milano: Garzanti, 1946), p. 58.Google Scholar

23 Bachi, R., “Storia della Cassa di Rispannio delle Provincie Lombarde, 1823-1922,” in Cassa di Risparmio delle Provincie Lombarde, La Cassa di Risparmio delle Provincie Lombarde nella evoluzione ecqnomica della regione (Milano: Alfieri e Lacroix, 1923), p. 199.Google Scholar

24 Essars, P. des, “A History of Banking in the Latin Nations,” in A History of Banking in all the Leading Nations (New York: Journal of Commerce & Commercial Bulletin, 1896), III, 199.Google Scholar

25 Data on equity were taken from Ministero di Agricoltura, Industria, e Commercio, Statistica delle banche popohri, decennio 1899-1908 (Roma: Tip. naz. di G. Bertero, 1911), Vol. I.Google Scholar Data on deposits were taken from an unpublished study of the Italian monetary system from 1861 to the present undertaken by the Bank of Italy and were made available by Dott. Antonio Finnochiaro.

26 Estimated from the figures supplied by Finnochiaro.

27 These figures were taken from: Ministero di Agricoltura, Industria, e Commercio, Bolletino ufficiale delle societd per azione (Roma: Botta, 1911), p. 1910Google Scholar.

28 Monitore di Prestiti, Jan. 24, 1911.

29 Romeo, R., Breve storia della grande industria in Italia (2d ed.; Rocco San Casciano: Cappelli, 1963), p. 73.Google Scholar

30 Ibid., p. 84.

31 The banks never undertook a project of any size alone; they always called in a select group of friends, either Italian or foreign or both. Evidence on this came from the archives of the Banca Commerciale Italiana which Dott. Mattioli, the president, kindly mad e available.

32 Davis, L., “The Capita l Markets and Industrial Concentration: The U.S. and U.K.: A Comparative Study,” The Economic History Review XIX (08 1966), 255–72CrossRefGoogle Scholar. Davis emphasizes these same relationships in trying to explain the greater degree of industrial concentration in the United States tha n in Great Britain in the last half of the nineteenth century.

33 Edison, Society, Relazione Annuale della Societa Edison, 1895.Google Scholar

34 Edison, Societa, Relazione Annuale, 1908, 1914.Google Scholar

35 Evidence of this comes from! the archives of the Banca Commerciale Italiana. The bank increased its capital in 1911 an d the archives note that Esterle was one of the subscribers to this ne w issue of equity capital.

36 Estimated from: Italiano, Credito, Notizie statistiche sulle principali societa italiane per azione (Milano: Tip. Fratelli Lanzani, 1912)Google Scholar. The founder of the Societa Conti, Ettore Conti, was quite clear about the implications of Esterle's presence on o his board of directors. He preferred to mee t his capital needs through credit provided by th e savings banks rather than through funds supplied by the banks of ordinary credit. He stated, however, that: “… in this I sometimes find myself at odds with my esteemed president, Esterle, who is a friend of the Commerciale and its directors.” (, Conti, Dal taccuino di un borghese, p. 43.)Google Scholar

37 These averages are based on the total value of assets belonging to joint-stock companies with capital of 1,000,000 lire or more. In this sense, the estimate is biased, for most firms in the economy at that time were not joint-stock. Nevertheless, the majority of electric power companies were joint-stock which is in itself indicative of average size. Raw data taken from Ministero di Agricoltura, Industria, e Commercio, Bolletino ufficiale delle societd per azione, 1900-1914.

38 , Conti, Dal taccuino di un borghese, p. 43. Conti, in fact, argued that lack of proper legislation retarded expansion in certain instances, especially in conflicts over property rights.Google Scholar

39 It should be noted that prices of electricity for use in large centers declined 37 per cent during the fifteen years prior to 1914, and an equally sharp drop occurred in the price of electricity for motor power. For whatever reason, the industry passed on productivity increases to the consumer. See , Mortara, “Lo sviluppo dell'industria elettrica in Italia,” pp. 340, 343–44Google Scholar.

40 For a discussion see Cohen, Jon S., “Finance and Industrialization in Italy, 1894-1914” (unpublished Ph.D. dissertation, University of California, Berkeley, 1966, Appendix A)Google Scholar.

41 Lanino, P., La nuova Italia industrial (Roma: Italiana, 1916-1917), III, 23.Google Scholar

42 The stockholders' report of 1909 note d that the company held shares in l'Agri-cola, another fertilizer firm, the Commercial Society of the East, the Italian Union of Pyrite Mines, the Sulfur Utilization Society of Sicily, th e Romagn a Sulfur Mines, the United Factories of Italian Farmers, and the Frenc h Societe des Phosphate Tunisiers. Monitore di Prestiti, September 18, 1909.

43 The president of th e new company, Giacomo F. Durazzo-Pallavicini, was the past president of the Credit o Italiano, and Enrico Rava, a director of the Credito Italiano, sat on the board of the new firm. Societa Ilva, Ilva, alti forni, Appendix.

44 This transformation took place with a loan of 96,000,000 lire from a syndicate formed under the Bank of Italy. The Banca Commerciale and the Credito Italiano each participated for 16,000,000 in this financing operation, and they thereby secured control of one sector. Leonardi, S., “L'industria siderurgica italiana dall'unita alia prima guerra mondiale,” Movimento Operaio, VIII (09-10, 1956), p. 634Google Scholar.

45 , Ilva, Ilva, alti forni, p. 90.Google Scholar

46 , Lanino, La nuova Italia industriale, 1, 21.Google Scholar Ansaldo, an engineering firm and not a member of the Commerciale group, was forced to establish its own iron and steel plants to assure itself of a supply of essential raw materials. ( , Romeo, Breve Storia, p. 85.)Google Scholar

47 Taken from boards of directors included in Italiano, Credit o, Notizie Statistiche sulle societd per azione. 48Google ScholarRomeo, R., Breve Storia, p. 95Google Scholar.

48 Romeo, R., Breve Storia, p. 95Google Scholar.

49 Based on balance sheet reported in Ministero di Agricoltura, Industria, e Com-mercio, Bolletino ufficiale, 1906.

50 These estimates were based on stockholders' reports which were published, in part, in the financial press, particularly in the Monitore di Prestiti and on the holdings of securities included in the year end balance sheets published in Ministero di Agri-coltura, Industria, e Commercio, Bolletino ufficiale 1906-1914.

51 , Gerschenkron, Economic Backwardness in Historical Perspective, p. 89.Google Scholar

52 It should be noted that the ties between industry and the banks were broken when the financial system was reorganized by Mussolini in 1936. This did not, however, signal the rise of a new, more perfect capital market. The Institute for Industrial Reconstruction (IRI), a government-sponsored and -financed organization, simply took over the job of financing industry which until then ha d been done by th e banks. Lack of capital remains a problem for industry in Italy even now, and the state, through agencies like IRI, is the main source of financial capital.

53 , Davis, “The Capital Markets,” p. 270.Google Scholar