The impact of Great Depression on the Italian economy

Global Political Economy Report:
The impact of Great Depression on the Italian economy

TABLE OF CONTENTS
PAGE
1. INTRODUCTION…………………………………………………………………………………….
2. BODY…………………………………………………………………………………………………….
2.1 UNEMPLOYMENT…………………………………………………………………..
2.2 GDP……………………………………………………………………………………….
2.3 BANKS …………………………………………………………………………………… 3. CONCLUSION………………………………………………………………………………………….

1. INTRODUCTION

The Great Depression of 1929 was the worst economic crisis to have impact on the United States and it persisted until about 1939. This decline started in the USA but it hit almost every country of the world causing fall in output, high unemployment and deflation. The depression began with the stock market crash, where investors with no experience started to speculate until prices reached unsustainable levels. The decline started and investors were impelled to panic and they commenced investing money they did not have increasing the decline and causing the crisis. Prices fell abruptly reaching a peak on the October 24 known as the Black Tuesday. To make matters worse the banks failed, people all over the globe feared of other economic woes stopped purchasing items, the American economic policy increased taxes on imports to protect American companies and the drought occurred in Mississippi valley on 1930 caused the Great Depression.
Regarding Italy, after 1929 it fell in a recession and the economic activity experienced a deceleration. The Depression was not very different from the other countries as we can see in the graph below.

Source: Mattesini and Quinteri
The world production index is computed as a GNP weighted average of the indexes of industrial production of United States, France, Germany and Great Britain.
The crisis, followed by a policy of autarky and the preparation for war, caused the collapse of the system at the end of the fascist period (Zamagni, 1993). In this report I am going to analyze three sectors of Italian economy that were particularly affected by this downturn.

2.0 BODY 2.1 UNEMPLOYMENT
Unemployment in Italy was not so high as in the other countries because Italy was an agricultural country and also because the fascists tried to increase public spending creating new roads and other public works and erecting public buildings. But there were still 1.3 millions of unemployed in 1932.
The fascist regime implemented a wage cut policy from 1927 to 1934: in 1927, wages were cut twice, by 10% and again by 20%; later, in November 1930, wages were cut by about 8% and in 1934 by an amount ranging from 7% to 12% (Zamagni, 1976). All these cuts led to a decrease in nominal wages but real wages actually raised and this influenced the unemployment experiencing another growth.

Source: Mattesini and Quinteri
2.2 GDP

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