THE ITALIAN ECONOMIC PROBLEM

Soon after the collapse of the German army in April, 1945, Allied economic experts entered the industrial heartland of Northern Italy. Experts who had seen systematic German destruction in the South were stunned by the sight of Genoa, Turin, and Milan. Thanks in part to the local resistance, about 85 percent of northern plant capacity had survived, although damage varied from sector to sector. The war-related metallurgical industry had been reduced to 75 percent of its 1938 value, but losses in the wool and cotton textile sectors were a mere 0.5 percent. Even though first impressions were comforting, calculations of physical damage revealed neither the true cost of Fascism, war, and foreign occupation, nor the size and complexity of the Italian economic problem at the time. That problem, it was generally agreed, had three fundamental and interrelated aspects.

The first and most pressing task was to restore production and employment. Industrial output stood at 29 percent of prewar levels at war's end; agricultural, at 63.3 percent. Estimates of unemployment were approximate, but most observers placed the number between two and three million in a population of forty-five million people. Obviously, the production problem entailed much more than factory repair. The internal transportation and communications systems were shattered. Forty percent of prewar rail lines had been wrecked, along with half the country's rolling stock.

The main obstacle to increased production was lack of raw materials, especially coal.