II. EINAUDI’S SHORT INTELLECTUAL BIOGRAPHY

Luigi Einaudi was born in 1874 in Carrù, an agricultural town in Piedmont, to a family belonging to the small rural bourgeoisie. In 1891 he enrolled at the University of Turin to take a degree in law, which included the study of political economy and public finance.Footnote ⁷ While still a student, he started to attend regularly the Laboratorio di economia politica created in 1893 at the Faculty of Law. The Laboratorio, which in a few years would become one of the most important centers in economic research in Italy, had the mission to promote empirical analysis, according to the positivist approach prevailing at that time (Faucci Reference Faucci1995, Reference Faucci2004; Becchio Reference Becchio2004). In the meantime, in 1896, he started to work as a journalist at the newspaper La Stampa, published in Turin.

The research work Einaudi carried out in this period at the Laboratorio was the basis of essays and monographs (Einaudi Reference Einaudi1900a, Reference Einaudi1900b, Reference Einaudi1902), which allowed him to obtain in 1902 the chair of public finance at the University of Turin, a position he held until the late 1950s. He was also in charge of the teaching of economics at the University L. Bocconi of Milan until 1926, when he was forced to resign as a consequence of his anti-fascist positions.

The late 1890s and the early years of the new century were crucial for Einaudi’s intellectual formation: during this period he built his theoretical foundations as an economist on the works of the classical economists, in particular David Ricardo’s monetary writings and John Stuart Mill’s Principles, and of neoclassical authors such as Alfred Marshall and, to lesser extent, Vilfredo Pareto. He also drew inspiration from Irving Fisher, particularly for the concept of double taxation of savings (Forte and Marchionatti Reference Forte and Marchionatti2012). In this period, furthermore, he set aside an initial sympathy for the socialist movement and developed a firm commitment to the principles of economic liberalism. On this point, it is crucial to underline that Einaudi’s defense of competition and market economy was mainly based on strong ethical considerations rather than on criteria of efficiency: only in a decentralized economy, in which people did not depend on the government for their survival, he maintained, could individuals really be free (Einaudi [1949] Reference Einaudi1964, pp. 321–325). To these principles he remained faithful throughout his entire life. In the 1940s, in the face of the social disruptions caused by the Great Depression and the war, he became, however, also a supporter of measures aimed at reducing social inequality, on the basis of the principle of equality at the starting point.

From the first decade of the twentieth century, he became chief editor of La Riforma Sociale, an academic journal published in Turin, which under his direction focused on policy issues and became the point of reference of a group of committed liberal economists (the so-called Turin school of economics; cf. Marchionatti, Cassata, Becchio, and Mornati Reference Marchionatti, Cassata, Becchio and Mornati2013). Besides being an active columnist for the Corriere della Sera, during the same period Einaudi became a correspondent for The Economist. This concurrent work, started in 1908, was at first sporadic but became regular in the early 1920s by invitation of the editor of the British magazine and continued during the fascist regime, a period in which he had, of course, to avoid open criticism of the policy choices of the government but still “made his opinion clear in controlled critical comments” (Marchionatti Reference Marchionatti2000, p. xiv).

During his decades-long activity, Einaudi was in correspondence, and, in some cases, cooperated, with the most important economists of his time;Footnote ⁸ suffice it to mention, among English-speaking economists, Edwin R. A. Seligman, Irving Fisher, Francis Y. Edgeworth, John Maynard Keynes, and Lionel Robbins. In 1915, in particular, at the invitation of Keynes, he wrote for the Economic Journal a detailed article on the state of public finance in Italy (Einaudi Reference Einaudi1915e).Footnote ⁹ In the early 1920s, Einaudi commented favorably in the Corriere della Sera on Keynes’s analysis of the problems of the monetary stabilization in Europe. In 1933, on the contrary, he strongly criticized the policy proposals expressed by Keynes in The Means to Prosperity (Einaudi Reference Einaudi1933a). In 1926, furthermore, Einaudi was appointed by the executive committee of the Laura Spelman Rockefeller Memorial as their representative in Italy for the nomination of candidates for fellowships in the United States and for supervising foreign Memorial fellows in Italy (Faucci Reference Faucci1986; Parisi Reference Parisi2010).Footnote ¹⁰ Among these was Oskar Morgenstern, who in 1928 spent a semester of his fellowship visiting Italian academic institutions and who, in the following years, was to maintain intellectual ties and friendship with Einaudi (Pavanelli and Nakayama Reference Pavanelli and Nakayama2008). As a leading representative of economic and political liberalism in Italy, Einaudi was also in contact with Austrian economists such as Friedrich Hayek and Ludwig von Mises, with William Rappard, director of the Graduate Institute of International Studies in Geneva, and with the German-born economist Wilhelm Röpke. In 1951, while still president of the Italian Republic (he held this position until 1955), he became a member of the Mont Pelerin Society.

III. EINAUDI’S ROLE AS OPINION MAKER

Einaudi started his work as a columnist in 1896, immediately after graduating at the University of Turin. In the previous years, the Gazzetta Piemontese, a daily newspaper founded in Turin in 1867, had undergone a radical transformation thanks to the resources provided by Alfredo Frassati, an ambitious journalist and businessman who had become the chief editor. Frassati renovated the equipment by purchasing a new rotary press, which ensured high printing runs, and renewed the newspaper by dedicating a page to cultural and literary themes and increasing the columns on economic and social issues. He reserved for himself the leading article, usually devoted to political issues. He was an advocate of social reforms and the extension of civil rights, and his pieces were characterized by a rough style and sharp criticism of the conservative political elite in government in Italy at the end of the 1890s, and found wide approval among the readers.

In the context of this process of transformation of the newspaper into a solid entrepreneurial initiative, a key step was to hire new collaborators: in particular, established writers, academicians able to intervene in an authoritative way on issues of interest to the public, but also promising young graduates. Among these was Einaudi, who at the very start was also required to contribute to the everyday work of the editorial office. With the new name of La Stampa (Gazzetta Piemontese became a subtitle), Frassati’s newspaper—which is still published today—was bound to quickly become one of the most influential in Italy.Footnote ¹¹

Between 1897 and 1902 Einaudi published an ever increasing number of articles in La Stampa: from thirty-two in 1897 up to 159 in 1901 (Bianchi and Giordano Reference Bianchi and Giordano2010, p. 46). However, in 1903 he decided to quit, probably in disagreement with the support manifested by Frassati to Giovanni Giolitti—the able but controversial political leader belonging to the liberal reformist camp who dominated the Italian political arena from 1901 till 1914 and promoted in 1912 the adoption of the universal male electoral suffrage but was severely criticized by many opponents for his often unscrupulous and authoritarian methods of government.Footnote ¹² During the same year Einaudi started to write for the Corriere della Sera, published in Milan. This newspaper, founded in 1876, had gained a new momentum after the turn of the century when Luigi Albertini, a brilliant journalist and manager, emerged as its new chief editor. Having understood, during a stay in London, the potential of the daily press as a new independent industry capable of spreading new ideas and influencing public opinion but also of distributing dividends, he proceeded, as did Frassati, to entirely renovate the publishing activities.Footnote ¹³ It is worth mentioning that Albertini, who had graduated in law at the University of Turin, had been a member of the Laboratorio mentioned above, where he became acquainted with Einaudi. Thanks to relentless efforts and substantial investments in new rotary presses and technological modernization (systematic use of linotypes and telephone services), sales increased dramatically in the following years (from 76,000 copies a day in 1900 to 350,000 in 1912, and about 600,000 in 1917–18).Footnote ¹⁴ The increased revenues enabled Albertini to distribute high dividends to the shareholders of the limited partnership that owned the Corriere Footnote ¹⁵ and to provide the newspaper’s contributors with adequate pay. Consequently, he was able to attract some of the best journalists and writers of his time (among them, Einaudi).Footnote ¹⁶ Thanks to his energetic leadership and ability to generate profits, Albertini had full control of the editorial policy. The Corriere, writes David Forgacs in a monograph on the formation of the cultural industry in Italy, “did not narrowly articulate the economic interests of its shareholders.” Overall, however, Albertini’s newspaper “was consistent with the values of the Lombard industrial bourgeoisie” (Forgacs Reference Forgacs1990, p. 36).

Between the eve and aftermath of the First World War, the Corriere della Sera had become by far the most influential paper in Italy and one of the most authoritative in Europe.Footnote ¹⁷

As already mentioned, Einaudi’s commitment to journalism predated his academic career and proceeded in parallel with it.Footnote ¹⁸ What matters most, he appeared to be fully aware of the crucial role played by newspapers as a key instrument in shaping public opinion. In a text written in 1928 but published several years later, he remarked that the daily press was the only information source for the majority of the literate Italian population during the second half of the nineteenth century; actually, the only channel through which “the ideas of philosophers and scientists” reached the public, and influenced politicians and compelled them to enact specific measures (Einaudi Reference Einaudi1945b, p. 194).Footnote ¹⁹

In the same article he emphasized the fact that, starting from the end of the nineteenth century, information in Italy had been greatly transformed by a few national independent newspapers (this was indeed the case for La Stampa and the Corriere della Sera, although Einaudi does not mention them explicitly). Unlike the traditional daily press funded by pressure groups and political parties, these newspapers had been managed as a business by a few entrepreneurs who had realized that in modern societies, the demand for information was increasing and they could gain substantial profits by providing this information in an efficient, reliable, and appealing way.Footnote ²⁰

As a matter of fact, while the press that was directly linked to pressure groups accumulated losses and was unable to enlarge its readership, the newly created independent newspapers increased copies sold and, as stated, distributed substantial dividends to their shareholders.

This sound business foundation had become the basis for a “new social and political power” (Einaudi Reference Einaudi1945b, p. 197). In other words, independent newspapers had become a driving force in shaping public opinion.

In his 1928 essay, Einaudi made an interesting distinction between the “legal” representation of interests in Parliament and “public opinion.” The latter was not organized but, in his view, derived its strength from a fundamental need of the citizens to have free and non-partisan debate on the fundamental issues facing the country.

Public opinion, however, had to be “enlightened”: “It is necessary,” he wrote bluntly in 1905, “to fulfil the duty of informers and organizers of a healthy and vigilant public opinion” (Einaudi Reference Einaudi1905c, p. 1). In this regard, a key point arises. Einaudi understood clearly that one of the crucial challenges facing Italy from the second half of the nineteenth century was its transformation from a country governed by a liberal elite—on average intellectually capable and determined to complete the process of national unification but the expression of only very restricted social groups (only 3% of the population had the right to vote in the early 1860s)—into a modern democracy capable of allowing an active participation in political life of the middle class and of the workers while at the same time guaranteeing the full respect for the constitutional rights (including property rights) typical of a liberal system. In the years preceding the First World War, indeed, important steps in this direction were taken by Prime Minister Giovanni Giolitti: he had sought an agreement with the socialists and had promoted universal suffrage. Einaudi, as mentioned, was a strenuous opponent of Giolitti. In an article published in Reference Einaudi1941 (reprinted in his collection of essays in 1954), however, he acknowledged that the latter had to be credited, at least, with “one great idea”: that of “enabling the working classes and the peasants to be part of the political and economic government of the country.” In implementing this program, however, wrote Einaudi, Giolitti had limited himself “to letting the socialists do the experiment.” This was “too little for a statesman who must be able to channel and lead the social forces to which he opened access to power” (Einaudi Reference Einaudi1954, p. 286).

Einaudi’s work as opinion maker and columnist appears, then, strictly connected with this complex process of transformation of Italian society and institutions and aimed at broadening the basis of consensus of economic and political liberalism in Italy.

In order to promote a widespread movement inspired by the principles of liberalism, indeed, monopolies, collusive practices, and unproductive rents had to be singled out and castigated. To defend savings and “honestly productive capital,” Einaudi wrote in a letter to Alberto Geisser, a co-editor of La Riforma Sociale, he was ready to attack corrupt politicians and “take by the collar the capitalists robbing other people’s properties.”Footnote ²¹

On this point the collaboration with the Corriere della Sera, in itself a great opportunity as a channel of transmission of his ideas, was also a constraint. As we will see later, Albertini was resolute in avoiding involving the Corriere in press campaigns considered too radical or such as to alienate moderate readers.

In his role of opinion maker Einaudi was indeed a gifted writer, whose ability to persuade could hardly be matched. In dealing with complex issues, he tried first of all to convey to the reader relevant information, both qualitative and quantitative. Only after setting out the problem did he make his point of view clear, advocating a specific measure or criticizing a policy adopted by the government. Einaudi’s journalistic style reflects his habit of careful perusal and interpretation of official papers and statistical data, a habit he had acquired during his early years as research assistant at the Laboratorio di economia politica of Turin. Even more decisively, it reflects also The Economist’s principles. Einaudi greatly admired the weekly journal founded by James Wilson in 1843 at the height of the anti-corn laws movement, and which had become, with Walter Bagehot, an influential source of information for the business community in Great Britain and elsewhere (Edwards Reference Edwards1993; Berta Reference Berta and Romani2012). In particular, Einaudi appreciated The Economist’s commitment to the principles of free competition and individual initiative, and its determination to adopt them as a guideline, but also its pragmatism.

Between 1896 and 1925 Einaudi signed only a portion of the numerous articles he wrote for La Stampa and the Corriere della Sera: usually, but not necessarily, those in which he focused on key policy problems. At any rate, he soon acquired a large following among the readers. Umberto Ricci, professor of economics at the University of Rome, after praising him for teaching the principles of political economy to thousands of people, observed that he was increasingly considered by his readers as “an oracle” (Ricci Reference Ricci1917, p. 392). Over the years Einaudi received innumerable letters from private citizens or representatives of institutions who praised him for a specific position or denounced wrongdoing and inefficiencies.Footnote ²²

Furthermore, as a leading columnist of the most influential newspaper in Italy, on several occasions Einaudi addressed Italian political leaders and ministers directly, criticizing them for not having taken into account his remarks in the columns of the Corriere and urging them to act.Footnote ²³ Not infrequently, his criticisms triggered worried replies from the politicians involved.

In his work at the Corriere, Einaudi cooperated strictly with the chief editor, Luigi Albertini, with whom he shared a strong commitment to the principles of liberalism and a common vision of the role and duties of the Italian bourgeoisie. As mentioned, however, Albertini was firm in his role as having ultimate responsibility for the continuity and coherence of the editorial policy of the newspaper he directed. In his letters to Einaudi, besides constantly stimulating and inspiring him on the subjects to tackle in his columns, he intervened several times to smooth out what he perceived as excessive or untimely criticism. In some cases, he did not hesitate to send one of Einaudi’s articles back, urging him to revise it substantially or to publish it in another journal. Furthermore, at least until the First World War, Albertini was reluctant to criticize the Italian trade tariff, characterized by heavy protectionism, and vetoed any proposal to embark the Corriere on a free trade campaign. In this regard his views were in tune with those of Luigi Luzzatti, the influential protectionist economist and political leader who had been the architect of the Italian tariff and who frequently wrote in the Corriere on policy issues. Consequently, for several years Einaudi published his articles in favor of free trade and his denunciations of the rent-seeking activities of the steel or the oil industriesFootnote ²⁴ in his monthly journal, La Riforma Sociale, and in L’Unità, edited by Gaetano Salvemini,Footnote ²⁵ both characterized by limited circulation.

As already mentioned, Einaudi was strongly committed to free competition and private enterprise. In his articles he sided with the numerous Italian entrepreneurs who were able to compete and to sell their products on the domestic and international markets without seeking subsidies or protective duties from the government, with the artisans and workers who thrived through hard work and self-restraint, and with the peasants who managed to acquire the land they worked thanks to lifelong savings. At the same time, he castigated the inefficiencies of the public sector, the increasing influence of the bureaucracy, and the irrationality of the Italian tax system. Indeed, particularly after the First World War, Einaudi’s attitude appears to be that of a preacher whose sermons went often unheard but who had to provide them anyway, to fulfil a precise duty.Footnote ²⁶

IV. EINAUDI’S COLUMNS ON ITALY’S ACHIEVEMENTS AND CONSTRAINTS

In his work as a columnist at La Stampa and the Corriere, Einaudi analyzed the main challenges facing Italian society of his time: the evolution of the industrial relations and the role of the trade unions; the industrialization of northern Italy; the backwardness of the agriculture in the South; the expansion of international trade; the rationalization of Italy’s railways, ports, and navy transport; and the need to reform the public administration and to control public expenditure.

This section focuses on the main issues tackled by Einaudi, starting from his analysis of industrial relations, the often turbulent confrontation between the Italian workers and the industrialists. In a series of articles published in La Stampa in September and October 1897 and reprinted in his Cronache economiche e politiche di un trentennio (1959), Einaudi provided his readers with an accurate report of the first organized strikes in the textile sector in Piedmont, focusing on the main features of this industry, on the living conditions of the workers, and on their personal aspirations and expectations (EinaudiReference Einaudi1959, pp. 40–62). Three years later, in December 1900, he took on the task of reporting on a major strike proclaimed in the port of Genoa after the disbandment, decreed by the government, of the local trade union controlled by the socialists. Once again, he did not limit himself to a description of the facts but analyzed the causes and the likely consequences of the confrontation (Einaudi Reference Einaudi1959, pp. 290–309).

Einaudi’s reflection on strikes is closely related to that on the nature and role of the first trade unions. Most of these organizations, he observed, had emerged spontaneously as a result of the efforts of individual workers who, animated by a legitimate desire to improve their living conditions, realized that it was better to advance their claims in a collective manner rather than at an individual level. It is not surprising, therefore, that Einaudi was against any legislation aimed at imposing a regimentation of the unions: his model was Great Britain, where, he wrote, there was “the maximum freedom for all, workers and entrepreneurs, to associate to defend their interests” and at the same time it was possible to withdraw from an association when it was no longer considered convenient to be part of it (Einaudi Reference Einaudi1901, p. 1).

A lively confrontation in the labor market, in any case, maintained Einaudi, was a clear indicator of the fact that Italy was a growing and dynamic society.Footnote ²⁷ After a period of financial turmoil and recession during the 1890s, at the turn of the new century Italy was finally experiencing a substantial increase in industrial production, export, and income per capita. In his articles Einaudi ascribes this positive process to the creativity and determination of thousands of entrepreneurs, craftspeople, and workers, who had been able to face an increasing domestic demand for consumption goods and also to compete at an international level without requesting government subsidies or protection. The stabilization of the banking system and the adoption of a more responsible fiscal policy had also had a positive influence.

On the contrary, no specific merit was attributed to the Italian governments and particularly to Giovanni Giolitti, whom, as previously mentioned, Einaudi opposed as a politician ready to accept any compromise in order to stay in power.Footnote ²⁸

According to Einaudi, a sign of Italy’s increasing capacity to produce was the fact that its international trade had been steadily growing since the beginning of the new century. Italy, he observed in an article published in May 1905, imported from abroad a growing amount of raw materials and instrumental goods to create new finished products: “We are no longer a purely agricultural country … ; we are also a country which lives by its own industries and buys abroad raw material to be transformed” (Einaudi Reference Einaudi1905a, p. 1). For the time being, exports were not actually increasing with the same vigor as imports; as a consequence, the balance of the trade was in deficit. Einaudi, however, was not particularly concerned, considering it a temporary imbalance, bound to flatten out in the medium run.

Another relevant issue in those years was a huge increase of emigration, particularly from southern Italy. In the 1890s the average number of emigrants had been 300,000 per year and from 1909 to 1913 the outflow increased to 700,000 (Candeloro Reference Candeloro1981, pp. 131–132). Einaudi dedicated some of his most eloquent pieces in La Stampa to this mass exodus, describing at length the sufferings of emigrants—often victims of abuse perpetrated by local authorities and speculators—but also envisioning the birth of a “great transatlantic Italy” in Latin America, thanks to the labor and creativity of the Italian citizens abroad (Einaudi Reference Einaudi1959, pp. xii, 350–367). In the Corriere he returned to this subject with some significant articles, in which his concern about the negative consequences of an emigration of such a large scale on Italy’s human capital, while significant, recedes into the background compared with his appreciation of its positive aspects as a security valve against the excess of labor supply in the domestic market. The solution, in his view, was to promote economic growth in the South through new infrastructures, a rational use of water resources, and land improvement (Einaudi Reference Einaudi1906g). Moreover, several emigrants tended to return, after a period of work abroad, to their homeland, bringing new skills and capital, albeit modest, which they used to acquire land property (Einaudi Reference Einaudi1910).

One of the most recurring themes tackled by Einaudi at the Corriere was the need to make public administration and finance leaner and more efficient. Thanks to substantial restructuring efforts accomplished in the previous years and also to the economic upturn, the government budget at the turn of the twentieth century was in much better condition than in the 1890s. The trustworthiness of the country, which had been gravely jeopardized in that period by a wave of financial scandals and by excessive military expenditures in the colonies, was now re-established, and in 1906 the government succeeded in obtaining a remarkable reduction of the interest rate of the consol, by far the most important government bond at the time, thus relieving the impact of interest payments on the state budget.Footnote ²⁹ However, numerous issues remained open, starting with the need to implement strict rules in public expenditure and to reform Italy’s obsolete and inefficient tax system.

In Einaudi’s opinion, the former issue was the most pressing one, in order to ease the burden on Italian taxpayers and to enhance economic growth. Instead, the government was heading in the opposite direction: in particular, it was continually inflating the number of employees in the public sector for electoral purposes and under the pressure of the bureaucrats.Footnote ³⁰

The need to defend the country’s financial stability against the demands of pressure groups to the detriment of the Treasury dictated to Einaudi the content of some of his most effective pieces. In several articles, for example, he criticized the complex system of maritime conventions stipulated by government in collaboration with private shipping companies. These agreements were admittedly crucial, in many cases, to guarantee postal services and vital connections to remote coastal areas of the peninsula and to the colonies. However, if badly structured, they risked causing excessive burdens for the taxpayers (Einaudi Reference Einaudi1906b, Reference Einaudi1906c, Reference Einaudi1906d).

In spite of the abovementioned problems, the trend of the Italian economy before the First World War was remarkably positive. It was, however, accompanied by fluctuations in the financial markets, the most serious being the 1907 crisis (Bonelli Reference Bonelli1971; Zamagni Reference Zamagni1993, p. 181). These complex issues were tackled by Einaudi in some interesting articles.

Starting from 1901, the average price of stocks at the Genoa, Milan, and Turin stock exchanges had been dramatically increasing. The stock market reached an unprecedented peak in the car industry, located in the northwestern part of the country and still in its early stages. In an article published in June 1905, Einaudi stigmatized this event as a speculative “fever,” similar to other episodes that had occurred in the past. Broadly speaking, the fact that Italian households were putting their savings in the stock market was in itself positive: had they not been excoriated in the past for having been too conservative and investing too much in government bonds? Investors in the stock market had to be prudent nonetheless, distinguishing between already consolidated sectors and “new industries,” in which profits had not been reduced to a normal level through competition. The car industry was one of the latter and undoubtedly had been affected by speculative maneuvers. A part of the blame had to be put on the banks, who should have “separated the wheat from the tares”: in other words, they should have recommended the more solid assets over the less reliable ones (Einaudi Reference Einaudi1905b).

The bull market was bound to continue until October 1906, when the Genoa Stock Exchange nearly collapsed as a consequence of a major liquidity crisis triggered by an ill-conceived speculation on the stocks of Società Terni—a major steel company that specialized in armor for the Italian navy—by its president, Ferruccio Prina (see Bonelli Reference Bonelli1971; Tusset Reference Tusset, Augello, Marco and Pavanelli2016).

Solicited by Albertini, Einaudi dedicated to this theme an extensive article published by the Corriere at the beginning of November with a special editorial introduction. In the last few years, wrote Einaudi, following the creation of many new industrial enterprises, the market had been inundated by a huge number of stocks. The banks, who had initially been ready to accept them as collateral, became more cautious and, in several cases, traders who had incurred a substantial debt were forced to “distress selling.” Another cause of the fall in stock price was the worldwide increase in interest rates. In the light of all this, speaking of “bearish plots” or conspiracy by speculators was pointless. On the whole, stock markets had to be considered a key institution for the economy (Einaudi Reference Einaudi1906e).

Einaudi’s article aroused great interest among the readers, and a few days later Albertini was writing to commission a further article on stock speculation focusing on Prina’s case with Società Terni.Footnote ³¹ In the same letter Albertini specified the topics to be treated. Einaudi, however, followed only in part the suggestions of the chief editor of the Corriere, transforming his piece into an act of accusation against the steel industry, which at that time was heavily subsidized by the government. Following Albertini’s wishes (which were also in line with his views), he argued that corporate managers should abstain from stock speculation and in particular from attempting to artificially manipulate the price of company stocks. Their only duty was, and should have been, to adopt adequate entrepreneurial strategies and to put aside part of the profits in order to reinforce the corporate reserves. Having dealt with this issue, Einaudi did not hesitate to openly criticize the Terni management: the stock price collapse was partly a consequence of the fact that the government had at last remembered its duty towards the taxpayers and had started questioning the inflated contractual conditions of the steel sector (Einaudi Reference Einaudi1906f).

The months of October and November 1907 witnessed a worsening of the crisis at an international level. This time the epicenter was in the United States: at the New York Exchange the stocks hit bottom. In an article published on November 18 (“The American Tornado”), Einaudi identified with his usual clarity the factors provoking the overseas crisis, which had followed a long period of euphoria and boom.Footnote ³²

In the following years, on the eve of the World War I, the nominal interest rates increased on the financial markets. This led to a reduction in the price of government bonds and particularly of the consols, in Italy and abroad. In an article published in February 1912, Einaudi, endorsing explicitly Irving Fisher’s view, attributed the rise of nominal interest rate to the increase of the rate of inflation: “the scientific explanation,” he wrote, “[had been] given by Fisher, no doubt the greatest living American economist, an insightful observer of the current situation” (Einaudi Reference Einaudi1912a, p. 4). In his article he also mentioned Fisher’s distinction between the nominal and the real interest rate, an analytical point that at that time was quite innovative.

Therefore, in order to counteract the price reduction of the government bonds, it was necessary to stabilize the cost of living. In another article, published a few days later, Einaudi explicitly mentioned the stabilization plan set forth by Fisher in his Purchasing Power of Money. Fisher’s plan, observed Einaudi, was convincing, at least in principle, even though not all economists agreed with its theoretical assumptions and particularly with the hypothesis that the increase in prices had been caused by an excess supply of gold (Einaudi Reference Einaudi1912b).Footnote ³³

V. REDUCING CONSUMPTION TO FINANCE THE WAR

One of the worst consequences of the First World War was, undoubtedly, the collapse of the complex network of institutions and rules—mainly informal—that, by fostering the free movement of consumption goods, raw materials, and factors of production, was at the very basis of the unprecedented increase in income and wealth that had characterized Europe and North America from the second half of the nineteenth century.

Einaudi was aware of the key role played by this system and indeed he repeatedly defended it against criticism. Nevertheless, from the end of 1914 he actively campaigned, together with Albertini, for Italy’s intervention in the conflict against Austria and, later, against Germany. Similarly to other intellectuals of his generation, he believed that the war would have led to the completion of the national unification process initiated in the second half of the previous century, reinforcing at the same time the position of Italy as one of the leading political and military powers at an international level. Furthermore, by aligning with France and the United Kingdom, Italy would have contributed to defending the liberal values that appeared to be threatened by the German bloc.Footnote ³⁴ As demonstrated by the events in the following years, this analysis actually proved to be a tragic underestimation both of the human and economic costs of the conflict and of its political and social effects. In Italy and in other belligerent countries, the liberal institutions and constitutional rights were ultimately brought to a collapse by the disruptions of the war and the irrational expectations and myths it created among the population.

The articles written by Einaudi during the war period were characterized by an austere and patriotic tone. The primary objective was to reduce private consumption to the minimum, if possible through moral suasion or, if necessary, through the law (see, among others, Einaudi Reference Einaudi1916a, Reference Einaudi1916b). Public investments in infrastructure had to be postponed, too. The resulting resources should be raised through taxation (extra profits deriving from army supply contracts should have to be specifically targeted) or through the purchase of government bonds by the households and then used to finance the war. Only in this way would it have been possible to avoid a huge increase in paper money, which would have fueled inflation and caused iniquitous redistributions of income.Footnote ³⁵

Increasing tax revenue, though, was quite a slow process. Therefore, in the immediate future the purchase of government bonds by Italian households was the best way to pay for the war without hampering price stability. As a matter of fact, in the years 1915 to 1918, five major issues of long-term bonds were launched by the government (Fausto Reference Fausto and Cotula1993, pp. 3–7; Fratianni and Spinelli Reference Fratianni and Spinelli1997, pp. 114–117).

In his articles in the Corriere, Einaudi actively engaged in a systematic work of persuasion and propaganda, urging people to reduce consumption and to subscribe wholeheartedly to the massive issuance of bonds by the Treasury. Referring to the first issue of one billion lira launched in January 1915, when Italy was not yet taking part in the conflict, Einaudi argued that by buying bonds the savers were not only fulfilling a patriotic duty but also acting according to their best interest, as the conditions offered were very favorable (a forecast that, of course, proved to be wrong in that it underestimated the effects of inflation on the real interest rate and on the value of bonds; see Einaudi Reference Einaudi1914b and Reference Einaudi1915a).

Commenting on the second issue of bonds, promoted in June 1915, after having emphasized the fervor pervading the country to the point that many citizens were ready to incur debts in order to acquire these assets, he stigmatized the lack of commitment of most industrialists despite the fact that they had accumulated large profits thanks to military contracts (Einaudi Reference Einaudi1915b).

In the first two government loans, wrote Einaudi in another article, the Italian savers had provided as a whole two billion lira compared with fifteen billion in Germany and twenty-four billion in England. In normal conditions, this result would have been acceptable, keeping in mind the big disparity between Italy’s income and that of other European countries. Italy, however, was taking part in a major war: in this context the resources collected were not enough to avert the danger of forced loans and inflation. Politicians, lamented Einaudi, had not been very active in promoting the loan in their constituency. The intellectuals, and particularly the economists, had also been, with few exceptions, conspicuously absent. This was not acceptable: there were circumstances in the life of a nation, he wrote, in which intellectuals should try to keep their critical attitude silent and “act as preachers” (Einaudi Reference Einaudi1915c).

Einaudi himself, it must be added, was not completely consistent with this guideline. In December 1915, in agreement with Albertini, in the Corriere he criticized some clauses of a new issue of government bonds that determined an unjustifiable difference of treatment among subscribers.Footnote ³⁶ On the whole, however, particularly after the severe defeat endured by the Italian army in CaporettoFootnote ³⁷ in October 1917, his propagandist zeal on this issue prevailed over scholarly analysis. In this difficult period, when inflation increased and Italian households faced the risk of losing, in real terms, most of the capital invested in government bonds, he continued to urge his readers to buy these assets by presenting this investment decision as a bargain as well as a patriotic duty.Footnote ³⁸

Several articles published by Einaudi in the Corriere during this period provided the documentary materials for a major book published in 1933 in the Italian series of the Carnegie Endowment’s economic and social history of the war, and which is still one of the most insightful works on Italy’s economic and social events in that period: La condotta economica e gli effetti sociali della guerra italiana (The economic conduct and the social effects of the Italian war) (Einaudi Reference Einaudi1933c).Footnote ³⁹

VI. THE RECONSTRUCTION PROGRAM

In the aftermath of the armistice, proclaimed in November 1918, Italy had to face economic and social problems on an unprecedented scale. In order to cope with the needs of the war in a context in which revenues from taxes were by no means sufficient, the Italian government had borrowed huge resources both from domestic households (by issuing an increasing amount of bonds) and from abroad (mainly raw materials and military equipment from the United States and Great Britain). Further financial resources had been provided by the Bank of Italy. The ensuing increases in paper money, as was predictable, fuelled inflation.

Besides all this, it was necessary to promote a complex reorganization of the industrial sector, which had been entirely mobilized for the needs of the war and now had to convert to original production.

More generally, the experience of war brought new hopes of radical social and political changes. These aspirations, repressed during the conflict, were bound to break out in the years of 1919 and 1920 as a wave of strikes and street protest. In this dramatic and complex situation, Einaudi reacted by increasing his efforts as opinion maker at the Corriere. In his articles published in this period, he was able to devise a national “reconstruction program” based on fiscal restraint, monetary stability, and the defence of free competition and market economy (Barié Reference Barié1972, pp. 389–390).

In Einaudi’s view, balancing the government’s budget was indeed the most pressing problem of the day. This goal had to be reached, on the one hand, by introducing a radical reform of the Italian tax system and, on the other, by drastically reducing public spending. Public subsidies, particularly those aimed at keeping the price of bread artificially low, had to be abolished. The consolidation of public finances, in turn, was a prerequisite for a freeze of the Bank of Italy’s liquidity creation and for price stabilization. According to Einaudi, domestic price stability would have halted the depreciation of the lira and led soon to exchange rate stability. This was the precondition to the adoption, in due time, of the gold standard. Contrary to other economists of his time, however, he opposed pegging the lira to gold too hastily: a reasonable period of a de facto stabilization was needed. Even more so, he was against restoring the pre-war parity of the lira with the pound and the dollar, as such a measure would have led to an unsustainable deflationary process.Footnote ⁴⁰ On this point, Einaudi commented favorably in the Corriere on an article by Keynes, also published in Albertini’s newspaper on April 29, 1922.Footnote ⁴¹

Fiscal restraint and price stabilization were, of course, not enough. A further key issue was the need to dismantle the complex and inefficient system set up during the war to control economic activity and channel it towards military production: a system that was based on arbitrary rules and restrictions. In this framework, it was crucial to get rid of top bureaucrats who were convinced they had superior knowledge and let businessmen produce and sell freely without special authorizations, extra taxes, and pleas (Einaudi Reference Einaudi1919a). It was also necessary to abolish the exchange rate control established in 1917, which created enormous obstacles to the purchase of raw materials and manufactured goods essential to the relaunching of national productions (Einaudi Reference Einaudi1919b).

The government, he wrote, should choose between “regulated and free market economy, between those who require a State-led system and those who maintain that the State should only set the framework within which private business can thrive” (Einaudi Reference Einaudi1920c, p. 1).

Once the major obstacles to economic activity had been removed, however, entrepreneurs should pull their sleeves up and avoid asking the government for new favors. On this subject, Einaudi strongly criticized the requests, made by the main business associations, to substantially increase custom duties on imported manufactured goods. Contrary to what had happened before World War I, when he had to soften his stance on this issue, he was now able to campaign vigorously against protectionism in the columns in the Corriere della Sera, accusing those who favored the policy of fuelling “class selfishness” and slandering Italian farmers and industrialists by representing them as people unable to succeed without constant government protection (Einaudi Reference Einaudi1919c).

Another important issue in Einaudi’s articles was the radicalization of the social and political conflicts in Italy. In 1920 the CGL, the trade union linked to the Socialist party, launched a wave of strikes during which factory committees of unionized workers tried to take control of several major industrial plants in the Northwest, exonerating the managers and the owners. In September many plants were occupied by the workers in Turin and Milan. Several weeks of strong tension ensued, during which a violent uprising inspired by the Soviet revolution appeared imminent to several observers (Berta Reference Berta1995, pp. 16–17).

Writing before these dramatic events, Einaudi conceded that factory committees could play a useful role, provided that they limited themselves to discussing wages and working conditions in the firms. However, he strongly condemned the occupation of the industrial plants and the objective of “self-ruled management” pursued by the workers. These were disgraceful experiments, he wrote, which, besides violating the pre-existing property rights, were based on the wrong assumption that the control of the “capital” was a sufficient condition to create a new and even more efficient economic system. On the contrary, the most likely result would be misery and chaos (Einaudi Reference Einaudi1920d).

The acute social confrontation and the perspective of a violent overturning of the political and economic system induced Einaudi to harden his opposition towards the socialists. At the same time, he failed to criticize the violence perpetrated by the first fascist “action squads” and, in September 1922, he even depicted fascism as a movement that drew inspiration from the “old liberal tradition” (Einaudi Reference Einaudi1922c). This was, of course, a tragic misunderstanding, which indeed was shared at that time by several Italian intellectuals.

After Mussolini’s appointment as prime minister in October 1922 and the formation of the so-called national government, Einaudi evaluated positively the work of the new minister of finance, the economist Alberto de’ Stefani, praising him for restoring fiscal discipline and for enforcing a credible plan aimed at balancing the budget.Footnote ⁴² During 1923, however, he expressed an increasing unease towards the authoritarian methods adopted by Mussolini and particularly his strategy to marginalize the role of Parliament. This criticism became an overt opposition after the assassination, perpetrated by a fascist squad, of one of the leading members of the opposition, the moderate socialist Giacomo Matteotti. In an article published in the Corriere on August 6, 1924, Einaudi denounced the spread of illegality and violence in the country and strongly condemned the government’s attempts to abolish constitutional rights, particularly the freedom of the press. At the same time he urged the industrialists, most of whom, he wrote, were able to prosper and thrive without depending on public subsidies or favors, to speak up and to condemn these abuses (Einaudi Reference Einaudi1924).

This passionate, although belated, plea was in vain: in the following months Mussolini was able to consolidate his dictatorship and to silence all opposing views. In November 1925 Luigi Albertini was forced to give up the leadership of the Corriere and Einaudi decided to suspend any collaboration with the newspaper, now controlled by the regime.Footnote ⁴³

From the end of 1925 a long period began for Einaudi of “internal exile,” characterized by a forced retreat to academic teaching and research, although he still tried to defend his ideals, writing in La Riforma Sociale and, when this was suppressed by the regime in 1935, in a new journal, Rivista di Storia Economica. The latter being— at least officially—specialized in economic history, could bypass, until the early 1940s, the rigid censorship of the regime. In this difficult period Einaudi probably came to the conclusion that his activity as preacher had been almost useless. However, he wrote in the 1950s after the re-establishment of constitutional rights in Italy: “To those who have in their blood the imperative to write it serves no purpose to be persuaded of the futility of their work…. As soon as I recovered the freedom of putting on paper my own thought, the habit revived and I was forced again to write” (Einaudi Reference Einaudi1956, p. ii)

As a matter of fact, on July 28, 1943, just three days after the fall of Mussolini’s government, he wrote to Ivanoe Bonomi, an anti-fascist political leader who in 1944 became prime minister of the Italian democratic provisional government, declaring himself “ready to resume after 18 years, since November 1925, my collaboration with the daily press.”Footnote ⁴⁴

VII. CONCLUDING REMARKS

In retrospect, Einaudi’s work as columnist in the daily press and particularly his collaboration with Luigi Albertini’s Corriere della Sera, by far the most influential and widely read Italian newspaper in the first decades of the twentieth century, appears to be a unique chapter in the diffusion of economic and political liberalism in Italy, an ambitious attempt to broaden the consensus in public opinion on the principles of free market and competition—then shared only by a minority of the population—in a context of a difficult process of transformation of the country in a modern democracy open to the participation in political life of new social classes.

The economic discourse conveyed by Einaudi in his pieces for the Corriere was certainly not “value free”: he praised thrift, frugality, and individual responsibility as the only way for workers and artisans to improve their conditions and for businessmen to thrive; sided with the small entrepreneurs who were able to compete and to succeed without claiming subsidies and public aid; and condemned as inefficient per se any attempt by the government to coordinate economic activity or to promote specific sectors.

In his decades-long intellectual activity, Einaudi abhorred the tendency to interpret the role of the economist as pure “technician.” In one of his last contributions, presented at the Mont Pelerin congress held in Turin in September Reference Einaudi1961, he reiterated the view that had guided him in his work, namely that economists should act as intellectuals able to grasp the relationship between economic actions and “the political or moral or spiritual action[s]” (Einaudi Reference Einaudi1962, p. 260), and, also for that reason, ready to actively participate in policy debates.

Einaudi’s work as opinion maker was indeed a chapter in many ways unique for the economic discourse in Italy and the spread of liberal ideas and values in public opinion. As such, it was not exempt from constraints and shortcomings: this is the case of the anti-protectionist battle or his battle against the rent-seeking activities of the steel and oil companies, indeed central issues of any program inspired to economic liberalism and which Einaudi could not deal with in the Corriere, at least until the first postwar period, because of Albertini’s reluctance to engage his newspaper on campaigns that could alienate moderate readers. During the same years, on the whole, Einaudi paid limited attention to the problems of southern Italy, characterized by secular backwardness. Also, the strenuous support of Einaudi and Albertini for Italy’s intervention in the First World War turned out to be a tragic underestimation of the costs of the conflict and of its consequences at political and social levels.

As a matter of fact, despite the efforts made in the first postwar period by Einaudi to promote in the columns of the Corriere a program of economic and social reconstruction of the country inspired by the principles of economic liberalism, the political system and constitutional rights in Italy would soon be overwhelmed by the myths and vested interests created by the war—myths and interests that were skilfully exploited by Mussolini and the fascist movement to conquer the existing power structure.

The defeat, however, proved not to be irreversible. Immediately after the collapse of Mussolini’s regime, in July 1943, Einaudi was ready to assume again the role of “untiring educator” (Cafagna Reference Cafagna2004) and preacher, which would have led him to collaborate again with the daily press and, fairly soon, to take on roles of political leadership in the new Republic.