IB History Impact of Domestic Economic Issues on the Foreign Policies of Italy Notes

Italy's Economic Weakness in the 1920s

1. In the 1920s, Italy's economy was heavily dependent on Britain, France, and the USA for imports of food, fuel, and raw materials. Italy had no domestic oil or coal supplies and limited iron ore, making it structurally vulnerable to any disruption in international trade.
2. "An embargo on fuel by the USA or Britain, for example, would severely restrict the economy. Reduction in food imports from France would cause food shortages in Italy and massive price increases." While fascism advocated war and empire, there were "clearly limits on what could be achieved without putting the country at financial risk."
3. Italy's foreign policy in the 1920s was therefore "primarily opportunist" (Philip Morgan), "taking advantage of small incidents to gain politically." The Corfu Incident (1923) and the seizure of Fiume (Rijeka) from Yugoslavia "required little on the part of Italy" and did not risk provoking the Western powers.
4. Italy's post-war economy was burdened by massive debts. The government owed huge amounts to banks and industrialists who had financed the war effort. Promises made to 2 million soldiers (such as farmland grants) were unfulfilled, fuelling the social unrest of the Biennio Rosso (1919-1920).
5. Italy exported manufactured goods to Western partners in return for essential imports. France, working to isolate Germany, included Italy in diplomatic efforts and "was not concerned with Italy's weak military." Mussolini desired southeastern France and Corsica but these ambitions were "simply tabled for the future" because France was far more powerful.

The Great Depression and Italy's Economic Transformation

1. The Great Depression (1929) paradoxically freed Italy from Western economic dependence. When Britain, France, and the USA raised protectionist trade barriers, Italy redirected trade toward Yugoslavia, Austria, Hungary, Bulgaria, and Romania. These countries "mainly exported raw materials and food, allowing Italy to export manufactured goods to them in return."
2. This meant Italy had "less fear of economic retaliation in response to its policies." "In effect, the Great Depression gave Italy more freedom to operate its foreign policy than previously and more in line with its fascist governing philosophy." The economic constraints that had kept Mussolini cautious were removed.
3. Italian unemployment rose to over 2 million by 1933. Industrial workers faced mandatory wage cuts, and agricultural wages dropped by 20-40% during the decade. The domestic economic crisis created pressure on Mussolini to find solutions, and military spending became his answer.
4. "The worst point of the Depression was 1932, when planning for an invasion [of Abyssinia] started. But the economy was beginning to recover during 1934. That recovery was certainly aided by the government's war-related commissions and contracts" (Philip Morgan). War preparation and economic recovery became inseparable.

The Corporate State and Military Spending

1. Mussolini created the corporate state: government-appointed boards of employers and workers managed each industry. "This eliminated competition in industries such as steel so that all producers set a single price for products and then divided the market between them." Independent trade unions were banned.
2. Massive deficit spending went into military production: "trucks, tanks, ships and aircraft, as well as rifles, tyres, shells and engines." Workers in these industries "would naturally spend their pay on food and consumer goods accordingly, causing other factories and industries to employ others." The army and navy "massively expanded, providing jobs for up to 1 million men by late 1935."
3. In 1933, Mussolini reorganised the government and personally took control of the ministries of war, air, navy, interior, and foreign affairs. This centralisation allowed him to direct all national policy toward military expansion. No other figure in the government could challenge his decisions.
4. Italy pursued autarky (economic self-sufficiency) as a national goal. The "Battle for Grain" aimed to reduce food imports, while industrial policy focused on domestic alternatives to imported raw materials. However, Italy never achieved true self-sufficiency and remained dependent on German coal (two-thirds of supply) and imported oil.
5. "Preparation for war undoubtedly had an impact on employment, which by spring 1935 was down 250,000 on 1934" (Philip Morgan). Military spending was both an economic stimulus and a foreign policy tool, reducing unemployment while building the armed forces Mussolini needed for expansion.

Economic Motivations for Expansion

1. The combination of domestic economic need and a 'nothing to lose' mentality explains why Mussolini shifted toward aggressive foreign policy in the 1930s. Military spending addressed unemployment while serving imperial ambitions. The Depression created both the motive and the opportunity for expansion.
2. Italy's existing empire (Libya, Eritrea, Somalia) "were not particularly important and were somewhat of an embarrassment because of their poverty." Mussolini wanted to create an empire like Britain and France to make Italy a Great Power. Only Abyssinia and Liberia remained unconquered in nearby Africa.
3. Abyssinia was "conveniently located beside the Italian colonies" with "loosely defined" borders. However, Mussolini was "completely uninterested in its economic potential" and "also disregarded the state of the Italian economy, which was totally unprepared to finance a war for any purpose." The invasion was ideologically driven, not economically rational.
4. Italy invaded Abyssinia on 3 October 1935. The war was expensive: modern weapons, aerial bombing, and poison gas were used against Abyssinian armies with "antique weapons." Over 750,000 Abyssinians were killed. The conquered territory produced little economic return despite the enormous cost.
5. The Spanish Civil War (1936-1939) further drained Italy's economy. "Money, troops and supplies that Italy could not afford were wasted" on approximately 75,000 troops plus "large quantities of weapons" and naval support. Mussolini hoped France would intervene, allowing Italy to seize Corsica. This did not happen, and the intervention brought no territorial gains.
6. The invasion of Albania (April 1939) added another military commitment. By 1939, Italy had spent heavily on three military campaigns in four years while its domestic economy remained fundamentally weak. The military had expanded in size but not in quality.

Economic Dependencies and the Road to War

1. League sanctions during the Abyssinian Crisis further isolated Italy economically. Italy "was further isolated from the markets and relative wealth of Western Europe and its trade with the USA was restricted." "Economic sanctions simply pushed Italy further from co-operative diplomatic relations" with the democracies.
2. "Economically, Italy was affected by the Abyssinian Crisis in many ways." Italy was "further isolated from the markets and relative wealth of Western Europe." This encouraged Italy to continue expanding economic ties with central and southeastern Europe, "giving it more independence in its foreign policy."
3. The broken economic ties with the West drove Italy toward the Rome-Berlin Axis (October 1936). Economic isolation and ideological alignment reinforced each other. "Germany's economy was far greater than that of Italy" and Italy was "soon reduced to a junior partner" in the relationship.
4. Italy became increasingly dependent on German coal (two-thirds of supply). Germany owed Italy approximately $40 million by August 1939 for Italian exports. When Britain blockaded German coal ports in March 1940, Italy's energy supply was directly threatened, creating economic pressure to align fully with Germany.
5. The Pact of Steel (May 1939) committed Italy to a military alliance it could not afford. Mussolini warned Hitler Italy would not be ready until 1943. When war came in September 1939, Italy declared non-belligerency, sending Hitler a deliberately impossible list of 17 million tonnes of supplies needed to enter.
6. Italy only entered the war on 10 June 1940 after the Fall of France convinced Mussolini the war would be short. He told his Chief of Staff: "I need only a few thousand dead to sit at the peace conference." The economic reality was devastating: Italy's campaigns in Greece and North Africa both failed.
7. In North Africa, 236,000 Italian troops were routed by 36,000 British, with 130,000 prisoners captured. Germany had to send Rommel's Afrika Korps. In Greece, the Greek army pushed Italians back into Albania, forcing German intervention. Military spending had produced quantity but not quality.

Historiography, Source Analysis, and Exam Preparation

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