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1894, the crucial year of the period of depression. Now they are quoted at par and even above. A remarkable fact, in con

. nection with the rise in the price of our state bonds, is the progressive concentration of our debt in Italian hands. The number of bonds placed abroad is continuously diminishing. This evidently adds to the encouraging character of the situation, since the possession of a large share of the national debt by foreigners is always to be looked upon as an element of weakness and a possible source of danger. The gradual nationalization of our foreign debt, however, could not be regarded as an expression of reluctance on the part of foreign capital to consider our bonds as a safe investment. This is disproved by the remarkable decrease in the rate of exchange-a fact that can only mean confidence in the soundness of our circulation. The exchange had reached as high a rate as 15.95 per cent. in 1893. It has now fallen to about 2 per cent. and is bound to drop still further, since the condition of the circulation is constantly improving. We have, first, a continuous reduction of the state currency. The silver coin (1 and 2 francs), which had been replaced by paper in 1894, is now again in circulation. We have also a progressive increase in the metallic reserve of the treasury; while, on the other hand, there is a steady improvement in the condition of the three national banks controlling the circulation, namely, the Bank of Italy, the Bank of Naples, and the Bank of Sicily. The reserve held by these banks a few years ago was equal only to one-third of their circulating paper, It is now as high as 50 per cent. Hand in hand with the increase in the reserve goes the liquidation of the heavy loans on real estate, which had so badly crippled the action of our banks, and were due to hasty and immature plans of city improvements. In 1894 these assets of difficult realization, known as "bills of stone” (cambiali di pictra), amounted to 637,000,000 francs. In October, 1901, the dead load had been reduced to 367,000,000. This work of purification of the portfolios of our great banks still actively continues.

Thus, to sum up, the characteristic features of the financial situation of Italy, at the present moment, are:

1. A sound budget-probably one of the most solid of Europe —showing a constant and increasing surplus of receipts, due to revenue and not to debts.

2. A steady improvement of the currency, due chiefly to an increase in the metallic reserve held by both the state and the banks in guarantee of their circulating paper.

As a result of these two facts we have:

3. A continuous rise in the value of the state bonds on the foreign markets.

4. A constant diminution in the rate of exchange, Italian paper having a greater buying power than heretofore and gradualiy approaching par.

III. Encouraging as they may seem, the facts just mentioned can acquire a deep significance only when viewed in the light of the economic condition of the country. The public budget is not a dead arithmetical expression. Behind its figures there is the whirl of national life, and finance is, in reality, the outcome of national economy. Now, what are the economic conditions of Italy ?

The esteemed foreigner, to whom reference has already been made, will probably shrug his shoulders at the question. He considers Italy an insignificant quantity in the economic life of the world. There seems to be, in his mind, a dissonance between the two words: Italy and industry. At best, the only concession that he is willing to make is that Italy might be an agricultural country, nothing else. Let us at the very outset do away with this oft-repeated assertion. To maintain that Italy can never be other than an agricultural country, and that she has to draw her resources exclusively from agriculture, is paramount to the assumption that the country is incapable of taking its share in the industrial movement of our time, and that, by a sort of miracle, Italy can escape the crises, the diseases, the vicissitudes of weather, the competition that so seriously disturb agricultural conditions in western Europe. It is a well-ascertained fact that, in spite of the most energetic action of capital and fertilizers, and in spite of all the improved methods and processes of modern agricultural technique, the old countries of western Europe cannot compete with the younger countries which are exploiting an almost virgin soil. In Italy, American and Australian competition has resulted in diminishing the production of wheat, with the consequence of rendering possible a duty on imported wheat, through which the price of bread has been raised, greatly to the detriment of the consumer-in this case the people at large. On the other hand, foreign competition has had the beneficial result of stimulating agricultural production in other directions. Thus, if wheat production has decreased, we find a remarkable increase in the exportation of fruits, flowers, vegetables, wine, and oil. The exportation of citrus fruits grew from 994,918 quintals in 1879 to more than two millions in 1899. During the same period the exportation of butter has increased as I to 3; that of cheese has quintupled; that of poultry and eggs has shown an increase of about 50 per cent. Cattleraising has also progressed, the exportation of the different varieties, excepting horse, largely exceeding the importation. But, in spite of these rapid strides along the various lines of agricultural production, the net revenue from the cultivation of the soil has remained stationary during the last quarter of a century in Italy as in neighboring agricultural countries. In order not to fall below this average standard of production, Italy has been compelled to abandon obsolete methods and to adopt the processes of modern agricultural technique, to study the wants and needs of foreign markets, to pass, in short, from the stage of agricultural production to that of agricultural industry and trade. The success achieved in this direction goes far to prove the falseness of the assumption, already referred to, concerning the incapacity of the Italian nation to become a factor in the industrial movement of our time. But there is

With a population increasing at a terrific rate, Italy could never have lived on agriculture alone, in spite of the most vigorous intensification of culture. She was therefore compelled, nolens zolens, to transform herself into an industrial power.

How far Italy has progressed in this direction may conclusively be shown by one single figure. The coal imported for

more.

industrial purposes in 1871 amounted to 791,389 tons; in 1899 it had risen to almost 5,000,000 tons. Metallurgy, the basis of modern industry, was in a primitive condition in Italy some thirty years ago. Today it has developed to such a degree as to emancipate the country entirely from foreign production in the two typical lines of naval and railway construction. We have the splendid dockyards of Ansaldo at Sestri Levante, of Orlando at Leghorn, of Armstrong at Pozzuoli. They not only supply the material for our navy, but do a large exportation business. Their armor plates and artillery supplies have won quite a reputation abroad. As for the railroad industry, Terni and Savona furnish the rails, while the great factories of Meda in Milan, Diotto in Turin, and those belonging to the Mediterranean Railroad Co. furnish the locomotives and the cars. The wonderful development of these two great industries has acted as a powerful ferment of activity in other directions. We cannot mention in detail the different industries that have grown up during the last twenty years.

Among the most important we might recall the chemical industries, the manufacture of paper, that of sugar. The growth of the textile industries has been altogether remarkable.

There is a steady increase in the importation of raw material, while, at the same time, the exportation of the manufactured article has greatly exceeded the importation. The surplus of exportation of silk dress and piece goods was 141,000 kilos in 1894; it had reached 746,000 in 1900. Together with the growth of the various industries goes the development of the merchant marine. In 1890 the tonnage of steam vessels of our marine was 186,000; in 1899 it had risen to 315,000. The tonnage of Italian vessels entered and cleared at Italian ports in 1896 was over 6,000,000; in 1900 it had risen to 20,000,000. In the same year the tonnage of Italian vessels entered and cleared at American ports was 864,483, which exceeds the French tonnage for the same period by 89,088."

* There are, of course, other signs of the economic development of Italy, such as the increase in the number of steam engines employed in industry, the increase in the number of hydraulic and hydro-electric plants, the increase in the importation of machineries, the increase in the number of commercial corporations, etc. We cannot give a detailed statement of figures. The reader desirous of obtaining fuller informa

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