Costantino Bresciani Turroni and the macroeconomics of reconstruction

Costantino Bresciani Turroni and the macroeconomics of reconstruction. Costantino Bresciani Turroni is well known internationally for his book on the German hyperinflation in the early Twenties, a reference that no serious scholar in monetary economics can ignore when dealing with the origins and dynamics of inflations and hyperinflations (Bresciani Turroni, 1931). Less well-known are his role as a policy advisor and policy maker at the end of World War II, and the contributions that he made to the debate on the reconstruction of Italy and its position as an open economy in the new world economic order. My objective in this article is to illustrate his response to the challenges and policy choices facing Italy, and to some extent Europe and the world, in a period when the lines of the new international economic order, as well as the role of individual countries within it, were still under discussion, and basic choices were still in the making. The paper firstly discusses some archival materials, shedding light on a relatively unknown, important episode in American-Italian relationships at the end of the war, in which Bresciani Turroni took part as an advisor to the Italian government in 1945. Secondly, it presents a simple economic model illustrating the macroeconomic framework underlying Bresciani’s contributions as a policy maker and policy advisor in that context. Here is a brief summary of Bresciani’s approach to the problem. (i) The basic obstacle to the economic reconstruction in Italy was the scarcity of raw materials and foodstuff. The consequences were both a difficulty in re-starting production and balance of payments disequilibria. The implication was that external deficits should be tolerated for a period of time. In this context, he produced a very interesting criticism of the “classical” Purchasing Power Parity doctrine, which he regarded as inadequate to analyse the balance of payments problems of European economies after the war. According to him, this approach regarded the exchange rate as a mere relative price, thus ignoring some underlying structural factors of current account deficits. (ii) Stabilization policies should start with the acquisition of foreign loans and aids to finance external deficits, rather than with domestic stabilization policies, as suggested by other liberal economists at the time, such as Corbino and Einaudi. Economic policies for the domestic economy, once started, should aim at avoiding the dangers of inflation but, interestingly, also those of deflation. An “active monetary policy” was advisable, although only to the extent that it served the purpose of financing the expenses necessary for the economic reconstruction rather than speculation. (iii) Finally, the conflicting claims of different social classes should find an equilibrium point, with a fairer distribution of the “sacrifices” necessary for reconstructing the economy.