Italian financial crises and national loans in wartime (1866-1918). Narrative, institutional discourse and crisis perception

Between 1861 and 1920, Italy faced severe financial crises. Two of them were related to public finance as a consequence of great military conflicts, the 3rd war of Independence and the WW1, which led governments to cover extraordinary financial needs through public debt, heading to the brink of default. In this paper we focus on the Italian financial crises in correspondence of Italian Independence warfare periods, in 1866 and in 1915-1918 (also called the 4th war of Independence). In both cases, the need for governments to resort to “national loans” entails the support of domestic public opinion in order to increase the share of Italian debt owners and to bolster bonds value, as well. In this case, the success of underwriting in the presence of serious default risks makes us question about the public's real perception of the crisis and how trust and consensus can be reinforced and conveyed through narrative and institutional language. To answer this question, after describing the main characteristics of the debt crises (1914-1920) and their impact on the Italian budget, the analysis moves to iconographic and other narrative sources, focusing mostly on the rhetoric and propagandistic use of terms such as Nation, Liberty, Independence, utilized to extend the subscriptions of the National Loans despite the precarious conditions of public finance. Drawing on the narrative economics approach (Shiller 2017), through text mining methodologies applied to specific sources in a wide range of political, institutional, and narrative contexts (regulatory, newspapers, economists' discourses), we try to corroborate the findings analysis by examining the functions, characteristics and applications of narratives that shape crisis-related discourses, affecting investment decisions that cannot be fully explained as purely economic feedback. We maintain that thanks to a massive campaign that involved all the communication dimensions, the financial crisis was overtaken, a quite-reliable public debt market was imbued with confidence and a financial attitude started to spread over the country.