A Fundamental Instrument

The rose is off the boom in Italy, where a dizzy round of high living, heavy imports and inflation has stalled the nation's fast postwar growth. The Milan stock market has dived, the lira has been trembling on world markets, and two weeks ago the U.S., the International Monetary Fund and the World Bank backed a $1.2 billion emergency loan to shore up the Italian economy. Last week, after the Italian Senate approved a stabilizing program that restricts installment-buying and raises taxes on cars and gasoline, automaking Fiat and Innocenti threatened to fire thousands of workers. Olivetti also announced cutbacks and layoffs. But amid these signs of protest and trouble, business continued to be good for one giant, Istituto per la Ricostruzione Industriale, a state-run holding company that is the biggest enterprise in Italy.

Public Interest. If industry is to lift Italy out of its economic bog, the country will have to depend heavily on IRI (pronounced eerie). But that is what IRI is there for. Founded by Mussolini in 1933 as a hospital for depression-sick companies, IRI provides jobs for nearly 300,000 Italians. Says IRI's genial President Giuseppe Petrilli: "IRI is the state's fundamental instrument for supporting sectors in temporary crisis."

By being such an instrument, IRI has managed to do well for itself--in terms of volume. Since 1950, its sales have risen fivefold, to $2.5 billion last year. At the same time, high costs have held profits to less than 1% of sales. Whenever an Italian telephones or watches TV, he patronizes IRI. It also owns the seagoing Italian Line, the Alitalia airline, automaking Alfa Romeo, and three of the country's largest commercial banks.

Its construction companies are building 1,600 miles of Italy's handsome autostrade, using cement from IRI plants. IRI's Italsider subsidiary is Europe's biggest steelmaker. All this makes it much more diversified than its smaller if better known cousin, the ENI petroleum monopoly.

Private Zeal. In many respects, IRI behaves like a private enterprise. President Petrilli, 51, a gracious economics professor who directs the many-sided complex from a baroque building on Rome's Via Veneto, encourages the chiefs of its 130 companies to stand on their own with a minimum of bureaucratic stuffiness. IRI has sold to private investors up to 45% of the stock in some of its individual companies, has joined in ventures with U.S. Steel and Raytheon. Italy's leftists have damned IRI as a thinly disguised capitalist entity; on the other hand, conservatives have complained that it aggravated inflation by breaking industry's united front against the unions' wage demands last year. But almost all political factions support the company because it is so important to the economy. On the instep of the Italian boot, IRI is now completing a $400 million steel plant for Italsider that will employ 45,000 and help to fulfill a legal requirement that IRI devote 40% of its investments to industrializing Italy's south.

Because of its role in the economy, IRI should have no trouble raising the $800 million it wants for 1964 expansion--though the rest of Italy's industry is likely to be strapped for capital. Premier Aldo Moro last week told the Senate that most revenue from the new taxes on gas and autos would be used to develop industry, which means that much of it will be given outright to IRI. In addition, IRI can count on a large chunk of the World Bank's $350 million that was earmarked for industrial development in southern Italy.

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