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SECRET through the help of FEA and UNRRA, which centered its effort on supplying fuels and raw materials for the rehabilitation of industry and restoration of transportation. The effect of this concentration on fundamentals was gratifying. Between January and September 1946, the combined index of industrial production had risen from some 25 percent to 60 percent of the 1939 level. Thereafter, however, the tempo of industrial activity was slowed by the interruption of fuel imports. The coal and the maritime strikes in the United States and the abnormally low supply of water for electric power in Italy forced many industrial establishments to shut down. In the space of a few months half of the 1946 advance in production had been lost. With the resumption of coal shipments the situation was improved, and by April 1947 governmental restrictions on the work week were lifted. Since then, pro- duction has climbed to about 80 percent of prewar production. Coal deliveries from the United States have been regular, and, if maintained at the present rate, will with domestic production, permit the continuous operation of the Italian industrial plant which by now has recovered from its wartime damages. Railroad transport, though not completely restored, is no longer an industrial bottleneck. The Italian merchant fleet, which at the end of the war was a mere 15 percent of its former tonnage, has been restored-largely by purchases, restitutions, and gifts from the United States-to two- thirds of its former size. The most remarkable recovery was recorded by the textile industry which was favored by an almost undamaged plant, a hungry world market, the temporary absence of many competing nations, and available raw materials. In 1946 textiles made up one-half of Italy's exports. Other industries recovered more or less, depending on the state of equipment at the war's end, on their dependence upon imported raw materials, and on their priority in allocations. d. International Trade. Beyond the immediate urgent need for allocation of essential raw materials and the provision of financial aid to maintain its present levels of production, Italy must choose the best fields for expanding its industrial efforts. It would be to the bene- fit of Italy if she were able to encourage fields of manufacturing which require a rel- atively high percentage of labor in order to exploit the wealth of manual skills that is available. To improve the over-all purchasing power of the domestic market, the level of incomes of South Italy will have to be raised through increased productivity. Since the land in the south is already crowded with more people than it can maintain, in- dustrial activity employing existing skills and available production (especially agricul- tural) must be greatly expanded. Capital investments in manufacturing would lead to a better balanced economy in the South, and therefore a better balanced Italy. Meanwhile, land improvements would raise the standard of living of the farmers. The position of Italian industry in Europe, the elimination of uneconomic fields of manufacture subsidized by the Fascist self-sufficiency program, the encourage- ment of industrial endeavors for which the country is especially suited, the lowering of trade barriers, and the extension of cooperative international productive efforts are SECRE II-8

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    "ocrText": "SECRET\nthrough the help of FEA and UNRRA, which centered its effort on supplying fuels and\nraw materials for the rehabilitation of industry and restoration of transportation.\nThe effect of this concentration on fundamentals was gratifying. Between January\nand September 1946, the combined index of industrial production had risen from some\n25 percent to 60 percent of the 1939 level. Thereafter, however, the tempo of industrial\nactivity was slowed by the interruption of fuel imports. The coal and the maritime\nstrikes in the United States and the abnormally low supply of water for electric power\nin Italy forced many industrial establishments to shut down. In the space of a few\nmonths half of the 1946 advance in production had been lost.\nWith the resumption of coal shipments the situation was improved, and by\nApril 1947 governmental restrictions on the work week were lifted. Since then, pro-\nduction has climbed to about 80 percent of prewar production. Coal deliveries from the\nUnited States have been regular, and, if maintained at the present rate, will with\ndomestic production, permit the continuous operation of the Italian industrial plant\nwhich by now has recovered from its wartime damages. Railroad transport, though not\ncompletely restored, is no longer an industrial bottleneck. The Italian merchant fleet,\nwhich at the end of the war was a mere 15 percent of its former tonnage, has been\nrestored-largely by purchases, restitutions, and gifts from the United States-to two-\nthirds of its former size.\nThe most remarkable recovery was recorded by the textile industry which was\nfavored by an almost undamaged plant, a hungry world market, the temporary absence\nof many competing nations, and available raw materials. In 1946 textiles made up\none-half of Italy's exports. Other industries recovered more or less, depending on the\nstate of equipment at the war's end, on their dependence upon imported raw materials,\nand on their priority in allocations.\nd. International Trade.\nBeyond the immediate urgent need for allocation of essential raw materials\nand the provision of financial aid to maintain its present levels of production, Italy\nmust choose the best fields for expanding its industrial efforts. It would be to the bene-\nfit of Italy if she were able to encourage fields of manufacturing which require a rel-\natively high percentage of labor in order to exploit the wealth of manual skills that is\navailable. To improve the over-all purchasing power of the domestic market, the level\nof incomes of South Italy will have to be raised through increased productivity. Since\nthe land in the south is already crowded with more people than it can maintain, in-\ndustrial activity employing existing skills and available production (especially agricul-\ntural) must be greatly expanded. Capital investments in manufacturing would lead\nto a better balanced economy in the South, and therefore a better balanced Italy.\nMeanwhile, land improvements would raise the standard of living of the farmers.\nThe position of Italian industry in Europe, the elimination of uneconomic\nfields of manufacture subsidized by the Fascist self-sufficiency program, the encourage-\nment of industrial endeavors for which the country is especially suited, the lowering\nof trade barriers, and the extension of cooperative international productive efforts are\nSECRE\nII-8"
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