Entrepreneurship, knowledge and employment

The intervention of central banks in industry: Italy, France and Britain, 1930-1970

Cerretano Valerio, University of Glasgow

There is now a large enough body of evidence pointing to the conclusion that central banks in the western world intervened massively in industry and in the private sector over the past century. They intervened under the pressure of economic crises, i.e. to salvage firms or entire industrial sectors, or under the pressure of governments desperate to find resources for industries and companies, which were considered strategic in equal measure for development, employment or rearmament. One consequence was the accumulation of industrial holdings and private assets, particularly in periods of crisis, i.e. in the 1930s and in the 1970s. The conclusion that intervention was a crucial aspect of central bank activity, and the fact that the mandate of central banks has changed a number of times since the creation of the latter, can be reached by looking at the experience of Italy, France and Britain. There is a rich literature analyzing the intervention of central banks in each single country (especially Italy and Britain), but there is little in terms of comparative analysis. This paper will attempt this comparison, but it will narrow down the analysis on a few specific points. These can be summarized as follows. Why did central banks in those countries first become involved with industry? What role did governments have in encouraging intervention? Why were central banks the chosen instrument for intervention? To what extent was intervention stimulated by austerity? Was intervention conceived to be permanent or temporary, i.e. to compensate for market failures or to support long-term development strategy? How did central banks sold their stakes and holdings?

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Keywords: central banks, central bank mandates, industrial intervention

Paper file