Woe to the vanquished? State, ‘foreign’ banking and financial development in Southern Italy in the nineteenth century

Abstract

After Southern Italy became part of a new, national state in 1860, its financial sector was radically transformed under Piedmontese influence. This article challenges the conventional wisdom that the aggressive penetration of a Northern credit institution, the future Bank of Italy, into the South following unification harmed the local banking system and highlights instead its transformative role in modernising and deepening regional credit markets. On the basis of new statistics, banking and political records, this contribution shows that the introduction of ‘foreign’ banking from Northern Italy under the auspices of a national, constitutional government resulted in a financial revolution and a democratisation of credit supply to the advantage of the whole South. Public banking under the Bourbons had privileged the needs of an absolute government over those of the private economy and of the capital city over those of the rest of the country, retarding financial development. Credit undersupply and regional fragmentation could only be overcome through the integration of the South within a larger Italian market, in which, however, the lion's share went to a predominantly Northern institution.

The Bank of Naples and the struggle for regional power in Risorgimento Italy

“…Such one-sided interpretations opposing Northern and Southern economic interests can be easily challenged from the point of view of financial history (Chiaruttini 2020a(Chiaruttini , 2020b. In this article, however, I will focus less on their intrinsic merit than on their genesis in the aftermath of national unification.…”

“…Meanwhile, its notes rapidly spread across the whole country thanks to the numerous legal privileges they enjoyed. Although never grossly misused by the government, the Bank was primarily used to finance the public household and its lending to the private sector (including pawnbroking loans) was severely constrained by the near absence of a branch network (Chiaruttini 2020a(Chiaruttini , 2020b.…”

“…These were all attempts, as we shall see, invariably portrayed as patriotic deeds. Moreover, their very failure was taken as a sign of the government's abhorrence of anything Southernnotwithstanding the many branches the National Bank was establishing in the South, which were lending hundreds of millions of lire under Southern management and with the full support of some of the major Neapolitan bankers (Chiaruttini 2020a(Chiaruttini , 2020b).…”

“…11 If blaming the Bourbons for their conservatism and Neapolitano-centrism in banking is all too easy, the Bank of Naples was the only institution which, lavished with government favours, could not complain. Moreover, its management had been arguably complicit in the stifling of competing credit institutions and the endless delaying of banking expansion outside the capital's precincts (Chiaruttini 2020b). If on the eve of unification the Bank of Naples could boast the highest amount of deposits in all Italy, it was certainly not simply because it descended from Renaissance charities but because of the privileges it had been granted in 1816.…”

Two Portrayals of Public Debt in the Formation of Modern Italy: From the Ancien Régime to Modern Capitalism

“…Moreover, the bank could also make advances on public securities, if required. 61 However, the important issue concerns the different uses that were made of bank credits. While Southern banks were generally more cautious in the issuing of such credit, Northern banks were more unscrupulous, and would lend money to private customers depending on the available liquidity.…”