ABSTRACT
The widespread depression in industrial production and investment, which culminated in a dangerous financial crisis, led Gino Luzzatto, the most respected Italian economic historian, to define the years 1889-94 as the blackest for the new Kingdom's economy. The crisis of 1893 did not only involve the two main commercial banks and a good number of medium-sized ones, but also struck at the heart of the system: the banks of issue. A new and more serious confidence crisis hit the Italian banking system. Given the fact that the balance of payments on current account balanced in 1891 and then had considerable surpluses one cannot but think that an expansionary fiscal and monetary policy would have cushioned the fall of industrial production and accelerated the reversal of the trade cycle. The indices of both Gerschenkron and Fenoaltea show a reversal of industrial production cycle around 1888.
