In March, industrial production froze forecasts: instead of continuing on the road to recovery, it remained unchanged compared to February, causing the increase in the first quarter to drop to a modest 0,7%. At this rate, if there is not an acceleration in the coming months, even the 1,2% GDP growth target for the whole of 2016 appears difficult to reach. Certainly in 2015 Italy came out of the terrible recession that lasted almost 7 years, but the recovery appears slow and uncertain. Above all the manufacturing industry, which has always been the engine capable of driving the entire economy, appears anemic no less than the construction sector which in the past was the second pillar of our development.
Although the external conditions are very favorable with the cost of money at such low levels as never seen in the past, the devaluation of the Euro against the dollar, and the low price of oil, our industry, which in other similar situations had shown that he knows how to shoot upwards, he shows a fairly slow recovery pace. Surely the persistence of cyclical causes due to the slow recovery of domestic demand weigh on this trend, but the structural changes that occurred during the years of crisis and the evolution of international markets are probably even more significant.
Trying to understand the root causes of this relative decline is essential in order to be able to study and implement a recovery strategy, avoiding coming up with old industrial policy recipes or already failed public intervention methods, and certainly not suitable for facing the new economic scenario global.
Patrizio Bianchi has been councilor for training, research and work for the Emilia-Romagna region for several years, where he was able to put into practice his convictions on industrial policy gained over many years of studies as a professor at the University of Bologna and Ferrara. We asked him for an explanation of what is happening and consequently for some advice on the guidelines that the new Minister for Development, Carlo Calenda, should give to his ministry.
Professor, what do you think are the underlying causes of this ups and downs, but substantially stationary trend of Italian industrial production?
“On the one hand there have been profound changes in the international framework and on the other there have been major changes in the structure of our industrial system between those who have managed to stay on the international market and those who have remained anchored to internal demand, i.e. between those who own the technology and organizational skills to project themselves into the world and those who, on the other hand, do not access these markets and rather suffer competition from producers of low-cost consumer goods at home".
“If we look at what is happening on the world market, we see that for the next few years the IMF forecasts quite modest growth which will in any case be the preserve above all of the emerging countries, China in particular. It is precisely China today that is moving from a producer of unsophisticated consumer goods to a supplier of high-end technologies. Think of what is happening in the railway sector where in the large investment projects that should facilitate the passage of Chinese goods to the West, China no longer acts as a simple promoter of financial initiatives but as a real technology supplier sophisticated in this branch of transport. This makes us understand that in the future, even for our companies that possess the technology to stay on international markets, there will be an increase in competition and that therefore we need to equip ourselves in time to maintain adequate margins of competitiveness".
But the long economic crisis that began in 2008 has also affected the structure of Italian industry to such an extent that production has dropped by 25% and is now struggling to recover.
“Certainly a double rift has arisen between the various sectors of the industry, and sometimes even within the same sector, between those who have managed to stay successfully on international markets and those who have not been able to have this access. Furthermore, the rift between the North of the country, hooked to the heart of Europe centered on Germany, and the South, which instead remained cut off, has worsened. In other words, there are companies, mainly mechanical, but not only, that have managed to become part of a central European industrial chain, for which foreign sales today represent 90% of the total and therefore on the Italian market is in fact totally marginal, and companies which instead export small percentages of their turnover and for which the internal market is largely dominant. The former are doing well while the latter are still on the verge of crisis. This fracture also has a territorial consequence as the leading enterprises are concentrated in a few regions of the North (Lombardy, Emilia, part of Veneto and Piedmont) while in the other regions traditional industry prevails with a mainly domestic market. The problem today is therefore how to hook up the two segments of companies and bridge the territorial differences in order to be able to once again have a sufficient boost from the industrial system as a whole to drive the entire Italian economy”.
But how did the monetary policy of the ECB and the crisis of the banking system affect these structural changes, especially of the Italian banks which encounter great difficulty in expanding their credits mainly due to the regulatory constraints of the Frankfurt authorities?
“Certainly a monetary union not accompanied by territorial rebalancing policies and support for the weaker productive sectors (not in the sense of the old subsidies, but to help their competitive evolution), has produced these results. It was easily imaginable. The current difficulties of banks, especially Italian ones, certainly do not facilitate commitments to make product or process investments but above all they do not support the need to implement expansionary policies on international markets. Because today the real critical point for companies is to imagine a real global trade strategy which is not only the export of a part of its products, but the ability to establish itself in a stable manner on many markets with commercial structures and also integrated production companies”.
Given the epochal changes in international markets and the blows suffered by our production system, what should be the priorities of the new Minister of Development Carlo Calenda, to safeguard our production system and to start a process of real reindustrialisation?
“The central point for maintaining or bringing new products to Italy is no longer so much the cost of labour, or financial support, but innovation, the diffusion of technologies and work skills. In short, it is necessary to spread innovation through the production chains precisely to prevent those companies that have already internationalized from being just an island in the middle of a sea of stagnation. The tool to be used is not so much the old generalized subsidies as clear rules and regulations maintained over time, which form part of a well-defined strategic direction that is understandable to all social actors. In short, what we must try to create is a system that moves all together towards a very clear and convincing direction. It is necessary to offer Italian and international investors a clear vision and consequent rules. Then the investments arrive: in Emilia Audi has made several investments and also Luiss Vuitton finding a favorable environment and professional skills formed by good technical institutes which have arisen taking into account the needs of companies”.
Should the government launch a major project for industry 4.0 as done in Germany by the minister for education and research?
“I firmly believe that the government's task is to give a strategic direction capable of linking innovation, skills, networking in a long-term project for the development of the country in which the manufacturing industry is destined to remain the driving force. The central point is to be able to mobilize all the forces of society towards a realistic and clear objective, increasing the knowledge shared and usable collectively. This is the only way to develop competitiveness and social cohesion together. Germany is doing well in this area. Nothing prevents you from taking inspiration from what they are doing”.
