MANAGING THE EMERGENCY, WORKING FOR THE FUTURE
In analogy with other Western countries, the Italian Government has launched measures to inject liquidity into the system, pursuing the objective of safeguarding the survival of companies and jobs, dramatically affected by the Coronavirus.
Still, these initiatives, barring a necessary, first recovery intervention, may not be sufficient, while they will certainly weigh on the public debt.
Il Fitch downgrade it is a sign of how Italy is today facing a much greater and more complex challenge than that experienced by other Western countries.
The Coronavirus crisis has in fact hit an already exhausted economic context. Marked by years of uncertain political management, with no development programs, no actions to reduce the public debt, except for the now cloying complaint against the European Union. With a part of the entrepreneurial class too often at the window, or committed to moving their headquarters to the United Kingdom and Holland, in search of tax advantages.
THE DANGEROUS USELESS FUNDING OF RAIN
An indiscriminate injection of liquidity (this appears, to a large extent, to be the Government's orientation) would be added to the one which companies have already drawn in abundance during these long years of interest rates at historic lows. It would have no effect other than increase the indebtedness of economic subjects. As a consequence, marginal and non-competitive realities would be kept alive, for the sole purpose of safeguarding employment.
Specifically, the industry would not regain competitiveness, the State would not be able to reduce its debt, while the banks would be penalized in their ratings, due to the higher credit risk.
Using debt to keep a sick economy alive can therefore become very dangerous: it is a great gamble for the future.
A RELAUNCH PLAN FOR THE INDUSTRY
There is another way, feasible today thanks to the huge financial resources made available by the pandemic emergency.
It consists of launch a grand national plan, aimed not only at strengthening our economy, but also at preparing it to face the “new normal” in front of us today.
Starting from the restructuring and consequent relaunch of the industrial sector: indeed, a strong manufacturing industry is indispensable to ensure good employment, a surplus of our balance of payments and a vital boost to innovation.
To move in this direction statist shortcuts are not acceptable today (new forms of public intervention as a panacea for all ills) while there is a need for the involvement of business, in terms of both ideas and finance, to mend that long-broken plot between the government of the economy and the industrial world.
Un large co-investment pact therefore, with the commitment to address three crucial issues: 1) the increase in size of companies and their financial rebalancing, 2) the conversion towards sectors with greater added value, 3) the widespread migration to digital.
COMPANY SIZE AND FINANCIAL REBALANCING
73% of Italian businesses are small or very small, compared to 44,9% in Germany (which has only 6% of very small businesses against 22,5% in Italy) and 41,2% in France ( Eurostat data, 2017).
Small business is not only synonymous with low productivity and this term does not fully explain what lies behind the small size in a large number of cases. We are referring to the scarcity of resources and managerial skills, the backwardness of the management systems, the dependence on exports, from dealers and wholesalers with the consequent reduction of one's margins.
Finally, let's think of a certain type of entrepreneurship that has preferred not to grow in order to maintain control, not to invest in its own companies in order to seek extra profits in finance.
These small businesses are mostly characterized by a lower capacity to generate income from operational management, have high debt (unbalanced in the short term) and too little equity capital compared to third-party funds.
In an increasingly international and technologically advanced context, where competition from global players is very high, it is unthinkable that they can survive for long. Small size and high debt do not allow it. Either you increase your critical mass (internal development, acquisitions, mergers), or you quickly exit the market.
INCREASE ADDED VALUE, PROMOTE RECONVERSION
Furthermore, the weakness of the little one is revealed in his subordination within the supply chain leaders global: the value produced by Italian companies is significantly lower to that of the German and French counterparts.
To illustrate, it is natural that the value of a car is higher than the sum of its individual components. And Italy, with few exceptions, does not produce cars, but components: brakes, clutches, gearboxes and so on.
La supply chain leaders it is governed by those who manage the final market and few of our companies are in this position, while the vast majority are employees.
Finally, a look at Made in Italy. behind theItalian-style today multinationals with headquarters in other countries are on the move. In Italy, with appreciable exceptions, there remain many contractor producers, the most threatened by global competition.
Support those who intend to go back along the supply chain leaders to integrate and get closer to the final market, or whoever wants to reconvert their production towards goods with higher added value, must be the primary objective of the financial and business systems.
The country is rich in expertise: from avionics, to space, to robotics. We produce high quality capital goods. Stimulate these directions of growth by discouraging those most vulnerable.
This also includes the current topic of the restoring: lose control of strategic productions, not only in the health sector, but also in telecommunications and information technology is unacceptable.
ACCELERATE DIGITAL MIGRATION
Public and private will finally have to agree together a far-reaching Industry 4.0 plan. If on the political side we have so far limited ourselves to limited initiatives (which have nevertheless borne fruit), on the entrepreneurial front the incentives provided have served little of the real purpose for which they were conceived: to allow the digital transformation of our businesses.
The Coronavirus is accelerating trends that have been going on for some time. Higher automation will promote social distancing and safety in the workplace, the spread of big data and AI will help us work better remotely.
Digital transformation is an enabler that will allow us to live with the risks of the pandemic.
Distribution channels are being redesigned: online shopping and automated delivery to minimize human contacts, additive manufacturing (3D printing) to compensate for supply chain shocks. Entire sectors (telecommunications, e-commerce, digital payments, telemedicine) are already growing rapidly and their applications are spreading.
Italian industry must accelerate its transformation to digital and associate all its potential with its strengths.
The country needs decisive change, of a "creative destruction" that draws on its best resources and skills.
It is essential to act in a focused manner, aware that directing the industry towards new growth trajectories will inevitably require discriminating choices and unpopular measures. A joint action of political and entrepreneurial initiative, with the necessary involvement of workers' organizations, will allow this.
Once and for all, let's get out of the logic of postponement, which inevitably transmits the public debt from generation to generation.
Resources to be mobilized, even private ones, once a shared and credible path has been created, there are plenty of them.
°°°°The author teaches Industrial Economics and Corporate Finance at the Polytechnic University of Marche
Menghini to do what you say you need a strong state and country-system .. and not 21 pathetic "lordships"