The reflections that follow concern what can be useful to do to foster a "true" economic recovery led by industry. This is a reasonable proposition, given that Italy is Europe's second largest manufacturing country and boasts very important manufacturing skills and market positions both domestically and abroad.
Up to now, there has been a great confusion of ideas and possible instruments regarding policies. In the meantime, we must start from the current situation which sees Italy stagnating with a system that seems to have settled on a balance of strong underemployment of the resources at its disposal. Industry is traveling (April 2015) with a quarter of unused production capacity (rough estimate based on the industrial production index published by Confindustria) and the workforce numbers 17 million people who could work, but find themselves unemployed or inactive. In addition, we log over a billion (sic!) layoff hours. This state of affairs, it is known, comes from the depression that followed the great financial crisis caused by the reprehensible behavior, still unpunished, of the large international banks. Some of these have been "saved" by the national states, in defiance of all the statements of principle on the rules of the "market" even placed at the basis of the treaties of the EU itself; a market that no one has ever understood as it should have been and which, it is evident, has not eliminated the bad fruits. A market that is anything but perfect (as many have believed, sharing the actions of the Anglo-Saxon and EU lobbies) and which therefore "must" be corrected.
Lo economical progress it will return only if adequate policies are put in place. Since we are in heavy underemployment, these policies must aim at the full use of resources, above all of the workforce, seeking to eliminate the unacceptable defects of modern society. Keynes identified them in his time precisely in the inability to provide full employment and in the arbitrary and unfair distribution of wealth and income (General Theory, Chap. XXIV). Since I believe in Keynesian analysis, I find it correct to focus on investments which are, it is known, the real engine of social progress: they allow the introduction of the innovations that represent the fuel of that engine.
Is a national policy aiming at full employment possible today? The answer is no because we are bound by a Community policy based on interests that are not ours and which provides for exceptions (see the aforementioned bank bailouts) applicable in favor of our competitors and, now and in the future, against our banking system. There is much debate on the subject and I won't dwell on it, but I stress that we will only be able to get out of the impasse we have ended up in if we call into question the Community rules; starting from the parameter (illegal for many qualified scholars, Prof. Giuseppe Guarino in the first place), of the balanced budget and the income and expenditure components that contribute to it.
Another principle to be called into question is the statute of the European Central Bank (ECB) whose action must at least be traced back to that of the other major central banks: the main purpose must be the economic development and progress of society (i.e. of the "taxpaying" citizens who make it up) rather than a pure and simple "stability" combined with the interests of the prevailing country. We also need to stop "defending" the so-called autonomy of central banks, an autonomy that is used not for the good of citizens, but to preserve the privileged positions of those who administer on their behalf without subjecting themselves to judgment on the results.
A national policy for full employment must be based on aggregate demand supported by robust investment. Not just private and not just public: both are needed, given the importance of the two sectors, public and private. Investments depend on the expectations of entrepreneurs and on state policy. In Italy, entrepreneurs' expectations today are negative because the internal market is not "pulling", while the State is holding back public spending mainly due to the need to respect the so-called parameters for the stability of the Eurozone. It is not a question of financing or of the ability to export: since 2004 the self-financing of the main Italian companies has abundantly exceeded the expenditure for technical investments (by 65% in 2013: by so much they could have increased in the presence of favorable markets; data from Area Studi Mediobanca). The ability to sell abroad is also not lacking since, faced with the unsatisfactory dynamics of national consumption, our businesses (especially the district and Fourth Capitalism ones) have successfully boosted their foreign turnover, achieving record surpluses in the trade balance. In my opinion, two additions to national policy are needed. The first concerns the state and the second private individuals.
The state must first implement a serious reform to regulate public investment. By this "discipline" I mean a credible and "technical" assessment of their productivity: utopia? A public investment must produce income (or stimulate its production by citizens). Criteria can be selected to establish a scale of preferences: the absorption of unemployment, the promotion of activities intended to employ skilled labour, the support of export currents that stimulate domestic production and the rebalancing of per capita income among advanced geographical areas and backward ones (e.g. the South which continues to be a great untapped resource for our economic recovery). An idea of this type was applied in Italy in 1982 when the Fondo Investimenti e Occupazione (Fio) was set up to finance public administration investments. The selection of projects was based on the application of a methodology derived from World Bank practice; this is done by an Evaluation Nucleus with technical investigation functions "with specific regard to the evaluation of costs and benefits" (Article 4, Law No. 181-1982). The Nucleus operated at the Ministry of the Budget and Economic Planning (initiative of Minister Giorgio La Malfa). An attempt was made to apply Spaventa's maxim according to which administration and politics (which expresses the Government) must be distinct and separate. Consistently, the Evaluation Team was made up of independent technicians with specific skills; among them, many Italians recalled from the jobs they had in international organizations (e.g. Enzo Grilli). Is it possible to ensure that a Minister does not know the names of the citizens benefiting from his provisions? Or, which is the same thing, that they don't demand, through lobbying, measures that are profitable for them? The Fio experience foundered precisely because of the "administrative and political degeneration and malpractice" - these are Spaventa's own words recalled by Ugo La Malfa in his Interview on non-government.
I recalled these principles because without a serious rethinking of the discretionary power attributed by current laws to the public administration, it will be difficult to obtain productive public investments. And even public works carried out "in a workmanlike manner", a requirement that the events of recent days (the collapse of pylons and the crumbling of the plaster of a school inaugurated a few days earlier) have brought to the fore. The famous reforms that serve the country's growth are these and not those of a Community nature aimed at disqualifying our labor market by promoting low-value-added activities justified by low wages. Instead, we need activities with high added value and therefore the use of qualified personnel paid with high salaries. The revision of the laws should be the first problem to face for a government that really wants to achieve growth driven by investments cleaned of the crust of corruption. These public interventions should also have an effect on private expectations. Furthermore, national policy should be accompanied by a territorial policy through which citizens can support the development of their own area (a sort of self government).
A "national" intervention of great effect could be that of allocating the Milanese area covered by Expo 2015 to a real city of science in which the exhibition pavilions were transformed into research venues, both fundamental and applied. This requires a strong connection between the academic world of universities and the business world. In this way robust engines of innovation could be activated with results that can be transferred to our best manufacturing companies; those of the districts and of the Fourth Capitalism. These are companies that are already innovating continuously, but support of the type mentioned could equip them with a fundamental weapon to beat the competitors who are emerging in ever greater numbers from developing countries, characterized by low production costs. If world competition is shifted to the quality – rather than the price – of products and their greater “performance” content,
the city of science could well represent the fundamental basis for high-end production.
Regarding territorial policy, I recall the proposal I made together with Lino Mastromarino (Coltorti, Mastromarino, 2014, pp. 24 et seq.); it is based on the use of two tools:
1) a district (or area) strategic plan developed by a local committee or agency e
2) one or more pivot companies that make investments capable of activating local supply chains.
The medium-sized enterprises (pivots) have produced a new evolution of the Italian district areas, providing them with organizational and financial skills and capacities. They are the best expressions of the "Fourth capitalism", the only successful model of manufacturing enterprise available to Italy today. The strategic plans should include actions aimed at improving or re-establishing organizational skills, while the financing of the consequent investments should be thought of, in addition to a relationship with the local banking system, with recourse to new types of instruments: network contracts, district bonds or network, forms of capitalization through the issue of new types of shares (e.g. development shares), initiatives aimed at favoring workers buyouts, etc. However, I remain convinced that the main financial nourishment of our production systems must remain bank credit and this for two reasons: a) the best knowledge of the customer that a local bank (or with a qualified local presence) can achieve, b) the need to short-term funds to cover working capital, the main capital use of a small or medium-sized enterprise. In this context, it is necessary to maintain a certain stability of short-term financing for the company, a concept which, although apparently contradictory, is the basis of the incentive to invest and develop business in specialized local contexts.
Last but not least, the smaller companies and the Fourth Capitalism which organizes them into networks and supply chains, live in the territories and develop only if these are safeguarded. It would therefore be desirable that savings produced locally were invested locally; in this sense, the provisions announced on popular credit and the consequent hoped-for policy of new banking combinations would further restrict the number of institutions with a local vocation. Therefore they do not seem to promise anything good.
