What can be done to make the magic square work in Italian industrial companies? Opinions differ greatly here. The thesis supported in this paper is that much can be done with intelligent industrial policies. But let us deal with the contrary opinion. That of those who argue that industrial policies are useless, or, worse, often harmful. And that instead it is simply necessary to recreate the conditions for companies to be able to return to success by themselves. This thesis unites different visions. Let's see them below. Simplifying, the first argues that industrial policies should not be made for ideological reasons; the second that they shouldn't be done for problems of application, and because their effects are doubtful; the third that they must be done only indirectly, through actions on the external conditions that can facilitate the life of the companies.
It will suffice only to remember that for many economists, including many Nobel laureates, this is not the case, and that, especially with the international crisis, many have begun to reflect again on the damage that the lack of prudent policies and regulations can cause, freeing themselves from ideological constraints . The free market does not exist in nature; its borders are always the result of a collective decision of a political nature; in any case, many political decisions influence companies and their dynamics; many markets present forms of imperfect competition (monopolies, quasi-monopolies, oligopolies), for which, even in theory, leaving a free hand to companies does not produce positive effects; there are widespread externalities. The gist of the opposition is that on the one hand there is an extreme position: long live the market always and in any case; on the other, a pragmatic position: let's check if and when public policies are needed. On the other hand, incidentally, reasoning - rather than expressing professions of faith - should be a peculiarity not only of the economy but of research and teaching as a whole. But that's another story. Rather there is a very interesting fact: precisely in cases where there are fewer explicit policies, particularist decisions are more frequent.
Economic policies are not only a terrain for the confrontation of ideas, but also for the clash of vested interests; the strong ones manage to assert themselves, often disguising themselves behind continuous paeans for the free market (for the others), working with skill and speed in dark rooms for their own interests. There are also many examples in recent Italian events, starting with the courageous captains of Alitalia.
The second view is definitely more interesting. It will suffice to mention it here because it will be taken up again later. In essence: industrial policies can be discussed in theory, but in reality many of them are fallacious; in Europe and in the rest of the world there is a long history of failures in public decisions taken to influence the behavior of companies. However, a more balanced historical analysis leads to the recognition that the history of industrial policy is also full of great successes. It is certainly not infallible: for this reason, skepticism about the effectiveness of interventions must be taken very seriously. We cannot be satisfied with proving the usefulness of certain tools in theory: we need to verify in reality that they really work.
The third vision deserves a more extensive comment. What Italian companies really need, they say, are more favorable conditions for their activities, through indirect, horizontal policies. It is an important way of thinking, which inspired, at least until 2010, the community documents and the consequent decisions of the European Union, for example in the matter of aid to enterprises. What are these conditions? The list usually starts with the protection of competition. Breaking the positions of income and privilege enjoyed by some, above all in the services or energy sectors, since they have been rarer in manufacturing for some time now, thanks to European integration and the single EU market. Stimulate competition, so that the best emerge and can offer goods and services on more favorable terms, to the benefit of all. Competition is good for businesses; greater competition in the tertiary sector can help the industry a great deal.
Another important topic follows: administrative simplification in the life of companies and in relations with public administrations. This too is not very controversial: the reduction and simplification of the obligations that weigh on businesses and the procedures that make relations with public administrations linear, transparent, predictable are important. The data from the World Bank's Doing Business allow us to evaluate how there is still a lot to do in Italy in this area. And these issues are always accompanied by the efficiency of the justice service, essential for ensuring the protection of property rights and settling disputes. Also in this case, all the data show how the Italian situation is negative in international comparison. Protection of competition, simplifications, efficiency of the justice service represent an important chapter of business policies, as the Bank of Italy never ceases to underline.
Naturally, infrastructural conditions are also important: in an increasingly integrated world, the availability of broadband connections to exchange data and sell services and effective and inexpensive transport services for goods and people are decisive elements for guaranteeing competitiveness for businesses. There is broad agreement on the crucial importance of providing well-qualified workers with a high level of education and an adequate body of knowledge to enterprises. Both of these themes deserve in-depth reflections, which however would take us far, diverting the course of reasoning. One, however, stands out: in both cases the results achieved by our country are lower than the European averages. Moreover, for some years now the investment effort in both areas has been declining. The infrastructural realizations and the same maintenances have strongly reduced with the collapse of the expenditure in capital account; resources dedicated to the education system, especially university education, have been cut, much more than in most other advanced countries.
If these trends in infrastructure and education policies were to persist, the negative effects on the competitiveness of Italian businesses would be significant. Then there is a more controversial issue than the previous ones. Some believe that in order to relaunch Italian companies, it is necessary to increase flexibility in the use of labor and reduce its cost. Flexibility is a double-edged sword. On the one hand it is very useful: it allows companies to easily increase and reduce their workforce according to market trends; they say: precisely because they can reduce it, they will have no problem hiring. Furthermore, it allows the workforce to be shifted from declining firms to developing ones, accompanying the indispensable processes of readjustment of the industrial apparatus. On the other hand, however, it is counterproductive: a long stay of the workers in the companies determines a positive-sum game, in fact the former are highly motivated, develop a sense of belonging, actively collaborate in the common success; the latter can invest in the training and improvement of their workers, knowing that they will be able to enjoy the advantages of their greater skills for a long time and to the full. The most suitable situation lies in the middle; and like all intermediate solutions it can be continually revised. But certainly – to put it in the jargon of the Italian debate – abolishing article 18 of the Workers' Statute is not exactly the magic key to relaunching Italian companies.
As for the cost of labour, a low level certainly helps the competitiveness of businesses. A low wage policy has a thousand social and economic contraindications, starting with the compression of domestic demand; on the other hand, the tax component of labor costs, which is very high in Italy today, can be reduced. Unfortunately, it is difficult to imagine a truly significant reduction in the current state of public finances; especially in a European framework which leads governments to concentrate taxation on labour, as capital is mobile. However, every effort is worthwhile. In general, low labor costs help; but it is not the decisive condition for competing in an international framework in which there are countries with wages equal to one tenth or one twentieth of those of Italy. The Bank of Italy's own analyzes lead to the exclusion for the last decade that "the cost of labor may be the most significant determinant of the loss of competitiveness compared to other European countries".
What matters is the relationship between cost and productivity: Germany is successful, with much higher wages than Italy's, thanks to higher levels of productivity. To put it simply, Italy can only follow Germany, and not China. It is the challenge of productivity, the decisive one.
