Italy is still not firing on all cylinders in terms of competitiveness. The country is lagging on international markets, is attracting declining levels of foreign investment, and is expected to remain in recession throughout 2013 and to post low levels of growth in 2014. Italy is hobbling along. Businesses are shutting their doors, and the country’s most precious asset, its manufacturing base, is dwindling away, having lost 15% in capacity and not looking good in terms of future development. In other words, despite it all, there is still a robust culture of enterprise that is holding off Italy’s collapse, but there are still no real strategies for growth, no good industrial policymaking, and not enough spending in research, innovation and education to keep pace with the other nations that are our competition. In short, and as Pirelli chairman Marco Tronchetti Provera said in an interview with Corriere della Sera (7 June), Italy doesn’t take good enough care of itself.
Figures released by the IMD World Competitiveness Centre in Lausanne show that Italy comes in at just 44th in the annual ranking of international competitiveness (behind the U.S. in first place, Switzerland in second, Hong Kong third, Sweden fourth, Germany ninth, the U.K. in 18th and France in 28th), slipping back four spots from its already low position of 2012. Spain, Portugal and Greece trail behind, but that’s no consolation. There are cyclical economic factors, i.e. the recession, as well as structural factors that haven’t helped, i.e. Italian bureaucracy, taxation, the lack of transparency, political uncertainty, and the consequent scarcity of foreign investment.
Indeed, here we have another aspect of the crisis: the lack of international investment. According to a recent study by Ernst & Young (see Il Sole24Ore of 6 June), Italy is driving away investors and losing ground on the other EU nations: Fewer projects, fewer resources, less employment, less innovation, and so less development.
Of course, there is some good news to be found if one reads the newspapers carefully. For one, the French Alstom group is investing 34 million euros to build a premier research centre for energy transmission in Sesto San Giovanni. The U.S. multinational Valspar acquiring the Italian paints manufacturer Inver for its headquarters for European development. And the U.S. Mohawak group, after acquiring the world-famous Ceramiche Marazzi, appointed an Italian, Mauro Vandini, to lead the business and, by investing in new technologies, develop an original alliance between multinationals and the manufacturing skills of the Sassuolo district with a keen eye on international markets. Or even the insurance giant Berkshire Hathaway, a leading shareholder of which is Warren Buffett, in the race to acquire Milano Assicurazioni. Not to mention the fact that international investors now hold 34% of Pirelli’s stock. These are all signs, in their own way, of faith in the capabilities of Italian multinationals, in the vibrant growth of small and medium enterprise here, and in the strength of our human capital (such as the engineers coming out of the polytechnic schools in Milan and Turin) in pursuing cutting-edge industrial research. So there are good investments coming into Italy, but it’s not yet enough to be truly optimistic.
There is some reason for this active, productive Italy to believe in growth, as called for by the president of Confindustria, Giorgio Squinzi, a staunch supporter of manufacturing as a cornerstone to growth and of the need for all of the EU to work to “reindustrialise Europe”. But we are still waiting for public policies and government decisions that are up to the challenge.
There are many businesses that are doing what they can, but government support measures are few and far between. No aid. No incentives. Not enough underlying policy decisions to create a favourable environment for business growth, for domestic and foreign investment, or for new and innovative start-ups. We need public investment in research and innovation, in education and the transfer of technologies, and we need to break free from the bureaucratic and fiscal shackles preventing investment. Through domestic policy and European policy. We need a true “industrial compact” that can support growth now that we have sought balance in the public accounts through the “fiscal compact”. Industrial Italy is showing that it knows how to face the crisis despite the heavy burden it has to bear. Government and policymakers have a duty to support resiliency and recovery.