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“Manufacturing renaissance” now also a goal of Prime Minister Renzi

“A new industrial renaissance” is a priority of Italian Prime Minister Matteo Renzi for Italy’s term in the presidency of the European Union, and it is important to see how a concept to come out of the debate between economists and proponents of the culture of enterprise (from the American manufacturing renaissance as written about by Gary P. Pisano and Willy C. Smith from the Harvard Business School to various studies by the Aspen Institute (Washington, D.C.), the Boston Consulting Group, or McKinsey, not to mention by Confindustria, Assolombarda and the Pirelli Foundation in Italy, as have been featured on the pages of this blog) has finally become a central topic in both political strategy and government planning.’The best manufacturing firms in Italy and elsewhere have reacted to the Great Crisis by combatting the practices of raider finance with strategies involving innovation, quality, creativity, exports, new markets, the green economy, and the social and environmental sustainability of both products and processes, and they have shown that “the new factory” (a blend of manufacturing, research, and high-end services) is the solid core of an economy able to create jobs, wealth and stable growth. Now the political machine is taking note and beginning to take action (through fiscal and economic policies and other reforms) in order to breathe new life into European industry. This is a good move and a potential new direction for a continent in search of greater identity and of more effective responses to the needs of its citizenry.

Renzi says that “growth and jobs are the central values for Europe” and emphasises both the recovery in traditional manufacturing and the need for a new industrial renaissance. In an interview with Time, he reiterated Italy’s role as a leader and as “the locomotive of Europe”, turning around manufacturing through Italian ingenuity because “in its moments of maximum difficulty [Italy] has always found the strength to do the most incredible things”. His thoughts are in line with similar assessments taking shape in France and in other of Europe’s Mediterranean nations, as well as in Great Britain, which is rediscovering manufacturing, and in Germany, which remains Europe’s leading manufacturer, just in front of Italy (such that Flavio Valeri, managing director of Deutsche Bank in Italy, in an interesting interview published by Il Sole24Ore on 8 May, rightly spoke of an axis of excellence in manufacturing between Italy and Germany).

It will take an industrial compact along side an intelligently designed – and perhaps reformed – fiscal compact (taking investment in research, development and innovation out of the calculation of the 3% ratio of deficit to GDP), and it’s also worth heeding the advice of a great economist, and Nobel Prize winner, such as Amartya Sen, who defends the importance of the euro and of the EU, but is critical of the ideological obsession with austerity and defends the strategy of sustainable development.

Romano Prodi, having led the European Commission for a number of years, is all too familiar with both the EU and the world of industry both in Italy and around the world (both as an academic and as a politician) and speaks of the sort of “innovation that creates value” (Il Sole24Ore, 10 May) and, together with Alessandro Ovi, founder of the MIT Technology Review Italia, points to the importance of large corporations (from Pirelli to Ferrari), of small and medium enterprise (businesses like Protocast and Zehus), of business incubators, and of the start-ups that were the focus of a major event concerning industrial innovation at MAST and at Alma Graduate School in Bologna on Sunday and Monday. “Rewarding innovation in business can help awaken the sort of creative spirit that can certainly be found in Italy”, Prodi rightly notes.

Italy and its best enterprises have made great strides in this direction, but more can still be done. Within the EU, international competitiveness is based on innovation, technology and research, as confirmed by a recent book by two economists, Giorgio Barba Navaretti and Gianmarco Ottaviano, “Made in Torino? Fiat Chrysler Automobiles e il futuro dell’industria” (published by Il Mulino), which seeks to demonstrate the return of the central importance of manufacturing in Italy, in Europe and in the western world generally. Manufacturers can succeed, not by pursuing competitiveness based on the cost of labour (the two authors point out that the cost of labour accounts for no more than 5% of a car’s total manufacturing costs), but through competitive advantage that depends on the local availability of specialist labour, services and infrastructure – confirmation of the challenge ahead and the choices that need to continue being made. Indeed, this “manufacturing renaissance” of which Renzi often speaks has to do with high-quality supply chains, with medium-tech enterprise and high-tech services (e.g. broadband), with excellence in education as seen at the polytechnic universities in Turin and Milan, contexts suited to industry (e.g. without excessive bureaucracy), and good culture of enterprise. We can move forward.