Productivity, here’s why Italy is still in crisis. Investing in reforms, innovation and hi-tech industry
Italy has to do more for productivity. This warning comes from the OECD, in early June, after a positive assessment of the economic growth and appreciation for the reforms launched by Renzi’s government. Now is the time to move forward: “The drop in investments due to the crisis has aggravated the slow-down of productivity, which has been in place for quite some time. To increase it, we need to accelerate the process of resolution of distressed bank credits, improve the mechanisms for the selection and implementation of investment plans in public infrastructure and increase the efficiency of administration”.
The warning by the OECD is an important one. This is because it focuses on a competent point to think about regarding a topic, the productivity crisis of the Italian system, which has recently made a come-back in public debate and in which politicians and social experts, economists and entrepreneurs are taking part.
The Chairman of Confindustria, Vincenzo Boccia, in his report upon taking over the helm of the organisation, tied productivity to salaries, insisting on the close relationship that needs to be established between these two elements, in view of contract renewals. An old way to address the issue, as the leader of Cgil Susanna Camusso cut short, while the heads of the other trade unions Cisl and Uil proved more open to dialogue. Naturally, the issue is relevant. It brings us straight to the revaluation of territorial and corporate contracts, where the productivity-salary exchange is clearer and which the government is in agreement on.
During the crisis, some businesses have grown, innovated, performed research, modified production processes and products, exported and purchased abroad, achieving major positions on the international markets: pocket multinationals, more innovative production supply chains, excellent quality manufacturing in mechanics and chemistry, pharmaceuticals and rubber, furniture, fashion and agro-industry. These companies are productive. They are competitive.
Yet, alongside them, the majority of businesses have in fact innovated very little, stopping and stalling on the domestic market, failing to grow, getting wrapped up in the limitations and restrictions of familistic and provincial capitalism. These companies are far from productive and competitive, they are “a large industrial body comprising mostly of companies that are unwilling to innovate and make investments”, in the words of Massimo Riva (L’Espresso, 2nd June). Indeed, this is the very area that we need to work on. With policies that stimulate innovation, growth, internationalisation.
“Productivity is the key word”, declares Minister for the Economy Pier Carlo Padoan. And he’s right. There is a side to productivity that is down to companies: greater investments, more effort on innovation of both process and product, greater aperture to the financial markets, to exports, to local and supply chain ties, which are all addressed by the clever analyses by the Censis survey by Giuseppe De Rita (with the requisite appendix of the relationship between rise in productivity and improved salaries, to stimulate with suitable favourable tax choices). There is also a necessary and improved system productivity that needs to be set up. This is a political responsibility.
This is where we come back to the warning by the OECD. Let’s look more closely. “Since 2000, productivity has grown by 1% against an average 17% of our European partners. During the same time frame, the cost of labour per product unit has risen twenty points more than in Germany”, asserts Ferruccio De Bortoli (Corriere della Sera, 31st May) according to the data from the Def, the government’s economy and finance document. The answer: more investments, more innovation, more “digital”, taking on the challenge of Industry 4.0, “a revolution of processes, time frames, distribution methods”. There are Italian companies that are already doing well and moving in this direction swiftly. The Italian system on the whole is behind, however.
Marcello Messori, a sharp economist, recalls another indication by the OECD, according to which “the average dynamics of productivity of factors and productivity of labour in a Country do not depend so much on the intensity of its innovations on the frontier as much as on their rapid and efficient distribution across the remainder of the economy. The delays in Italy therefore have two consequences. First: significant increases in the various forms of productivity accumulate in specific parts of the national productive apparatus and can cohabit for long periods of time with disappointing average dynamics. Second: to remove a crucial obstacle to growth, we need to identify the causes of the negative trend in Italy regarding the spreading of innovations and focus on remedying such causes, also using policy initiatives” (Corriere della Sera, 28th May).
Here’s the new underlying theme: micro decisions, in the corporate world; and macro or system decisions in economic policy and industrial policy.
“The long slumber of productivity”, declares Luca Ricolfi on Il Sole24Ore (29th May) recalling that “it is not only the productivity of labour that is stagnating, but the total productivity of productive factors (capital and labour)” and that Italian productivity is affected “by the complex of external effects, of collateral conditions and contexts which make a smooth and dynamic economic life possible: efficient and non-pervasive bureaucracy, fast civil justice, clear regulations that are easy to apply, speedy compliance with a limited number of regulations, well-established administrative powers, reasonably stable laws and regulations, definite time frames to start up a business… But also: investments in material and immaterial infrastructure, support for research, enhancing the value of knowledge”.
Productivity, continues Ricolfi, “has diminished in the majority of services (with very limited exposure to competition) but to compensate it has increased in the manufacturing sector and in agriculture”: these sectors have seen movement on the market, according to market cultures.
The best companies, starting with manufacturing of the “fourth capitalism”, “pocket multinationals” and the most innovative production supply chains, are doing their bit. The whole industrial world needs to insist on innovation and transformation. Yet it is the entire Italian system which needs to focus on more and better, as regards productivity and competitiveness, on reforms, public investments, “digital” economy, breaking down bureaucratic barriers, corruption, dysfunctions of a terrible “public machine”. Indeed, by re-reading the warning by the OECD on the crisis of productivity where we started. It is a genuine political challenge. One about “policy” and “politics”: about a vision of development and concrete decisions
Italy has to do more for productivity. This warning comes from the OECD, in early June, after a positive assessment of the economic growth and appreciation for the reforms launched by Renzi’s government. Now is the time to move forward: “The drop in investments due to the crisis has aggravated the slow-down of productivity, which has been in place for quite some time. To increase it, we need to accelerate the process of resolution of distressed bank credits, improve the mechanisms for the selection and implementation of investment plans in public infrastructure and increase the efficiency of administration”.
The warning by the OECD is an important one. This is because it focuses on a competent point to think about regarding a topic, the productivity crisis of the Italian system, which has recently made a come-back in public debate and in which politicians and social experts, economists and entrepreneurs are taking part.
The Chairman of Confindustria, Vincenzo Boccia, in his report upon taking over the helm of the organisation, tied productivity to salaries, insisting on the close relationship that needs to be established between these two elements, in view of contract renewals. An old way to address the issue, as the leader of Cgil Susanna Camusso cut short, while the heads of the other trade unions Cisl and Uil proved more open to dialogue. Naturally, the issue is relevant. It brings us straight to the revaluation of territorial and corporate contracts, where the productivity-salary exchange is clearer and which the government is in agreement on.
During the crisis, some businesses have grown, innovated, performed research, modified production processes and products, exported and purchased abroad, achieving major positions on the international markets: pocket multinationals, more innovative production supply chains, excellent quality manufacturing in mechanics and chemistry, pharmaceuticals and rubber, furniture, fashion and agro-industry. These companies are productive. They are competitive.
Yet, alongside them, the majority of businesses have in fact innovated very little, stopping and stalling on the domestic market, failing to grow, getting wrapped up in the limitations and restrictions of familistic and provincial capitalism. These companies are far from productive and competitive, they are “a large industrial body comprising mostly of companies that are unwilling to innovate and make investments”, in the words of Massimo Riva (L’Espresso, 2nd June). Indeed, this is the very area that we need to work on. With policies that stimulate innovation, growth, internationalisation.
“Productivity is the key word”, declares Minister for the Economy Pier Carlo Padoan. And he’s right. There is a side to productivity that is down to companies: greater investments, more effort on innovation of both process and product, greater aperture to the financial markets, to exports, to local and supply chain ties, which are all addressed by the clever analyses by the Censis survey by Giuseppe De Rita (with the requisite appendix of the relationship between rise in productivity and improved salaries, to stimulate with suitable favourable tax choices). There is also a necessary and improved system productivity that needs to be set up. This is a political responsibility.
This is where we come back to the warning by the OECD. Let’s look more closely. “Since 2000, productivity has grown by 1% against an average 17% of our European partners. During the same time frame, the cost of labour per product unit has risen twenty points more than in Germany”, asserts Ferruccio De Bortoli (Corriere della Sera, 31st May) according to the data from the Def, the government’s economy and finance document. The answer: more investments, more innovation, more “digital”, taking on the challenge of Industry 4.0, “a revolution of processes, time frames, distribution methods”. There are Italian companies that are already doing well and moving in this direction swiftly. The Italian system on the whole is behind, however.
Marcello Messori, a sharp economist, recalls another indication by the OECD, according to which “the average dynamics of productivity of factors and productivity of labour in a Country do not depend so much on the intensity of its innovations on the frontier as much as on their rapid and efficient distribution across the remainder of the economy. The delays in Italy therefore have two consequences. First: significant increases in the various forms of productivity accumulate in specific parts of the national productive apparatus and can cohabit for long periods of time with disappointing average dynamics. Second: to remove a crucial obstacle to growth, we need to identify the causes of the negative trend in Italy regarding the spreading of innovations and focus on remedying such causes, also using policy initiatives” (Corriere della Sera, 28th May).
Here’s the new underlying theme: micro decisions, in the corporate world; and macro or system decisions in economic policy and industrial policy.
“The long slumber of productivity”, declares Luca Ricolfi on Il Sole24Ore (29th May) recalling that “it is not only the productivity of labour that is stagnating, but the total productivity of productive factors (capital and labour)” and that Italian productivity is affected “by the complex of external effects, of collateral conditions and contexts which make a smooth and dynamic economic life possible: efficient and non-pervasive bureaucracy, fast civil justice, clear regulations that are easy to apply, speedy compliance with a limited number of regulations, well-established administrative powers, reasonably stable laws and regulations, definite time frames to start up a business… But also: investments in material and immaterial infrastructure, support for research, enhancing the value of knowledge”.
Productivity, continues Ricolfi, “has diminished in the majority of services (with very limited exposure to competition) but to compensate it has increased in the manufacturing sector and in agriculture”: these sectors have seen movement on the market, according to market cultures.
The best companies, starting with manufacturing of the “fourth capitalism”, “pocket multinationals” and the most innovative production supply chains, are doing their bit. The whole industrial world needs to insist on innovation and transformation. Yet it is the entire Italian system which needs to focus on more and better, as regards productivity and competitiveness, on reforms, public investments, “digital” economy, breaking down bureaucratic barriers, corruption, dysfunctions of a terrible “public machine”. Indeed, by re-reading the warning by the OECD on the crisis of productivity where we started. It is a genuine political challenge. One about “policy” and “politics”: about a vision of development and concrete decisions