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The future factory: a white paper from Assolombarda on economic crises and “digital green economy” strategies

How does one build a good “future factory” by defining development strategies in times of crisis and change? Let’s start with the crisis. Economic data shows that industry turnover in Italy has slowed sharply, with a drop of 0.3% in 2019 and an alarming 1.9% reduction in orders.

It’s the first drop since 2015 and a sign of general difficulty in the entire manufacturing system, except for a select few sectors (textiles, pharmaceutical and food) and with alarming conditions for automotive, mechanics and mecatronics. Exports are in marked decline, “not speeding along any more” as indicated in the headline of “Il Sole24Ore” (22 February). The industrial engine has more or less stopped. With annual data released on Friday 21 February, Istat confirms what was already indicated in the strongest manufacturing regions until last autumn, from Lombardy (with alarms in Brianza and Brescia, areas with a strong concentration of industry), to the North East. Everything suggests that 2020 will be another difficult year (backed up by a drop in orders). International trade tensions (from the US-China tariff war to Trump’s White House’s moves against Europe) are one of the key causes.

News of the “coronavirus” is adding to this already difficult situation, with heavily negative effects on the entire world economy, starting with China (the International Monetary Fund predicts a reduction in growth to 3.2%, with a drop of 0.1% in 2020 and 0.4% in China, adding that it could be even worse if the infection is not stopped quickly).

The Italian economy will also be affected, given the current spread of the virus, especially in Lombardy and Veneto, the most dynamic manufacturing regions (worth 31% of national GDP and 40% of exports): many economists forecast a recession of between -0.5% and -1%. As time passes, will see the actual effects of worry over a long-lasting crisis.

One thing is certain: in addition to timely measures to face the health emergency and its impact on the economy, in these times of alarming fragility and obvious social and economic tensions, it is important to develop strong, long-term ideas. We need to look ahead, to strengthen the real economic “paradigm shift,” to relaunch the quality of development and the quantity of economic growth: from emergency to recovery.

What are these ideas? They can be found in Assolombarda’s white paper on “the future factory” (following up those on work, tax, credit and energy). This was presented recently by Alberto Dossi, Assolombarda’s vice president for industrial policy and Ferruccio Resta, dean of the Milan Polytechnic (scientific research partner) at the Ansa Forum. As well as contributors of this blog.

The first point reconfirms something that is clear in economic circles, but unfortunately not in the political world or government circles: “Italian manufacturing is a source of competitive advantage for the entire country”, it provides leverage for creating work, widespread wealth and social improvement. It is necessary to defend our industrial capacity, to develop a true “National Industrial Policy Plan”, together with political decision makers and social players who have the skills and knowledge. There should be a “culture of change,” built on innovation, research and training.

We are facing monumental challenges: digital transformation affects the economy and society, not only in terms of production, but also the ethical and cultural issues posed by the growth of Artificial Intelligence (we discussed this at length in last week’s blog); the major issue of environmental and social sustainability, in order to deal with the alarming climatic changes and the ever less tolerable social, gender, opportunity and generational inequalities.

Business is central to these challenges. It plays the leading role. In the “White Paper,” there are no shortage of economic, political and cultural indications for approaching this intense season with a great sense of responsibility, with the ambitious, long-term views of those who want to build a better future. Business is a great “social elevator.”. We need to keep making it work.

How? “People are central to the new factory,” it says. With a focus on “who knows and who knows how it’s done,” knowledge is a fundamental economic and social value, in times of reckless contempt for skills, even in political circles. Respect for safety, both in work processes and in the cybersecurity dimension. Quality of life and work. Long term training, so that the process of change can be managed. Particular attention should be given to young people, to make them aware of the charm of the factory in the digital era and to involve them in production.

To put it briefly, the horizon is a Digital Green Economy, which considers sustainability to be a fundamental competitive asset.

Leadership with strong values and knowledge. Commitment to change according to data driven factory criteria, using the increasing amount of available data as a productive factor, in terms of quality, productivity and competitiveness. Cultural and scientific flexibility to understand and use the data to radically improve our manufacturers. After all, Italian companies are increasingly becoming “nodes” in a network, part of a “productive ecosystem”, a chain of relationships that enables even small and medium ones to keep up with radical, international transformations.

So, what needs to be done? The White Paper insists on the need to “promote innovation in the country system.”. In fact, one can’t imagine that our companies can stand up to the challenge of innovation and competitiveness in the digital economy alone, if the rest of Italy stands still. That’s why a development strategy which invests in the adaptation of infrastructure, both material and immaterial, technological and social (with schools at the forefront) is important. It needs to “support interoperability and the integration of ecosystems and supply chains,” to have an “effective, stable and clear” with regards to regulations and”multi-year industrial policy plans to support the companies of the future.”.

Even in difficult times, full of tension, crises and changes, businesses are playing their part. They are not asking for grants, but for clarity, in order to continue to invest and grow. It’s a cultural and social challenge. One that needs consequential political choices. Assolombarda insists that this is in the interest of the entire Italian system.