Italy
Unsolved problems stopped successful growth
A large economy with many contradictions
North is part of European core (or key regions “banana”)
EU founding member in 1958
Large differences between North and South
Strikingly unsuccessful regional policy
Uncoordinated, strike prone economy
Large firms in North and successful SME in Emiglia Romagna
Top industry and large tourism sector
Nevertheless:
For decades high growth
Above average per capita income/efficiency
Basis macroeconomic facts
Above average long run growth 1950 1980
Disappointing nineties: GDP 1.6% (EU 2.1%)
this extends to productivity
and to manufacturing and to
productivity in manufacturing
High unemployment rate 10.3% (2000)
And rather high inflation rate
Demonstrates insufficient macro- steering capacities
Of government, trade unions, employers federation
Recurrent de-valuations of the Lira did not help
Since rising import price were “returned” in higher wages
GDP per capita: 23 000 EURO,
2% higher than EU; approaching from above
GDP/employee and per hour also about average
Growth drivers
Very low research/GDP ratio: 1.57% (55% of EU average!)
Education/GNP one point lower than in EU
Share of secondary education 70% of EU average;
Tertiary education about half (9% of population only!)
Low share of life long learning
ICT production and internet use below average
Mobile phone highest rate in Europe
Informal innovation also below average
Investment/GNP share about EU average
As seen from the growth determinants
The growth 50 – 80 is difficult to explain
The deceleration in the nineties had to be expected
But there may be intangible facts not measured
Creative cooperation in Emiglia Romagna
Flexible specialization
Fashion and culture
Growth promoting fact in the past:
Recurrent devaluations of the LIRA
It lost more than 50% of its value 1970/2000
Costs
Wages 84% of EU-average (Greece 44%, Spain 66%)
Moderate wage increase in 90ties
High non wage share (profits)
Average tax rate 46% (up to 90ties above EU average)
High statutory (40.2%), low effective (27.9%) corporate taxes
Italy managed to meet the Maastricht criteria
But is running a new deficit in 2002
On top of a government debt of 108% GDP (2001)
Income inequality higher than in egalitarian countries
1st decile to 10th 1 : 8 (rank 7)
Hidden economy and hidden wealth may be larger
than in other countries
Northern Italy
Industrial and commercial center
Industry districts of Milano, Torino are leading regions
In Europe with regard to GDP and GDP/head
High density of firms
Research centers, universities
Overall productivity of manufacturing about or
lower than EU average
and decelerating in the nineties
Southern Italy: Mezzogiorno
High unemployment
Low level of education
Agriculture (though declining shares)
Slow convergence: South relative to North (100; source OECD Italy 1990 p 70)
1951196319731987
GSP per employee53.760.467.275.3
GSP per capita51.953.357.3
Hypothesis about non convergence
Geographic: high distance to the core
Extreme climate condition incl. Land erosion
Ethnic:high importance of non economic goals, leisure
Socio political:interests of Northern regions to keep lead
Feudal regime in the South, interested to
Keep dependency, land ownership,
Cheep labor for agriculture
Inefficient and corrupt administration
Stages of regional policy
Phase 1 (1950-56): building infrastructure
Offering cheap credits
Phase 2 (1957 64): targeted industrialization
Concentration in “best locations”
Large public firms required to invest 40% of investment
(60% of new investment) in the South
result large firms not connected with local base
“cattedrali nel deserto”
Phase 3 (1965 – 70) industrial poles concept
Targeting at firms with small and medium sized firms around
Favoring industries with input output relations
Car factory: Alfa Sud – Napoli
Steel factory: Italsider Trient
Oil refineries and petrochemical factories
Phase 4 (since 1970): regional and structural aid from EU
South Italy is objective 1 region with highest subsidy level
Physical infrastructure (highways, energy) now well developed
Industrial centers at the shore:
Pescara, Cagliari, Cantanzaro, Neape, Salerno, Brindisi
Persistency of differences remain;
very slow convergence: Calabria, Sicili, Sardinia
Specific Southern Fund (Cassa per il Mezzogiorno) cancelled in 1991
Large capital intensive firms did not initiate endogenous
development
Multinational firms prefer Ireland and Spain
Regional concepts favored – not for all parts of South Italy
A two tier industry structure
- Still large share of labor intensive industries
- Important skill intensive industries
Technical skills and fashion
No large share in ICT industries and in high tech
Largest share of textile industries in value added
Textile, leather, apparel supply 12% of production, 17% of exports
In European exports 25% market share
high unit values show the specialization in the upper market segment
Largest industry:
Machinery all types of speciality machines
Cars is second in exports (third in production)
Chemicals is second in production
pharmaceuticals
High share in consumer products like
sports goods, furniture, jewellery, domestic appliances
Large firms and corporate governance
Fiat Cars
GeneraliInsurance
ENI Oil, Chemicals, Water
Enel Electricity (former monopolist)
OlivettiTelecom; owns now Telekom Italia
TIM Mobil-Telekom subsidiary of Telekom Italia
Montesidon conglomerate food, chemicals, pharmaceuticals, energy
PirelliChemicals
Parmalat Food
Historically large share of firms state owned or owned by banks
IRI – national holding company over state owned firms
Including Finsider, Italsider (steel conglomerates)
Now privatized
Public ownership 2002:
30.3% of ENI (piecewise privatized since 1995)
67.5% of Enel
85% Tirrenia (ship operator)
Postal service, train, Alitalia
Privatization a la Italia
Market capitalisation still low
Venture Capital extremely low
resulted in many cases result in limited companies
Mediobanca Centrale was sold to Banca di Roma
Not for privatization: RAI (broadcasting), Alitalia (airline), Railways
Success story of Emiglia Romagna
Region in the middle (north - east) of Italy
Large cluster of small firms in machinery industry
High degree of cooperation
On informal base
Encouraged by authorities
High share of exports with joint marketing
Model of flexible specialization
Charles Sabel, Michael Piori: Flexible specialization
The answer to Fordism and mass production
Informal coordination of firms
Coordinated training, marketing exporting
A climate of cooperation including supportive communities
Policy environment 2002:
Unstable industrial relations
High regulation of labor market
Heavy protests of trade union against flexibilisation
High regulation of product market
Low steering capacity of central government
No consensus government/regions/trade union/business
Many unregulated small shops (even in retail)
Underdeveloped capital market
Low importance of competition policy
No convergence of regions in income per capita
Successful transition to EURO (Maastricht criteria)
But with heavy tensions and unsolved problems
Fiscal debt still higher than GDP
High burden of pension system
Conclusion:
A former high growth economy experiences high tensions
Large regional and social differences
Heavy under-investment into usual growth drivers
Instrument of devaluations lost: more discipline or larger problems
Activation of regional strategies or new labor relations necessary
EU-funds for development of South will decrease
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