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Concluding remarks

The global crisis caught the Italian economy in a structurally fragile situation. The underlying problems that have slowed its productivity growth, ascribable mainly to the limited openingup and competitiveness of markets and the inadequacies of public intervention to create the physical and intangible infrastructure needed for development, have also curtailed its ability to defend itself from the economic and social shocks inflicted by a crisis of external origin but of unusual severity. The economic recovery under way since last summer appears, for the present, to be more a rebound from the lows touched at the start of 2009 than a return to volumes of activity comparable to those, modest enough, recorded before the crisis. The stimulus coming from foreign demand is not coupled with a sufficient recovery in domestic demand, which is compressed by the stagnation of wages, the fall in employment and the persistent uncertainty about the future that paralyzes households’ and firms’ spending plans without the public finances – burdened with their unsolved problems – being able to intervene in support. The suspicion naturally arises that the Italian economy may have permanently embarked on a structurally lower growth path than that of the preceding decades. Moreover, in the aggregate data, the Italian economy appears to be increasingly inwardlooking. The ratio of trade in goods and services to GDP has fallen by nine percentage points in two years and is the lowest in the European Union, below that of the largest economies, for which this indicator of openness tends to be lower. Signs of retreat also emerge in direct investment abroad, while the Italian economic system’s ability to attract the interest of foreign multinational and immigrants appears to be limited with respect to its potential. And yet, before the crisis the competitive winnowing imposed by the new technological paradigm and the more intense integration of international markets seemed to be imparting a positive thrust to the productive system in Italy, as elsewhere. The emerging enterprises displayed a capacity for scaling-up, technological renewal, improving the quality of their products and developing strategies for international expansion. These changes were not yet sufficient to counterbalance the widespread difficulties in local production systems, whose crisis they sometimes even aggravated by interrupting long-standing subcontracting relations. But they did reveal an ability to react, indicating a possible way out for the Italian economy from a long phase of stagnation in growth. Even some macroeconomic data appeared to be starting to reflect the signs of this transformation. These included, in particular, Italian exports’ world market share, a summary indicator of the competitive success of firms and a subject of many of the analyses contained in this Report. Measured in value with respect to the total exports of the euro area, this indicator had risen by two tenths of a point in 2007, interrupting a long decline. But it lost seven tenths of a point in 2008-09 and at least another one in the first quarter of 2010. The reference to euro-area exports is useful in order to restrict the comparison to countries that are not too unlike one another, putting aside the often ambiguous role of exchange rates and the increase in the export shares of the emerging countries, particularly China, and the producers of raw materials. Among the euro-area countries, only Finland and Malta have turned in worse results than Italy’s in the last two years. Among the reasons for the decline in Italian exports’ share, special emphasis needs to be paid, as this Report repeatedly does, to the characteristics of their model of specialization, oriented mainly to products for which world demand has, for various reasons, grown more slowly than average. Without this negative effect, Italian exports would have posted better results, comparable to those of the other large euro-area countries. Among the structural aspects often cited in order to explain the Italian economy’s growth gap and Italian firms’ problems of competitiveness is the fragmentation of the productive fabric, the unusually large role played by small firms in Italy compared with other developed countries. There is a threshold below which it becomes very hard to sustain the costs and risks of the innovations needed to compete on the international markets. To emerge, small firms must make up for these diseconomies of scale with significant advantages in terms of productivity and/or capital and skilled-labor intensity, which are not easy to obtain. Some succeed, at times by exploiting external economies deriving from their strong local roots in industrial districts. Others fail, reinforcing the idea that policies designed to foster the scaling-up of firms are essential in order to support the growth of the Italian economy. But in 2009, in nearly every sector, the collapse in exports was severest for the largest companies, interrupting the gradual rise in their share. We do not know exactly why this happened, and it is too early to rule out that this was a one-off, transitory development. However, it may be useful to reopen discussion of the relationship between the size of companies and their international competitiveness. Instead of pursuing the scaling-up of existing firms for itself, on the assumption that this will automatically translate into greater capacities for innovation and internationalization, it might be better to aim for their qualitative improvement, by encouraging the patterns of evolution that had appeared before the crisis. The crucial point appears to be firms’ ability to adapt rapidly to the technological and organizational changes required by developments in the markets. If they succeed, growth in size will follow and a virtuous circle will be created, making international expansion a factor further boosting the productivity of the best firms. To this end, a context of rules, incentives and infrastructure favorable to entrepreneurial activities is needed, an environment that stimulates the best energies that are present in the country’s productive fabric. But there must also be major public investment in the education and research system, not only to turn its points of excellence to account but also, indeed mainly, to improve its weakest parts. Without a consistent, resolute effort in this direction, the drive to renew the entrepreneurial fabric and model of international specialization of the Italian economy risks foundering on the long-standing problem of the symmetrical shortage of both demand for and supply of skilled labor, which today forces many young people to seek their future abroad. An important element of the context in which firms operate is the system of public support for their internationalization. The set of measures and programs of financial and real support can play a valuable role in promoting and strengthening the international activities of firms, helping them to overcome the significant initial costs of access to foreign markets, with indirect benefits for the entire economy that justify public intervention. It is essential, however, to ensure that the system is designed in a way that avoids coordination problems among the different national and local organizations that participate in it, thereby maximizing the results achieved in relation to the human and financial resources used. The reform measures that the Government is preparing to implement must also be assessed with these parameters. Lastly, it is essential, for economic development and for the quality of social life, to relaunch Italy’s international openness. This task falls within various spheres of public action at different international levels: from trade policies, defined at European level, where the priority remains bringing the WTO negotiations to a positive conclusion; to competition policies, which can play a valuable role in opening up markets, especially in the crucial sector of services; to all the forms of international cooperation, beginning with policies for migrations, which can foster greater economic and social integration among countries at different levels of development, with benefits for all.