Romano Prodi confirmed my theory regarding Italy's "Mexicanization" on Il Messaggero

Innovation and investments to not end up like Mexico

Confident reflections and bitter findings were at the heart of the Italian Industrial Federation’s annual assembly. The confidence is in the finding that many of the export-oriented businesses were able to transform, and in growing, they adapted to globalization’s harsh realities.

Instead, the bitter findings regard the fact that, after a long crisis, recovery is still “modest and dissappointing,” and, most importantly, the Italian system’s productivity as well as the manufacturing industry are not keeping pace with other large European nations.

Along with the productive system’s loss of velocity, a selection process has provoked the loss of almost 20% of our businesses and a general worsening in economic results of the remaining businesses.

The Italian Industrial Federation’s president and the Minister of Development followed the reading of the results with a series of proposals intended to work favorably on the dimensions of these businesses, on the rules governing them, on the easing of their fiscal debt, on investment incentives, and on a more constructive rapport between the banks and public administration. These are not only useful measures, but necessary to give form to a swift and robust recovery that we’re all counting on.

A few additional reflections are, in any case, necessary to understand the fundamental elements making this recovery so difficult.

Let’s start with a simple but surprising fact. Our system’s long productivity crisis (and therefore efficiency crisis) and the contemporary lethal crises befalling many of our businesses were in fact accompanied by an excellent grip on our trade balance, widely active in the manufacturing sector. All of this highlights that, despite the disappearance of our large businesses, Italy has centers of excellence that, despite all our limitations, assert themselves in international markets besting German, Chinese, and American competitors.

If, despite these assertions, productivity does not increase, then this means that an excessively large part of our economic system is not capable of transforming, and is surviving by seeking internal niche markets that are continually shrinking due to the bad trends in our consumption and investments and well as the pervasiveness of globalization.

If we add the numbers ISTAT regularly provides regarding the very strong growth of the illegal economy, we’ll find ourselves before an increasingly anomalous Italian economy with respect to other European countries.

Using exaggeration as a didactic instrument, in a recent television interview Alberto Forchielli described the consequences of these statistics, confirming that Italy is orienting itself to a structure similar to Mexico’s, where three different economic organs exist. The first is formed by excellent companies that challenge international markets, a second that operates in the informal sector taking advantage of market imperfections and using poorly specialized and even more poorly regulated and remunerated labor. Finally, a large part of the country lives in defiance of rule, outside the law.

I do not believe that this is invariably our destiny, but I think the tendencies carrying us toward this reality must be fought with every measure, affirming the rule of law in every circumstance and operating as a function of skilled human resources that create the successful foundation of any modern country.

Facing reality is not comforting because challanges to the educational system’s efficiency are causing it to constantly fall behind, entire parts of the country operate in the shadows, and statistics regarding the expansion of illegal activities and crime’s penetration of the economic and administrative systems are alarming. In any case, I believe that we still have the ability to react successfully, demonstrating that we have common and shared objectives.

The task of dictating and imposing the strategy to win this fight rests, naturally, on the government. But, as they say in Great Brittain, the queen expects that everyone fulfills his duty.

Given that these reflections stem from the analysis of what was said at the assembly by the most authoritative representatives of the industrial world, I want to add that, while I am embittered but not surprised that many of our greatest and most florid enterprises have fallen into foreign hands, I am embittered and surprised that the profits of these sales were absolutely not invested in progressing our productive structures.

We need to conclude by saying that, if our generals don’t feel the need to fight, no incentives from the queen will suffices to win the very difficult battle that will decide our future.

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