Gino Moliterno. Encyclopedia of Contemporary Italian Culture

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very few firms that could actually use the products of these so-called ‘cathedrals in the

desert’ in the manufacture of final goods.

Insofar as the state’s investments in productive enterprises almost always involved

heavy industry, the industrial geography of Italy began to change noticeably after the

1960s. The heavy industries owned by the State, particularly steel (IRI) and

petrochemicals (ENI, the national hydrocarbons firm), came to dominate investment,

employment and output in the previously underdeveloped South. At the same time, inputs

from these firms fed into the large-scale mass production enterprises of the northwest,

which were mainly in the hands of family capital that had begun to realize the advantages

of stock market shares for expanding their enterprises. The small and medium-sized firms

of the northeast and central parts of Italy benefited from tax incentives and export

subsidies, but had to remain flexibly specialized in order to compete on world markets.

This situation has been defined as the phenomenon of the ‘Three Italics’.

Even though investments in the South had been quite high through the 1980s, a

fundamental flaw in the mechanisms chosen for national and regional economic growth

was that the Mezzogiorno did not achieve an autonomous capacity for sustained

industrial development. Ironically, at the very time that certain areas in southern Italy

were becoming used to the idea of being industrial, a process of tertiarization of the

economy, if not a full-blown deindustrialization, had begun. Simultaneously, the weak

equity market in Italy made it difficult for the large-scale family firms in the northwest to

float financial offerings to raise capital, and globalization made the going tougher for the

export-led growth sector of the northeast and centre. Industrial restructuring and

readjustment programmes, often painful for entire regions, were decisively implemented,

and thus by the mid1990s a whole new pattern of industrial development was underway.

The new model saw massive privatization, some closures of state participation

enterprises, a restructuring of the mass production sector, an invigoration of the

competitive drive of flexibly specialized firms through the elimination of export

subsidies, and an opening up of the Italian market to more foreign products (see also

privatization and nationalization). But privatization was only in part a response to

industrial problems; there was also a political dimension (albeit with economic

overtones). The European Union, via its commissions, had come to question the role

played by state enterprises in inhibiting trade and competition among the firms of

member states (see Masi, 1996). While Italy was not the only country with such holdings,

in the 1980s its state participation sector was by far the largest in Europe outside of the

then communist bloc. In fact, in its heyday the state participation sector employed nearly

three quarters of a million people and was engaged in activities that covered iron and

steel, cement, engineering, shipbuilding, hydrocarbons, chemicals, textiles and other

manufacturing. The holdings also extended into the service sector, including airlines,

highways, shipping, radio and telephones.

Privatization of the state participation sector was supposed to be an ongoing effort. In

the original mandate of the IRI, for example, individual firms, once placed back on a

solid financial and productive footing, were to be returned to private hands. Occasionally

this was done, but for the most part, until the mid-1980s, the state participation sector

grew rapidly, sometimes by continuing ‘salvaging’ operations and sometimes by creating

wholly new enterprises. The latter involved sectors into which private capital either could

not venture, because of high costs or simply would not, due to perceived high risks.

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While these firms for the most part did exactly what they were supposed to do, political

pressures to absorb local labour eventually led many to require state aid. Given the

sectors in which they operated, especially steel, restructuring efforts involving such aid

had to be approved by the European Commission in Brussels. The trade-off demanded for

supplying funds for restructuring was a reduction in productive capacity, and a

consequence of this was often a withdrawal of the state from ownership altogether in

order to avoid aid being funnelled illegally to such enterprises. The first major

privatization effort involved the sale of the Alfa Romeo automotive division to Fiat, and

this established a pattern of the sale of ‘national champions’ to local industrialists rather

than through a process of large-scale public offerings of stocks. By far the largest

privatization was the absorption of the old Finsider—Italsider—Ilva integrated steel-

making centres (whose most important productive activities were in Taranto, in Italy’s

southeastern region) to mini-mill operators Lucchini and Riva from Lombardy (in the

north-west, mainly centred near Brescia).

Three key factors in Italy’s successful reconstruction after the Second World War and

its overtaking of the United Kingdom in terms of gross domestic product by the end of

the 1980s were modern technology, flexible specialization and the production of high

value-added goods (Locke, 1995). In the transformation of its steel industry from a minor

competitor to the second largest producer in the European Union (after Germany), Italy’s

state participation sector invested heavily in the latest metallurgical engineering

advances. Its flagship operation was the integrated steel complex at Taranto, which in the

1980s was Europe’s largest. While the principal product of the state sector was basic or

crude steel (with some specialized items for the automotive, oil and gas industries), mini-

mill operators in Italy’s North specialized in single products, most notably concrete

reinforcement bars. Indeed, they practically cornered that market, to the dismay of the

Coal and Steel Commission of the European Union. The industrial districts of the centre

and northeast combined new technologies with a highly skilled labour force and dense

networks of social and commercial relations to produce goods to exacting standards and

customer specifications. In fact, the clothing industry in Italy has firms that are based as

much on advanced manufacturing techniques as on high fashion design.

The tight linkages between textile and garment producers in Italy have allowed Italian

firms to dominate some sectors (women’s stockings, for example) or be market leaders in

others (such as luxury men’s clothing). Recently, however, there has been some

movement toward vertical integration rather than on the more traditional co-operative

efforts. At the same time, the large manufacturers of the northwest have begun a process

of decentralization of their productive enterprises. Indeed, years after the incentive

programmes for the industrialization of the Mezzogiorno ceased, many large

manufacturers have discovered the advantages of locating in Italy’s South. Fiat now has

its largest manufacturing plant outside of Melfi in Basilicata, but has also located smaller

components factories in adjacent regions as well. At the end of the 1990s, the Melfi plant

had one of the world’s best productivity records. Fiat itself is the world’s fifth largest

automotive producer, second in Europe only to Volkswagen. In general, while Italian

enterprises have emphasized the importance of competitiveness in the global market, they

have generally chosen to compete on quality rather than on price.

Insofar as Italy is heavily dependent on the import of petroleum, its industries suffered

considerably from the oil shocks of the 1970s. The subsequent restructuring process saw

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an interesting mixture of adaptive strategies on the national level involving government

policies, national business associations and the trade union movement, and on the local

level involving stakeholders and interest groups.

The transformation of the Italian economy and in particular of its manufacturing sector

in the postwar period has been accompanied by abrupt shifts in government policies,

political alignments and the country’s industrial relations system. Eventually, however,

Italy moved from policies that favoured a form of planning to those that merely fostered a

good business climate. In so doing, it also moved dramatically to privatize its state

participation holdings, some of which were its national champions, in its successful effort

to compete on a world scale and become an integral member of the European Union. As

Italy’s Communist Party (PCI) became the Democratic Party of the Left (PDS), its

traditional strong alliance with the largest left-wing trade union (CGIL) weakened and

the latter, together with its more moderate trade union partners, began pursuing national

level negotiations directly with government and the employers’ association

(Confindustria).

The distribution of product and labour force by industrial sector in Italy continues to

change as the country’s economy responds to both internal institutional pressures and

external pressures based on tighter economic and monetary union with European partners

and greater global competition in more open markets. Significant regional differences

continue to characterize Italian industrial geography, but seem not to have worsened as

the state has withdrawn from direct subsidization of the poorer areas of the South. Italian

firms are increasingly present on foreign markets both in terms of the sale of goods

produced in Italy and as owners or partners of enterprises located in other countries.

Italy’s equity markets are expanding rapidly, and thus new avenues for financing

productive enterprises are also developing. The continued emphasis on high value-added

products, technological innovation, integration via networks or acquisitions, and flexible

specialization should allow Italy’s industrial structure to adapt success fully to emerging

and ever-changing world markets.

See also: postwar reconstruction; Third Italy; trade unions