As the crisis at white goods maker Electrolux heralds another round of plant closures in the Eurozone’s second largest manufacturing nation, economist Guido Viale argues that Italy has to take a radical new approach based on public sector intervention.
What is to be done when the owner of a company decides to close down a plant, or to transfer production abroad to pay less tax, or to pay workers less, or to pollute the environment? As a rule of thumb, the first thing to do is to seize the company (mayors have the power to do so, if only for reasons of public order) and stop it taking away the machinery. Then you should block its financial accounts and reclaim the funds, as 9 time out of 10 it has already received subsidies from the State in the form of grants , soft loans, and rebates on tax and social security contributions. Government and the judiciary have a role to play here too. A fortiori, this applies if the contractor in question poses unacceptable conditions on maintaining production in the country, for example halving wages, as is the case with the Swedish owned manufacturer Electrolux
But what you absolutely should not do is try to find a new owner, which is the way the Italian government pretends to deal with crisis situations. Indeed, the Ministry of Economic Development currently has more than 160 such rescues on the go. If there were a “contractor” or a group willing to take over the firm, they would have already come forward under their own steam. In fact, the few Italian companies that are still performing well, especially in foreign markets, have easily found buyers : they were almost all sold off. But firms or factories that have reached the end of the line are in need of different treatment : they must redirect production and look for new opportunities, possibly in the fields that have a future, those compatible with the environment.
Of course, such a conversion of production cannot be left solely to the abandoned workers. Mayors and local administrators, universities and research centers, as well as trade unions and the voluntary sector. Because it is precisely in the affected local economy and local communities, including those that have already experienced similar processes of factory closures and de-industrialisation or territories that you have to go and look for opportunities for new productive assets. On the condition, obviously, that your find funding, but this is much easier when you already have a credible project. Funding could be available in any case, if the budgetary straight jacket of Stability Pact that blocks local administrations from taking autonomous action to support the local economy and to pursue social objectives is challenged and and reversed.
Conversely, if a new owner – or entrepreneur – comes forward only now, it is because it is expecting favourable conditions – from the state – that is a lot of money – and we can be sure that he’ll pocket it. A good example is the two bankrupts who came forward to take over the Fiat plant in Termini Imerese in Sicily. The results are : the factory lies empty, four years on, and those aspiring entrepreneurs have dissolved into thin air, or are in jail . Furthermore, a company that wants to shut down a plant has no interest in leaving to a potential competitor a brand , patents, markets, or even a well-trained workforce , and therefore will do everything to make the take-over expensive and unprofitable. The Jabil Cassina de’Pecchi plant in Lombardy that made components for Nokia is a great case study: there was everything in place to make a new start: skilled labour, equipment and cutting-edge products, interested customers, but the US owner did not intend to encourage a potential competitor and preferred to screw up the take-over. Recent history is littered with such cases: Alcoa, Alcatel , Lucent, Lucchini , Maflow , Micron Technology, and so on and so forth. When the government says Italy has to attract foreign investors, it is certainly not these plants that it is thinking of. It is just thinking about swelling the coffers of the Treasury by selling what still works or that in any case is profitable: highways , railways , post offices, energy companies Eni, Enel, Terna , etc.
The threats to quit the country or close or sell up are part of a race to the bottom to squeeze more and more out of workers : this is what the story teaches of Electrolux teaches us. If you accept the rules of neoliberal globalization, which leaves to the downward spiral of competition how production is organised and distributed in terms of sector and geography, there is no escape. The supporters of this economic orthodoxy ( both liberals and Keynesians ), say there is a way not to be subjected to this logic: go formproducts with higher value add, higher-margin : instead of producing low end cars, produce Maserati and Jeeps, instead of washing machines and fridges, industrial refrigeration , etc. . Go for production with
a higher content of technology and research .
But for products with high added value we still need to find a market, which is for the most part already occupied by someone else. For example, Fiat ( now merged with the Chrysler of the US ) has very few cards in its hand to steal market share in the European high-end market dominated by Mercedes, BMW or Audi. For this reason Fiat’s automotive production in Italy, and with its plants, are largely condemned to death. To point to a way out for the impasse facing the Italian economy – and not only Italy – the theoreticians of economic orthodoxy resort to an old theory of development dating back to the 1960s and Albert Hirschman, which is called the ” flying ducks ” – economies are like a flock of ducks flying one behind the other. As those in the lead progress to more advanced levels of technology those that follow occupy the positions abandoned by the first, and in this way the process promotes global development.
But that theory reflected the trends of fifty years ago ( with the United States in the lead, followed by Europe, Japan, Korea , etc. . ) . But today it no longer works for the simple reason that many of the countries with lower wage levels and protection for the environment, which precisely for this reason have become the manufacturers of the the world ( first among them, China), today are also far ahead of us – and not just Italy but also Europe in general – in scientific research and technological innovation: it is devastating to compete with them on wage levels, although many companies do not see any other way to try to survive, but in many cases it is also impossible to compete at a technological level, especially in Italy where education and research are despised and neglected areas.
There is one area in which Italy and Europe still retain some “competitive ” advantage (but it would be better to say, in this case, “cooperative”) , although it is also being dismantled because of neoliberal theories that reduce everything to the dollar- value, to money. This area is the complexity of social life and associations, of habits, rooted in the tradition of the cultural heritage which represents a stratification that is misunderstood and thus ignored )
It is a factor that cannot be manufactured, reconstructed or recovered in the short term and which, thanks to their tumultuous development, emerging economies has destroyed, removing the strengths of large sections of their communities, and have not had the foresight to keep or to replace it with something equivalent.
This is the premise of a process of reconstruction, on the basis of the federalist European economy that is self-sufficient (but not autarkic), non-competitive (in the sense of reversing today’s the race to the bottom) , which knows how to use available technology and disseminated knowledge , both technical and ” experienced” to refocus production towards the shared needs of the population through the enhancement of a new generation of local public services, under the control of the local and regional governments.
These would comprise: energy (geographically dispersed, diverse and interconnected plants using renewable sources of energy and with enhanced efficiency ) agri-food sector (quality agriculture and zero kilometer food industry) flexible mobility , integrating mass transit and customised transport of both goods and passengers, through the sharing of vehicles; in the recovery and enhancement of resources (what we now call waste management); in safeguarding and enhancement of the territory; ( hydrogeological , urban planning, landscape, monuments, tourist industry, etc. . ) , and especially in the fields of culture, research, education, and the protection of the physical and mental health of all.
Here, then, is a different fate for troubled companies that have lost their markets. Here then is a strategic role for local authorities wishing to take charge of living conditions, but also the wealth of experience, knowledge, technical know-how, customs and cooperation of the workforce shown the door by their employers. And, here is the absolute prerequisite for promoting an alternative government, from local initiative, to cope with the chaos in which we are condemned by the European Union’s governance. It may appear a utopia, but we are heading into a time when extreme and hitherto “unthinkable” ideas will become necessary.