After the Three Italies: Wealth, Inequality and Industrial Change

Preface and Acknowledgements This book is one of the results of a research project (L213252028) funded by the UK Economic and Social Research Council under its ‘One Europe or Several?’ programme. The project was entitled Regional Economic Performance, Governance and Cohesion in an Enlarged Europe. The aim of the project was to discover whether, as EU integration and enlargement moved ahead, Europe’s regional economies were moving closer together, or whether new geographical differences and inequalities were being created. To this end the research concentrated on developed and less-developed areas in four countries: England, Italy, Poland and Slovakia. Aggregate data on the performance of regional economies were collected in each country. A plant-level survey of 482 establishments was also completed, as were 165 interviews with firms and regional development institutions. The research profited greatly from the support of the Programme Director, Helen Wallace (European University Institute, Florence), the contributions of the main researchers, Jane Hardy (University of Hertfordshire), Ray Hudson (University of Durham), Al Rainnie (Monash University), David Sadler (University of Liverpool) and Adrian Smith (Queen Mary, University of London), and the energy and enthusiasm of two research fellows, Alex Bolland and Brian Haywood (University of Sussex). As far as the Italian research was concerned, a major contribution was made by Ray Hudson who took part in the Italian field work and whose reflections helped shape this volume. In Italy, Gioacchino Garofoli (Università degli Studi dell'Insubria), Anna Giunta and Flavia Martinelli (Università della Calabria), Alfredo del Monte (Università di Napoli Federicio II) and Vittorio Nicolardi (Università degli Studi di Bari) made helpful and sometimes vital contributions. A number of other people played helpful roles in setting up and carrying out surveys and interviews: Emanuela Altomare, Cesare Benzi, Matteo Boemi, Oronzo Catucci, Lesley Dinnen, Fabrizio Guzzo, Caterina Marini, Alessandro Muscio, Michele Santangelo and Vincenzo Sileo. The idea of writing this particular book emerged in the final year of the project. At that time Lidia Greco took part in some of the interviews in southern Italy, and the two authors co-drafted a report on the Italian research for the End of Project Workshop held in Sussex in April 2002. At the same time both authors had worked for more than a decade on aspects of Italian regional and urban development and shared a concern about the adequacy of the perspectives and interpretations that dominated much of the international literature. The aims of this volume are threefold. The first is to provide an updated picture of Italy’s regional inequalities and to develop more generally applicable methods for documenting and analyzing them. To this end Italy's economic performance, its recent development relative to other European countries and the rest of the world, its internal differentiation and its persistent regional inequalities are all analyzed. The second is to examine the changing territorial division of labour in a number of economic sectors. A disaggregation of trends in regional development permits the identification of the contribution to regional performance of firm performance, which is itself examined in the light of corporate strategies that unfold in the context of wider product and value chains. The third is to help develop a critique of neoliberal theories of convergence and spatial development, to provide a new synthesis of theoretical ideas in economic geography, and to contribute to revitalized political economy approaches to territorial development. As far as the examination of Italian regional inequality is concerned, it is important to recall that the overturning in the 1990s of the post-WWII political order, the restructuring of interest group representation, the implementation of a series of administrative and policy reforms and the process of European integration created hopes of more successful economic and political development. In the field of regional studies, the exceptional growth of industrial districts in the centre and northeast of the country, innovative regional policy reforms, which replaced the top-down approach of the previous 40 years with a more democratic and participative bottom-up approach, and the evidence of economic vitality in some parts of the south renewed the hope that Italy's deep-rooted regional divisions might diminish. A careful analysis of quantitative and qualitative data suggest however a more qualified picture. Although territorial inequalities have started to diminish in the recent past, wide territorial inequalities remain. These inequalities are primarily macroterritorial and are determined by a divergence in employment rates rather than in productivity. The scale of contemporary inequality is in part a consequence of the fact that in 1974--96 Italy experienced sharp increases in territorial inequality, reversing earlier processes of catch-up and convergence: the economics and politics of excellence rewarded and strengthened successful regional economies, while unsuccessful economies were weakened and discouraged, often on the grounds that the result would be a faster increase in aggregate wealth. At the same time the Italian economy has lost momentum. Although Italy continues to occupy an important economic position vis-à-vis other advanced European countries, it confronts a number of serious challenges. Tight Euro-zone financial controls and strict constraints on macroeconomic management have constrained growth, while the end of currency devaluations relative to its European partners has exposed some of the structural weaknesses of Italy’s economic apparatus. At present, profitability and growth are suffering from the country’s specialization in traditional sectors and its dependence on slow-growing markets. What this analysis of regional inequality and economic performance highlights is the existence of a wide range of regional trajectories on the one hand and the interdependence and unevenness of Italy's economic geography on the other. In much of the recent geographical literature, however, these central features of Italy's economic geography are frequently overlooked and are no longer considered as something requiring explanation. Often this literature is characterized by region-centred approaches and a concern with what happens inside regional economies. Consequently, little attention is paid to the study of unequal economic development, socioeconomic inequalities and the role of power relations in shaping the space economy. Instead, accounts of the Third Italy, and also of the development of southern districts, addressed just one aspect of the structure and development of the space economy. Additionally, some of this literature implicitly assumes that areas that are more developed offer role models for areas that are less developed. A similar idea is an explicit aspect of neoclassical convergence models. As these models, with their expectations of catch-up, prevailed until recently, the economic literature also was difficult to reconcile with the reality of widening inequalities. The existence of these gaps between models/theories and reality suggests that there is a need for a more systematic account of regional inequalities that considers the relationships between development and underdevelopment. If development and underdevelopment are interconnected, it follows that, instead of a single pathway of modernization and development, there are multiple pathways, and that, alongside mechanisms that equalize development, there are mechanisms that make it more unequal. More radical versions of this thesis suggest that, in capitalist societies, development and underdevelopment are two sides of the same coin. An implication of these ideas is that the central object of analysis should be the shifting map of areal differentiation and the shifting mosaic of uneven development. In this volume, the analysis of regional inequality accordingly opens the way to the elaboration of a more comprehensive approach to regional economic development. To this end elements of different theoretical approaches are synthesized into an alternative and new conceptual framework. The aim is to disclose the nature of variations in regional development as the outcome of complex and geographically differentiated political and economic processes. More specifically, the framework seeks to identify the connections between comparative regional development, the underlying territorial division of labour and the mechanisms that shape it. The idea is that one can connect the changing trajectories of Italy's regional economies and the associated changes in inequality with the changing position of Italian enterprises in European and international divisions of labour, and that one can combine quantitative evidence of regional performance with quantitative and qualitative evidence of firm performance and industrial change. In the perspective that we suggest, the profit-seeking firm is the central economic actor in the explanation of industrial change. Nonetheless, the firms’ external environments and their network relations with other firms are also considered. Networks exist at a regional level. In contrast to the new regionalism, however, more attention is paid to interregional relationships and international networks. In addition, whilst acknowledging the fundamental profit-seeking nature of enterprises, the approach adopted recognizes that institutional variables, primarily the institutional environment in which companies operate, affect corporate economic performance. This institutional environment comprises not just other firms but also a set of institutional, political and cultural conditions. To summarize, this volume offers, first, an analysis of regional performance. In seeing regional performance as the outcome of the shifting relative weight of centrifugal (unequalizing) and centripetal (equalizing) forces, it provides an alternative to standard theories of catch-up. Second, it examines the role of firm performance in shaping regional performance. In doing so, it examines some of the micro-foundations of regional performance. Third, it centres explanations of the geography of industrial change on an analysis of profit-seeking in the context of wider value chains and institutional configurations. In doing so, it aims to insert a recognition of the role of profit-seeking into a theory of corporate conduct that is less rudimentary than those of mainstream economics. As with any joint work, there was a division of labour in the preparation of this volume. Michael Dunford was primarily responsible for chapters 1--4 and 6--7. Lidia Greco was primarily responsible for chapters 5 and 8. The conclusion and this preface were jointly written. All the chapters were discussed together and developed or edited in the light of these discussions. The authors wish to thank a number of people who played important roles in the preparation and publication of this volume. Franco Chiarello, Nick Henry, Ray Hudson, Benito Giordano, Roger Lee, Diane Perrons, Francesco Prota and three anonymous referees provided valuable comments on the script and/or were involved in helpful discussions of different parts of this work. Hazel Lintott (University of Sussex) drew many of the illustrations. Debbie Seymour carefully copyedited the script, while Angela Cohen and Jacqueline Scott saw the book through its various stages of production. The authors owe, finally, a special debt of gratitude to Ray Hudson for his role in initiating the collaboration that made this book possible.