1
Alla mia famiglia che è per me preziosa guida e sostegno insostituibile
nel mio cammino di vita.
2 Abstract (Italiano)
Il presente lavoro descrive l’evoluzione delle disuguaglianze regionali in Italia a partire dalla metà del secolo scorso, con particolare riferimento alle politiche intraprese sia a livello nazionale che europeo per promuovere la crescita economica nel Mezzogiorno. Il persistente dualismo tra Nord e Sud rimane un tratto distintivo dell’economia italiana, rispetto agli altri Paesi Membri dell’Unione.
Lo scopo della tesi è quello di approfondire le dinamiche che sottendono tali disparità a livello di crescita e sviluppo economico. In particolare, il presente documento si sofferma sull’efficacia degli interventi messi in atto fino ad oggi e sulle cause che hanno impedito una reale ripresa del Mezzogiorno. Lo studio mette in evidenza il ruolo centrale giocato dall’inefficienza della pubblica amministrazione, l’inadeguatezza infrastrutturale e la criminalità come deterrenti per gli investimenti esterni.
Nel dettaglio, il presente lavoro si concentra su un’analisi accurata della crescita del PIL, del livello degli investimenti in conto capitale, tasso di occupazione e volume delle esportazioni. L’attuale contesto economico del Sud Italia mostra timidi segnali di ripresa, specialmente nei settori dell’agricoltura e dell’industria e nel commercio estero.
Dopo avere esaminato i dati forniti, risulta evidente che nel corso degli ultimi due decenni i fondi destinati al Sud si sono significativamente ridotti, anche per far fronte ai vincoli europei. La tesi intende porre in rilievo la necessità di aumentare gli investimenti in conto capitale al fine di creare un contesto imprenditoriale favorevole e un tessuto industriale specializzato e produttivo. Risulta così evidente che le politiche nazionali attuate fino ad oggi debbano essere riviste e concentrate su pochi obiettivi prioritari, oltre ad essere integrate più efficacemente alle misure adottate in ambito europeo.
3 Abstract (English)
This paper offers a picture on the evolution of the Italian regional disparities from the second half of the last century, focusing on the main policies carried out both at a national and European level to boost economic growth in the Mezzogiorno. The long- lasting dualism between North and South remains a distinctive feature of the Italian economy compared to other European Member States.
The scope of this thesis is to develop further understanding of the dynamics behind inequality in economic growth and development. Namely, the present work sheds light on the effectiveness of the policies carried out up to now and on the main causes which have prevented a real recovery of the Mezzogiorno. The research highlights the key role played by the inefficiency of public administration, infrastructural inadequacy and organised crime as deterrent for inward investments.
More specifically, the present work focuses on an accurate analysis on GDP growth, level of investments in capital spending, rate of employment and volume of exports.
The current Southern economic framework suggests tentative signs of recovery especially in agriculture, industry sectors and foreign trade.
Upon examination of the data provided, it becomes clear that throughout the last two decades the funding allocated for the South is significantly reduced, also to face European constraints. This paper aims at giving evidence of the need to increase investments in capital spending in order to create a favourable business environment and a specialised and productive industrial fabric. It is therefore evident that the national policies implemented up to now need to be revised, concentrated on few priority goals and finally integrated more effectively to the European measures.
4 Abstract (Français)
Cette thèse décrit l’évolution des inégalités régionales en Italie à partir du milieu du siècle dernier, mettant l’accent sur les politiques mises en œuvre au niveau national et européen pour promouvoir le développement économique dans le Mezzogiorno. Le persistant dualisme entre Nord et Sud reste un trait distinctif de l’économie italienne par rapport aux autres États Membres de l’Union.
Le but de cette thèse est d’explorer les dynamiques qui sont à la base des différences dans le taux de croissance et de développement. En particulier, le présent document se concentre sur l’efficacité des mesures prises jusqu’à présent et sur les causes qui ont empêché une reprise réelle du Mezzogiorno. L’essai met en évidence le rôle clé joué par l’inefficacité de l’administration publique, l’inadéquation des infrastructures et la criminalité qui freinent les investissements étrangers.
Dans le détail, le présent papier se focalise sur une analyse minutieuse des données sur la croissance du PIB, les investissements en capital, le taux d’emploi et le volume des exportations. Le contexte économique actuel du Sud de l’Italie montre timides signes de reprise, en particulier dans les secteurs de l’agriculture, de l’industrie et du commerce extérieur.
Après avoir examiné les données fournies, il résulte évident qu’au cours des deux dernières décennies les fonds alloués au Sud se sont réduits considérablement pour faire face aux contraintes européennes. Cette thèse veut mettre en évidence la nécessité d’augmenter les investissements en capital afin de créer un environnement économique favorable et un tissu industriel spécialisé et productif. Il apparait ainsi clairement que les politiques nationales mises en œuvre jusqu’à présent doivent être révisées, concentrées sur les objectifs prioritaires et intégrées efficacement aux mesures adoptées dans le cadre européen.
5 TABLE OF CONTENTS
INTRODUCTION……….9
CHAPTER 1 THE EXTRAORDINARY INTERVENTION FOR SOUTHERN ITALY FROM 1950 TO 1992 1.1 The pre-industrialization policies (1950-1956) ………12
1.2 The industrialization policies (1957-1973) ………...16
1.3 The transition decade (1974-1983) ………...21
1.4 The end and failure of the extraordinary intervention (1984-1992) ……….…24
CHAPTER 2 THE ORDINARY INTERVENTION POLICIES FROM 1992 TO THE PRESENT DAY 2.1 The transition phase and the launch of the Nuova Programmazione (1992-2000)...29
2.2 The national measures within the Agenda 2000 Programme (2001-2006).………..36
2.3 The Great Recession and the National Programme for the South (2007-2013).…...40
2.4 The government interventions within the Europa 2020 Plan (2014-2020).……….45
CHAPTER 3 THE ROLE OF THE EUROPEAN UNION IN THE RECOVERY OF SOUTHERN ITALY 3.1 The European Union’s policy instruments for the development of Southern Italy...52
3.2 The impact of European Cohesion Policy in the Mezzogiorno……….59
3.3 The Southern Italy economic situation within the current EU framework…………65
CHAPTER 4 AN EVALUATION OF THE POLICIES IMPLEMENTED FROM 1998 TO 2019 FOR THE RECOVERY OF SOUTHERN ITALY ECONOMY 4.1 The Southern Italy economic performance throughout the last 20 years…………..70
4.2 The causes of current Southern Italy backwardness………..81
4.3 Some development proposals for a solid Southern Italy’s growth………93
6
CHAPTER 5 A COMPARATIVE ANALYSIS OF A LIST OF KEYWORDS ABOUT
“SOUTHERN ITALY ECONOMY” IN A CORPUS OF NEWSPAPER ARTICLES WRITTEN IN ENGLISH
5.1 A brief introduction to corpus linguistics………100
5.2 Types of corpus and criteria of classification………..102
5.3 An historic account on concordance software……….105
5.4 AntConc a concordance program for corpus analysis……….106
5.5 My data………108
5.6 Analysis of the linguistic features of some selected lexical items………..108
5.7 Concluding remarks………117
CONCLUSION……….118
BIBLIOGRAPHY……….121
7 List of Figures
Figure 1. Public investments in Italy and in the Euro area……….72
Figure 2. Production capacity (billion euros of added value for every 1000 inhabitants)………..73
Figure 3. Total employed per geographical breakdown (reference period 2008-2017)..75
Figure 4. Employees with fixed-term contracts (2008-2017 years) ………...76
Figure 5. Employees with open-ended contracts (2008-2017 years) ……….76
Figure 6. Employment trend for geographical breakdown………..76
Figure 7. Rate of unemployment for geographical breakdown………...77
Figure 8. Impact of absolute poverty in Italy for geographical breakdown………78
Figure 9. Fertility rate for geographical breakdown from 1999 to 2017 (number of children per woman aged from 15 to 49 years old) ………79
Figure 10. Internal migration flows in Italy from 1995-2016……….80
Figure 11. Evolution of public spending for public works 1970-2016………...82
Figure 12. Extension of motorway network per 1.000 Km2 of land area – Year 2016..84
Figure 13. Extension of railway network per 1.000 Km2 of land area – Year 2016…...84
Figure 14. The major European ports for container handling – Year 2006……….86
Figure 15. Index of the quality of regional public administration (2007-2016) ……….87
Figure 16. Rate of higher education continuation for geographical breakdown (2000- 2016) ………...…92
Figure 17. Figure 17. An assessment of the percentage of the firms that benefitted from the Industria 4.0 incentives in 2017, breakdown by geographical location………97
8 List of Tables
Table 1. Outline of the major legislative measures carried out within the extraordinary
intervention framework ……...………...28
Table 2. Investments in each sector (annual rates of change %) (a)………72
Table 3. Annual and cumulative rates of GDP growth in real terms (%) ………...74
Table 4. Economic forecasts for the period 2018-2020 according to some macroeconomic variables for geographical breakdown and their variation in %...74
Table 5. Demographic trend from 1991 to 2011………...…..79
Table 6. Migration flows calculated according to the changes of address (2002-2015).81 Table 7. Synthetic infrastructure endowment indices (Italy indices = 100,0) …………83
Table 8. Information on the railway network RFI with specific reference to the type of track and the extension for geographical breakdown………..85
Table 9. Major European ports for container handling………...…86
Table 10. Irregular workers for geographical breakdown………..90
Table 11. Schooling rates in EU countries and in the Italian macroregions (values %).92 Table 12. An assessment of the 2018 funds’ allocation………...94
Table 13. Most frequent words in both corpora………....109
Table 14. Collocates of growth in 2017 corpus……….109
Table 15. Collocates of growth in 2018 corpus……….111
Table 16. Term file of growth………...112
Table 17. Collocates of investment in the 2017 corpus……….113
Table 18. Collocates of investment in 2018 corpus………...114
Table 19. Term file of investment………..…115
9 INTRODUCTION
The present paper deals with the long-lasting economic inequalities between North and South of Italy. Policies and special incentives aimed at improving the socio-economic conditions of Southern Italy failed to foster a strong autonomous growth and to improve the endowment in collective goods. Important contradictions are still manifested in the levels of poverty, unemployment, public spending and quality of infrastructure.
The decision to treat the issue of the Italian dualistic economic situation derives me from the interest in exploring the origins of the problem, evaluating the results achieved and analysing the causes which prevent a real recovery.
The objective of my work is to provide an overview on the evolution of Italian regional disparities, starting with a detailed outline of the main policies implemented after Second World War up to the present day, focusing on their effectiveness and presenting some proposals which can support a strong and sustainable development in the Mezzogiorno.
In the first chapter I have distinguished the four phases in the extraordinary intervention in favour of the South, by focusing mainly on the activity of the Cassa for the Mezzogiorno, a public body endowed with significant financial resources for the reduction of backwardness in the South. During the first years of operation, the Cassa carried out the agrarian reform and allocated great funds to increase the infrastructure endowment in the Mezzogiorno. In the 1960s the main efforts were concentrated to foster heavy industrialisation, by granting incentives to Northern firms which located their business in Southern regions. However, the oils shocks of the 1970s, the Lira currency crisis starting from 1992 and the increased European integration contributed to destabilise the fragile economic situation of Southern Italy and led to the abolishment of the Cassa in 1984.
In the second chapter I have treated the new policy approach to regional development launched in Italy after the end of the extraordinary intervention. The New Planning for the South enters into force in 1998 and gave emphasis to endogenous local development, mainly based on local actors and productive specializations. The new scheme of intervention contained some significant positive changes compared to the
10
past extraordinary intervention, because it was based on a greater involvement of regional and local levels compared to the past and it was intended to increase regional productivity and competitiveness, bearing in mind the distinctive features of the different Regions.
These years have been characterised by a progressive reduction in the capital spending in favour of the South and by the inadequacy and fragmentation of the policies implemented. The Mezzogiorno economy has been negatively affected by the Great Recession and only in recent years, after the introduction of some measures dedicated to promote employment and growth in the South, encouraging results have been achieved.
In the third chapter I offer a picture of the main tools provided by the European Union to promote the development of the most-lagging behind regions, with specific reference to the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund (CF). These EU’s regional funds co-finance projects that are part of operational programmes (OP) and pursue strategic priorities like strengthening the labour market, improving social infrastructure or building better traffic networks. I have dealt extensively with the impact of the funds allocated by the European Union to the Mezzogiorno and on the main causes which have prevented these financial resources to have positive results. From an analysis on the EU policies’ effectiveness I realise that in some Southern regions, such as Sardinia, Molise and Abruzzo a proper use of the EU Structural Funds there have been significative improvements in the socio-economic conditions. However, the poor outcome in the other regions of the Mezzogiorno reveals the need to improve the integration between the different levels of governance and focus on few priority goals.
In the fourth chapter I provide an assessment of the economic performance of Southern Italy according to some parameters of major importance. The analysis of the evolution of GDP growth, rate of employment, investments per economic sector and demographic trends has a great importance in understanding the overall economic situation of Southern Italy. A slight improvement in the economic conditions occurred since 2016, as a result of the implementation of a set of measures included in the Masterplan for the Mezzogiorno. The current government has confirmed its commitment to support Southern development by increasing investments in agriculture, industry and infrastructure.
11
In the fifth chapter I have conducted a corpus analysis of three lexical items: growth, employment and investment, through the use of a concordance software AntConc. The analysis was based on two monolingual and comparable corpora, which included a selection of newspaper articles written in English regarding Southern Italy economic situation, published in 2017 and 2018 in influential newspapers. Firstly, I made a word frequency list to identify the most frequent words in the texts and then I created a term file for the three most recurrent words and I checked their collocations on three main sources: the Oxford Learner’s Dictionaries, the Oxford Collocations Dictionary and the Financial Times Lexicon. The analysis focused on studying the collocations, concordances, semantic preference and semantic prosody of the selected words in order to investigate their most frequent collocates, semantic field and communicative function.
12 CHAPTER 1
THE EXTRAORDINARY INTERVENTION FOR SOUTHERN ITALY GROWTH (1950-1992)
Abstract
The first chapter provides a reconstruction of the extraordinary intervention for Southern Italy, that begins after the Second World War and, for the most part, coincides with the life span of the Cassa for the Mezzogiorno (1950-1984). In detail, it sketches the main phases of the extraordinary intervention, examining the effectiveness of the policies which have been firstly concentrated on agriculture reform and infrastructure and subsequently turn increasingly towards industry and the most capital-intensive sectors. The oil crisis of the seventies, the intention to join the European Monetary System and subsequently the need to face budget constraints, together with the crisis of the Italian political system in the early 1990s contribute to the failure of the extraordinary intervention and the adoption of new policies focused on a decisive role of regional institutions.
1.1 Pre-industrialization policies (1950-1956)
In the aftermath of the Second World War, the backwardness of the South was considered a national priority. In fact, it was indispensable to foster the growth of the Mezzogiorno in order to allow the economic development of the entire country.
In this respect, the Italian government attempted to narrow regional economic disparities by implementing a set of policies to stimulate Southern growth within the national framework. These attempts successfully raised the aggregate and the per capita income and employment but did not close the regional gap.
In 1946 the Svimez (Association for the industrial development of Southern Italy) was founded and it was led by some prominent figures coming from different cultural backgrounds such as Cenzato, Giordani and Menichella, Morandi, Paratore and Saraceno. Its executive board included some renowned foreign economists such as Paul Rosenstein-Rodan (chief of the Economic Department of the International Bank for Reconstruction and Development), Jan Tinbergen (president of the European Coal and
13
Steel Community commission for the European market), Robert Marjolin (Oecd general secretary).
The first president of the Svimez, Pasquale Saraceno, promoted the state intervention in favour of the South, since he was convinced that Southern Italy growth was the first step towards the creation of a unified nation without regional economic disparities. The agrarian reform and a programme of industrialization were at the top of the agenda for action in support of the Southern regions.
The project for the establishment of the Cassa per il Mezzogiorno1, a “Fund for extraordinary works of public interest in the South’2, was drafted by the governor of the Bank of Italy Donato Menichella, who had been chief executive of IRI, and by the Neapolitan scientist Francesco Giordani, in the past president of IRI and of the National Research Council3.
The Cassa was born with the full involvement of some of the best Italian technocrats4, most of them being part of the brain trust of the State holding IRI, that had such an important part in the rescuing of several private banks and firms during the dark thirties.
A new management style was therefore introduced, that paid a lot of attention to strategic long-term planning, a striking novelty compared to the conservative and inertial behaviour dominant in the Italian Public Administration. In particular the independence from ordinary government was considered a necessary condition for avoiding corruption and other distortive practices like political patronage5.
The Cassa was established by the Italian Parliament with the law n. 646/1950 and its period of operation was of ten years.
1 Hereafter it will be simply called the Cassa.
2 The Cassa per il Mezzogiorno was an autonomous body with legal personality and a specific territorial jurisdiction, which embraced over the seven Southern regions (later become eight: Abruzzo and Molise, Campania, Puglia, Basilicata, Calabria, Sicily and Sardinia), plus some territories of Latium (provinces of Latina and Frosinone, and several municipalities in the provinces of Rome and Rieti) and other more limited areas in the Marches (the zone of Ascoli Piceno) and Tuscany (islands of Elba, Giglio and Capraia).
3 FELICE E., LEPORE A. (2017).
4 These technicians did not advocate a Keynesian approach, instead, they supported rigorous policies intended to control domestic consumption, inflation and public expenditure, to defend lira stability and maintain stable the balance of payments.
5 DI MATTEO M., PIACENTINI P. (2003).
14
The reference model was the American Tennessee Valley Authority (TVA), created in 1933 to build infrastructures (drainage, irrigation, hydropower) in the Tennessee river system, which was considered one of the winning choices of Roosevelt’s New Deal6. The Cassa’s activity was financed by the International Bank for Reconstruction and Development (IBRD), which provided the newfound Italian agency with 1.000 billion historical lire. The IBRD aids were granted on the condition that their administration was not entrusted to bureaucratic bodies permeable to political pressure, but to a special entity that would operate under the supervision of the IBRD itself7.
The Cassa benefitted from eight loans from this international institution over the period 1951-1965. The objective of the IBRD was, not only that of supporting the actions of the Cassa but also, to define an overall economic strategy, concretely implemented through a set of public policies in favour of the backward areas.
Furthermore, the Cassa endowed itself with an organisation which effectively facilitated this autonomy. In order to avoid local pressures, it concentrated its administrative centres in the capital; in its first year of life and it made remarkable efforts to hire the best technicians and employees. As a consequence, the Cassa came to be equipped with an effective organizational structure, formed by highly qualified technicians (agronomists, geologists, architects, surveyors and, mostly, engineers). The reason why an institution essentially of a financial nature needed for technical experts in reclamation and water projects, as well in other infrastructural projects, consisted in the lack of these skills within the ordinary administration. The Cassa had to make up for such a lack of planning and implementation capacity with its own staff, in order to provide technical assistance together with the financing of projects8.
6 Example of the Keynesian approach of intervention, which occurred during the New Deal Plan and envisaged that the central State supported the demand through the creation of work and income. In the light of this previous economic experience, the Italian politicians decided to cope with the southern backwardness through a set of public policies aimed at reducing the historical lack of infrastructure in the Mezzogiorno.
7 DI MATTEO M., PIACENTINI P. (2003).
8 FELICE E., LEPORE A. (2017).
15
The drafting of the plan of intervention for the economic and social development of Southern Italy and the coordination between the Cassa and the other authorities was entrusted to a dedicated Committee of Ministers for the Mezzogiorno9.
The Cassa was engaged in approving and subsidising important infrastructural works such as the reclamation of estates, the construction of drainage systems, aqueducts, electricity networks, ports, bridges, roads and schools, as well as the creation of jobs in order to stop massive emigration10. All these actions were not substitutive, but rather additional to the ordinary intervention carried out by the State administration.
The activity of the Cassa was coupled with another significant innovation, the land reform. Two important laws were passed in 1950 in this respect. The first one known as
“Sila’s law” was issued on the 12th May and was followed by the so-called “Legge stralcio”, which aimed essentially to expropriate and redistribute vast abandoned estates privately owned to farmers11. An effective agrarian system, equipped with the latest technologies and highly productive was a necessary condition for the industrialization process which would be put in place in the next decade.
With the law n. 949 issued in 1952 the Cassa’s budget was raised up from 1,000 to 1,280 billion lire: the share of funds for agriculture had reduced to 71.1% (49.2% for reclamations, land improvements and mountain interventions; 21.9% for the land reform), while the one for civil infrastructures, the so-called “pre-conditions for industrialization”, had correspondingly raised, with the significant, new inclusion of railway works (5.9%; 11.7% of the funds were for aqueducts and drains, 9% for the ordinary roads); tourism was down to 2.3%12.
The law n. 166 of 1952 financed specific initiatives devoted to facilitate the process of industrialization of the South and it was followed in 1953 by the law n. 298, which
9 The Committee of Ministers for the Mezzogiorno was composed of the Minister of Agriculture and Forestry, the Secretary of the Treasury, the Minister for Trade and Industry, the Minister for Public Works, Minister of Labour and the Minister for Social Security. The presidency was supervised by the Prime Minister.
10 Up to 77% of amounts allocated under the original 10-year plan had to go to agriculture (49% for reclamations, land improvements and mountain interventions, 28% for the land reform), the rest to aqueducts and drains (11%), ordinary roads (9%) and tourism (3%).
11 LEPORE A. (2016) in CASSESE (2016).
12 FELICE E., LEPORE A. (2017).
16
ordered the restructuring or creation ex novo of three special credit institutions designed to provide subsidized credit to the Southern firms: ISVEIMER for continental South, IRFIS for Sicily and CIS for Sardinia. In the 1950s the policy of pre-industrialization pursued in the South laid the basis for the progress of the subsequent decade.
1.2 Industrialization policies (1957-1973)
The second phase of the extraordinary intervention was characterised by a strong reorientation of the Cassa’s funds in favour of the industrial sector.
In 1957 the Italian parliament passed the law n. 634 that introduced some relevant innovations in the governmental policies for the recovery of the South. This top-down strategy was based on the idea of creating industrialized clusters in Southern regions to exploit economies of scale and positive externalities. This law encouraged the formation of areas of industrial development (industrial clusters mostly composed of public firms which attract also private firms) and of nuclei of industrialization (industrial clusters of a smaller size), which benefitted from the granting of subsidies, such as low-interest loans, tax reductions and straight grants.
In addition, dedicated local authorities’ consortia were created in order to facilitate the localization of such activities in the underdeveloped areas. The objective of this law was to foster the localisation of public and private firms in the South, by reducing both the initial cost of installation and the operating costs13. In this respect, the strategy aimed at creating the so-called development poles: positive externalities similar to those in the more developed regions of the Country, located in these selected areas, in order to ensure to the new firms, the proximity of complementary industries, the availability of services and a well-diversified labour market14. The investments had to be localized originally in municipalities with a population less than 75.000 inhabitants, but subsequently this threshold was moved to 200.000 inhabitants15.
13 LA SPINA A. (2003).
14 However, the overall effects of the creation of development poles in the Mezzogiorno were nil or even negative because of the mismatch between the industrial specialization of the large firms, generally active in heavy industries, and the local endogenous activities present in traditional sectors like food, furniture and pottery. In CAPELLO R. (24 November 2015).
15 Domenica Farinella in CENTORRINO M., RUSSO A. (2010) states that the law 634/57 did not achieve the expected results, since it was based on an indiscriminate allocation of incentives, which led to
17
Moreover, the Committee of Ministers was assigned the task of determining the localisation of investments, the characteristics of the eligible firms and the amount of non-repayable subsidies allocated. The legislator obliged the state-owned enterprises (“Partecipazioni Statali”) to set up 60% of their investments in new plants and 40% of their total assets in the South, if they wanted to benefit from fiscal incentives and capital contributions (initially directed only to SMEs).
These big firms, mostly created during the 1930s when State intervention rescued many private firms and banks on the verge of collapsing, normally employed advanced technology and were capital intensive. They were seen as the vehicle for spreading development in the South16.
In these years Italy was growing at an unprecedented rate. The sixties were classified as the “age of the Italian economic miracle” and were marked by a decreasing unemployment, absence of serious inflationary pressures and a high degree of macroeconomic stability. In this period the Italian government implemented a set of national policies focused on a process of industrialization and investments in the peripheral economic areas. As a consequence, the role played by the Cassa became decisive for the South in achieving the convergence with the North, through a more rapid growth of the agrarian sector and an impressive rise in industrial productivity.
As a matter of fact, the Cassa’s industrial strategy of the 1960s, based on highly capital- intensive firms, could be considered effective since its activity had a long-lasting positive impact and contributed in creating the industrial fabric of the South.
The law 634/57 also envisaged the extension of the Cassa’s lifespan up to 1965 and doubled the funds allocated to finance its projects: from 1.080 to 2.069 billion lire. The new fifteen-year plan (1950-65), drafted in 1957, confirmed this re-orientation toward infrastructures and industry: for all the fifteen years since the Cassa’s foundation, agriculture had to shrink to 55.3%, followed by-aqueducts and drains (15%) and then by the proliferation of small industrial clusters, without any great advantages for the social fabric of the depressed areas. On the contrary Antonio La Spina in LA SPINA A. (2003) maintains that the funds available to the Cassa for providing incentives for the industrialization of the South, although they amounted to a small sum, were allocated in a highly selective way. Through the provision of these incentives, the central State encouraged the creation of industrialization poles localized in the southern regions and supported the SME already present on the territory.
16 DI MATTEO M., PIACENTINI P. (2003).
18
transport and communications (12.6%); fourth was industry (11.8%), then came tourism (2.7%) and school and professional education (2.1%)17.
In addition, the Cassa became responsible for the workers’ professional education and it was entrusted with the organization of specialist and training courses.
In 1962 with the law n. 1462, the central government extended the range of beneficiaries of fiscal incentives, by allowing firms of any size to access non- reimbursable subsidies with an investment of 6 billion lire. In this way, large companies from the North were attracted by the possibility to take advantage of these tax benefits, by relocating their activities in the Southern regions.
The majority of the projects carried out in the “poles of development”, but also the very few localized outside of them, were in heavy, highly capital intensive industrial sectors:
according to the Cassa’s reports, by the end of 1970, roughly 60% of low-interest loans went to chemicals, metallurgy and engineering (by the end of 1973, their share had risen up to 70%); for what concerns the grants, these three sectors totalized 50% of the total (53.4% by the end of 1973)18.
However, between 1959 and 1969, the South lost its productive autonomy in the food, textiles, clothing and shoes industries – where a large handicraft capacity existed, substituted by the new specialization in heavy industry (iron and steel, petrochemical) led by public enterprises. Basically, the lack of entrepreneurship, individual constructive attitudes and strategic thinking was the main obstacle for the Mezzogiorno recovery, together with a lack of coordination and of industrial strategic planning to foster its growth19.
In May 1962 Ugo La Malfa, Minister for the Budget, wrote the Ministerial Statement on the Italian Economy, which provided an overall view of the Italian economic situation, highlighting its internal inequalities. In the national economic planning, great importance was devoted to the elimination of the North-South divide and to the problem of social and economic backwardness of the Mezzogiorno. La Malfa supported a central State intervention in order to cope with the South question, considered as a consequence of the industrial backwardness. He focused on three main strategies to overcome the
17 FELICE E., LEPORE A. (2017).
18 FELICE E., LEPORE A. (2017).
19 CAPELLO R. (24 November 2015).
19
internal economic disparities: the intervention in the agricultural sector, the industrialization of the Mezzogiorno and the improvement in public services such as education, health, social welfare and regional planning.
The gap in development between the Northern and Southern regions of the Country started to close in the late sixties and early seventies as a result of systematic subsidies, public infrastructure expenditure, and the creation of industrial development poles based on the construction by state bodies (IRI, ENI) of big plants in heavy industry20.
In 1965 the Italian parliament issued the law n. 717, which extended the life of the Cassa until 1980 and increased its powers and available funds, by providing for more significant financial resources for growth poles and areas of development21. This law prescribed the formulation of a “multi-year coordination plan”, aiming at linking the regional policies for the South to the emerging national planning. In this respect, the results were disappointing, mainly due to the lack of coordination between national and regional policies22.
The Minister for the Mezzogiorno, originally conceived without portfolio, was assigned the task of ensuring the compliance of the Cassa’s activity with the national planning. If on the one hand, the Minister for the Mezzogiorno increased his importance in the coordination, decision-making process and control over the projects, on the other, the Cassa was deprived of its original autonomy from the political sphere and of its relative considerable freedom of action.
Law n. 717/1965 determined three major changes in the management of the extraordinary intervention. Firstly, it led to a greater politicization of the Cassa’s activity, since its work was subjected to the control of the Minister for the Mezzogiorno.
Secondly it extended Cassa’s tasks at the expense of its traditional efficiency and effectiveness of intervention. Thirdly it contributed to submit Cassa’s work to a considerable bureaucratic control23.
20 DI MATTEO M., PIACENTINI P. (2003).
21 The Cassa budget for the period which goes from 1971-1975 was raised up to 3.126 billion of lire, to use half of them for industrial development purposes.
22 FELICE E., LEPORE A. (2017).
23 CONDELLO G. (2007).
20
The end of the sixties in Italy was characterized by internal social conflicts and trade union struggles, followed by an increase in the labour cost, the abolition of regionally compartmentalized labour contracts (“gabbie salariali”) and the adoption of a legislation favourable inclined towards workers, brought to a strong raise in the social expenditure.
In 1971 the Parliament passed the law n. 853, which abolished the Committee of Ministers for the Mezzogiorno and entrusted to a new body, the CIPE (Inter-ministerial Committee for the Economic Planning) the control and coordination of the activities of the Cassa, on the basis of well-defined programs. In addition, the law defined with general and specific directives the prioritised productive sectors and the areas on which focus the aids24. The government decided to abandon a capital-intensive type of development, in spite of having scheduled more substantial incentives for the SMEs.
Moreover, the legislator introduced the duty by the Minister for the Mezzogiorno and by the regions to draw up special projects and then submit them to the CIPE. The Cassa was entitled only to draft technical projects and to implement them after the assessment of the CIPE. In five years, 30 projects were implemented and those concerning water supply and regional facilities represent the more significant ones in terms of expenditure.
In the 1970s the Regions started to act as autonomous entities more than twenty years after the Constitutional Law had envisaged them. With their birth, the push towards power decentralization and a bigger role for local governments became stronger.
According to the 1971 regulations regions substituted the Cassa in many areas, including agriculture, road networks, urban development, tourism and took over in the implementation of some interventions. However, the Cassa was allowed to go on with its activity until the completion of the works already begun, which meant that it actually could continue to work in these areas for most of the seventies.
In this way, the new-established regions greatly increased political influence over the Cassa, by directly intervening in the planning and carrying out of the projects, and by progressively replacing the Cassa’s technicians with their own local bureaucracy (often selected through political loyalty)25.
24 The law n.853/1971 increased to 80% the percentage of new industrial investments of the state-owned enterprises to localize in the South and to 60% the percentage of total investments.
25 FELICE E., LEPORE A. (2017).
21
In the early seventies, following the establishment of the regions and the increasing fragmentation in the process of decision-making, the propelling phase of the Cassa came to an end. The temporariness of the interregional interventions and the lack of development policies able to integrate the Southern Italy’s economy with that one of the North and with the European one, determined gradually the shift to an ordinary model of intervention for the Southern question.
1.3 Transition decade (1974-1983)
The second half of the 1970s were years of deep crisis and high inflation in Italy. As a consequence of the oil crisis, many countries, including Italy, implemented a rationalization of resources. Moreover, the abandonment of exchange rate agreements set out under the Bretton Woods system, the creation first of the “Monetary Snake” and then of the European Monetary System (EMS) imposed a change in the priorities of the Italian government. The continuous currency realignment favoured competitiveness and export led growth mainly in the Centre-North.
Namely, the oil crisis of the 1970s resulted in a slowdown in the world economy and in Italy, where GDP growth fell below 3.6%. Conflicts over income distribution and the exceptional rise in the cost of labour caused difficulties for Italy’s large firms. Above all, the crisis affected energy-intensive heavy industry, which were located in the South, because they were more fragile (with higher transport and labour costs, for instance).
The actions of the policymakers aimed to subsidize the firms operating in obsolete sectors, which were no longer profitable.
Smaller firms kept the economy going, taking advantage of their greater organizational flexibility and their ability to adapt to the demand for personalized products. They benefited from the depreciation of the lira. Especially in the North-East and the Centre, the organization of small firms in industrial districts gained ground.
During these years, the economic policy in favour of the South had begun to lose in effectiveness since the late 1960s and, by the 1970s, it was no longer capable of expressing (and implementing) a new, coherent development strategy: the Cassa’s aids continued until the mid-1980s, but they went lost amid unproductive uses and at times they even favoured organized crime26.
26 FELICE E., LEPORE A. (2017).
22
As a matter of fact, the Cassa had progressively lost its autonomy since the mid-1960s, as it was subordinated first to the Italian government (since 1965), then to the new regional administrations in the South as well (since 1975). As a consequence, financial aids, which should have served to promote development, became a source of power for the local elites, given that they were distributed by way of political nepotism; they even distorted incentives to the middle and high classes of the Southern society, insofar as they ended up encouraging the search for permanent rents via personal loyalty, rather than innovation via risk and entrepreneurship27.
The 1975 was a turning point, signalling the end of the first phase in which incentives were provided without discrimination between industries. In view of serious disequilibria in the markets in energy products and in the prices of industrial inputs, a conviction had emerged during the first half of the 1970s that Italian industry needed to undergo profound structural change in order to cope with the sharp variations in relative prices and international competitiveness. These concerns were fuelled by numerous analyses that underlined a certain degree of rigidity in Italian industry and its inability to restructure itself and introduce technological innovations28.
With the law n. 183/1976 a five-year plan was drafted with the aim of redefining the special projects of intervention, establishing the directives for an industrialization policy and facilitating the coordination between the extraordinary and ordinary intervention. In addition, a permanent parliamentary bicameral commission was set up with the aim of coordinating all the investments in the South. The role and competencies of the Committee for the South were consolidated, by entrusting the committee with the task of controlling the planning and realization of the extraordinary interventions in the Mezzogiorno. The Cassa remained in charge of drawing up technical plans and to realize inter-regional projects of national importance. A new area where the Cassa had to operate, the so-called ‘development regional projects’, of specific interest to the regions, was established, to which the central government allocated 2,000 billion lire.
The competencies between the regions and the Cassa were not clear-cut and the decision to assign the regions the realization of many projects approved by the Cassa
27 TRIGILIA C. (1992).
28 PADOA SCHIOPPA KOSTORIS F. (1993).
23
caused some problems, due to the inability of the local authorities to manage this workload.
The law 183/1976 envisaged a new role for the Cassa, which would gradually be shorn of the functions for which it was created. In the legislator’s intention, the Cassa would have been gradually replaced by the regions, to whom it should have originally provide advice and technical support. In this regard, this provision enhanced the participation of local authorities, appointed regional representatives to the Cassa’s executive board and assigned to the Regions advisory powers on all the legislative initiatives and decisions of the Committee of Ministers for the Mezzogiorno.
The Presidential Decree n. 902 of 1976 introduced a National Incentives Fund, for industrial credit facility, 65 percent of which was reserved to Southern regions. The law n. 675/1977 on the restructuring and reorganization of industry at a national level together with the d.p.r. n. 902/1976 introduced a logic for intervention according to sector, as opposed to the traditional system of blanket incentives.
In the second half of the 1970s, the Italian industry continued to figure in the so-called traditional sectors, but its production methods had changed radically, thanks to the introduction of the new technologies able to increase factor productivity and modify factor-input ratios. Italy had a growing trade surplus on manufactured goods, with exports increasing more strongly than imports. The last years of the period under consideration saw a growing international integration of Italian industry and a steady improvement in the competitiveness of the very sectors that had been identified as areas without prospects for growth or competitiveness29. Furthermore, as argued by Trigilia, in this period even industrial aids to the South were counter-productive, as long as they provided the wrong incentives (to get funds from the Cassa without bothering for economic rationale) to local entrepreneurs30.
In 1983 the law n. 651 was passed by the Italian parliament and introduced a three-year plan for the development policies in the Mezzogiorno rather than the previous five-years program. This three-year program was drawn up by the Minister of the Mezzogiorno, taking into account proposals coming from the regions. The general intention of the Italian government was to end the extraordinary intervention, but the Cassa’s lifespan
29 PADOA SCHIOPPA KOSTORIS F. (1993).
30 FELICE E., LEPORE A. (2017).
24
was extended every six months through decrees, until the d.p.r 6 August 1984 which marked the abolishment of this agency. The central government identified in this provision three policy areas of the extraordinary intervention: systematic measures, incentives, technical support and training. It is worth to pointing out that all the laws passed in the decade from 1974 to 1983 attempted to coordinate the ordinary activities with the extraordinary intervention, by promoting the creation of positive synergies between the various parties involved.
The period which goes from 1974 to 1983 was characterized by a deep stagflation, which resulted in a rapid increase in inflation and a moderate growth in unemployment.
The accentuation of international competition during the 1980s caused public intervention in all countries to be concentrated more strongly on trade flows. In Italy, exports were aided by public subsidies for credit to finance exports of capital goods, while the law n. 227 of 1976 increased the subsidies available and reorganized the institutions responsible for granting export credit and export-credit guarantees.
In the 1980s industrial policy continued to be influenced by uncertainty about the prospects for the further development of the Italian industrial model. Measures therefore remained fragmented, and aimed at coping with emergencies or sectorial crises rather than achieving planned and strategic objectives of industrial growth31.
1.4 End and failure of the extraordinary intervention (1984-1992)
The fourth phase of the extraordinary intervention was marked by the abolition of the Cassa and the consequent failure of a State-aid policy launched in the aftermath of the Second World War. There were years characterized by the deceleration of inflation and the progressive increase in unemployment. In the eighties, Italy experienced a period of crisis as a result of the collapse of the Bretton Woods monetary system and of the rise in the international oil prices. In these years the Italian parliament issued a set of laws which put an end to the active development policies in favour of the South and concentrated the financial and fiscal incentives on the restructuring of Northern firms.
More generally, the years 1980 to 1986 saw a further rise in bureaucratic impediments, due first to the precariousness of the short-term extensions, then to the complexity related to the drafting of the new legislation. In fact, since 1980, the year in which the
31 PADOA SCHIOPPA KOSTORIS F. (1993).
25
Cassa’s activities had to cease, eight decrees and two laws followed in just six years to extend the agency’s lifespan32.
The first step towards the end of the extraordinary intervention was the abolishment of the Cassa, through the adoption of the presidential decree of the 6th of August 1984 by the Italian Prime Minister Bettino Craxi.
An attempt to reorganize the legislation on the extraordinary intervention was represented by the law n. 64/1986, which bore the title “Consistent legislation for the extraordinary intervention”. Through this provision the Italian government introduced Agensud (Agency for the promotion and development of the South), which replaced the Cassa that was put under liquidation two years before. Unlike the Cassa, which had technical competencies in the drawing up of the projects and executive powers to realize them, the new-established Agensud had to limit itself to the disbursement of funds and to the participation in specific “promotion agencies”. Several entities were entitled to ask for funds, from the central government to the regions, from local bodies to State- owned agencies and even to non-economic organizations, down to private entrepreneurs. In short, there was no longer a single agency charged with the task of developing Southern Italy33. Furthermore, the law 64/1986 set up incentives for business providing services and for R&D activities such as subsidised loans and envisaged measures for the development of local resources, the improvement of the quality of life, the upgrading of local economic, scientific and cultural organizations and the simplification of procedures.
The extraordinary intervention was scheduled in three-year plans (P.T.S. Piani di Sviluppo Triennali), which identified medium and long-term objectives for the development of the South and which were subject to the approval of the CIPE. The three-year programmes were implemented through a set of annual plans of application (P.A.A. Piani di Attuazione Annuali), for which the central government allocated 120.000 billion lire for the period from 1985-1993.
A Department for the extraordinary interventions was set up, with the task of making an economic evaluation of the projects submitted by the regions, which would then be included in the annual plans of application.
32 FELICE E., LEPORE A. (2017).
33 FELICE E., LEPORE A. (2017).
26
Thus, the regions were required to play a more active role, since they were consulted for drafting the three-years programmes, and more specifically they had to make proposals which would be then submitted to the Committee of Ministers before their implementation. Moreover, the Law 64/1986 introduced a new tool, called “contratto di programma”, for the implementation of inter-regional projects, which fostered the coordination of the different parties involved in the decision-making process.
The shift from a top-down to a bottom-up policy resulted into a further overlapping of functions and regulations, because of the lack in efficiency of public authorities.
The legislator redefined the competencies of the agencies for the promotion of the development in the Mezzogiorno. In this respect, law n. 64/186 entrusted these bodies with the consolidation and modernization of already existing industries. Firms could turn to these agencies for a support in improving their investments in technology, labour organization and available resources34.
The end of the extraordinary intervention was determined by the law n. 488 passed on 19th December 1992 by the Italian parliament, which abolished the Department for the extraordinary interventions in the Mezzogiorno and the newly established Agensud.
Through this provision, the central government reallocated the competencies of these two bodies to other institutions at different levels (national, regional and local authorities). In addition, it allowed firms in depressed areas, including the South, to be granted subsidized loans. It became operational only in 1996, but from 2007 it was no longer refinanced. Law 488/92 was intended to be a tool for the self-development model: as the structural intervention policy produced huge, expensive infrastructures of little social utility, and the state-owned enterprises were inefficient and inadequate, some economists deemed it appropriate to resize and shift commitments in favour of small firms, expressing best the skills and needs in the southern regions. The
34 The agencies involved in the redefinition of competencies, laid down by law n. 64/1986 were:
FINAM (Società finanziaria agricola meridionale) which was entrusted the enhancement of agricultural productivity.
FIME (Società Finanziaria Meridionale) which was designed promote the development of SMEs.
INSUD (Societò Finanziaria Nuove Iniziative per il Sud) which had to foster tourism activities.
FORMEZ which played an active role in training activities.
IASM (Istituto per l’assistenza allo sviluppo del Mezzogiorno) which was responsible for the technical support and promotion of the South, by encouraging the creation of new business activities.
27
development projects had to be revised within the broader national economic policy strategy35.
To sum up, according to Salvatore Cafiero, “first the precariousness of the extensions, then the suppression of the Cassa, which until then had retained responsibility for implementing the current regulations, negatively impacted upon the actual functioning of the extraordinary intervention”36.
The end of the 40-years extraordinary intervention policy coincided with a strong tightening of law enforcement and the beginning of a radical devolution of political and administrative power. The central government shifted from a supply-side policy to a set of public transfers to support the demand in the Mezzogiorno. In fact, in the legislators’
intention, the new economic orientation should have driven a self-maintaining growth in the South, thus abandoning the State aid policy, adopted in the previous 40 years through the extraordinary intervention.
In practice, Southern economy was too weak and dependent on the inward investments of the Cassa and on the industrial sectors, which suffered a crisis as a result of the economic restructuring process, which was postponed in the nineties to preserve employment in the South. The process of growth of sSouthern Italy required a greater effort in terms of direct public investments in order to facilitate the reconversion and the transition from large-scale industry to SMEs. The fragile industrial system of the Mezzogiorno did not receive the adequate support in the period when it needed it most.
The incentives provided by the central government had to remedy the interruption of the interventions for the industrialization of the South, but soon they became a subsidy to protect local firms. Besides, the scarce financial resources available were used for ordinary purposes, to face the inadequacies and inefficiencies of the public administrations.
To sum up, in the early 1990s, the extraordinary intervention came to an end and the development policies for the South were assimilated to those ones in favour of the depressed areas of the country. It is worth noticing that the great amount of investments made for the growth of the Southern regions, within the extraordinary intervention framework, determined a positive change in the environmental, infrastructural and
35 CANALE R.R., NAPOLITANO O. (29 October 2014).
36 CAFIERO S., (1996).
28
socio-economic conditions of the Mezzogiorno and contributed to the creation of a single internal market. Unfortunately, these measures did not manage to reduce the socio-economic divide between the North and the South of the Country, which still exists in terms of productivity, welfare and quality of life37.
Table 1 provides an overview of the laws passed by the Italian Parliament that make part of the extraordinary intervention framework.
Law n. 646/1950 Establishment of the Cassa per il Mezzogiorno with a ten-year lifespan.
Law n. 298/1953 ISVEIMER, CIS and IRFIS receive funds to finance credit facility to SMEs.
Law n. 634/1957 Extension of Cassa’s lifespan for five years, until 1965. Promotion
of industrial development areas.
Law n. 555/1959 Incentives to localize investments in industrial areas.
Law n. 1462/1962 Extension of Cassa’s activities in support of industrialization poles.
Law n. 717/1965 Extension of Cassa’s activity up to 1980.
Increase of its competencies and of its financial budget.
Law n. 853/1971 Abolition of the Committee of Ministers for the Mezzogiorno. CIPE
is entrusted with the coordination of the extraordinary intervention.
Law n. 183/1976 Approval of a five-year plan of all the investments for the South.
Increase in expenditure for special projects.
D.p.r. n. 902/1976 Establishment of a national fund for industrial credit facility, 65 percent of which reserved to southern territories.
Law n. 675/1977 Industrial restructuring at a national level.
Law n.651/1983 Definition of the new Cassa’s policy areas.
Adoption of a three-year plan of intervention by the CIPE.
D.p.r 6 August 1984 Abolition of the Cassa.
Law n. 64/1986 Restructuring of the extraordinary intervention.
Creation of Agensud.
Law n. 488/1992 End of the extraordinary intervention.
Table 1. Outline of the major legislative measures within the extraordinary intervention framework. For a similar table, see LA SPINA A. (2003) pp. 232-233.
37 CONDELLO G. (2007).
29 CHAPTER 2
THE ORDINARY INTERVENTION POLICIES FROM 1992 TO THE PRESENT DAY
Abstract
The second chapter deals with the national policies carried out to support Southern Italy recovery, after the end of the 40-year State aid policy. The Lira currency crisis and the signature of the Maastricht Treaty in 1992 lead to a public sector reform, financial restructuring and a steady drop in public investments for the Mezzogiorno. The New Planning for the South enters into force in 1998 and is based on the intention to decentralise development policies by entrusting a central role to regions, which obtain very extensive powers, as a consequence of the reform of Title V of the Constitution.
Despite the government’s intention to consider the Southern question as a national priority and to resolve it through ordinary policies, the failure to reach the 34% of the investments in capital spending for the South, shows the inadequacy of the overall financial commitment. In recent years, a tentative recovery in the South has been fostered by the creation of SEZs and the provision of fiscal incentives, promoting the establishment of a favourable business environment.
2.1 The transition phase and the launch of the Nuova Programmazione (1992-2000) In the early nineties, the end of the 40-year State aid policy was accompanied by structural changes in the Italian economic framework.
In particular, in September 1992, the Lira was involved in a speculative attack, which led the Italian government to operate a devaluation of the national currency38 and subsequently to exit the European Monetary System (EMS). The Lira crisis had consequences on the sustainability of the Italian public debt, claiming for a sharp
38 As documented by Miniaci and Weber (1999) the Lira crisis caused a reduction of GDP and household income of about 1.2% and 5% respectively, for the only year 1993. In the last quarter of 1992, the real exchange rate of the Italian Lira fell by about 10.25%, contributing to pushing Italy out of the European Monetary System (DI CARO 2014).
30
reduction of public spending that was partially achieved through the liberalization of some over-regulated markets and the privatization of relevant publicly owned firms.
As noted by Gianfranco Viesti among others, the process of privatization of Italian public companies had uneven consequences at a territorial level, with investments in railroads and highways decreasing more in Southern regions than in Northern ones39. The systematic program of privatization carried out by the Italian government contributed to fiscal consolidation, by keeping the stock flow adjustment broadly neutral, but it also helped to curtail the excessively bureaucratic system, while enhancing the outlook for the country’s financial markets and private entrepreneurship40.
In the first half of the 1990s the Italian economy slowed down further, to an average annual rate of growth of 1.4 per cent, compared with 2.4 per cent in the 1980s. The slowdown was common to other industrial countries as well, but it was more significant in Italy41.
At first, the devaluation of the Lira increased Italian districts’ competitiveness and allowed to collect resources to invest in innovation42, but once these effects had been exhausted, there was a gradual loss of world market shares and the rate of increase in labour productivity diminished sharply43.
However, since 1997, after a long period of stagnation, GDP growth occurred and raised to an average of about 2-2.5% a year. Also, the rate of employment began to recover since the beginning of 1999. The overall national economic growth was driven by the complex network of SMEs, working in the “made in Italy sectors” of households’
goods, textiles and apparel, and the typical Italian food industry.
In fact, the crisis of heavy industry and standardized manufactured goods was counterbalanced by the emergence of numerous industrial districts. The increase in
39 DI CARO P. (2014).
40 VERCELLI A., FIORDONI L. (2003) in DI MATTEO M., PIACENTINI P. (2003).
41 FAZIO A. (14 December 2002).
42 It is worth noting that the less export-oriented southern economy benefited less from the Lira devaluation.
43 After the abolition of the extraordinary policy of intervention for the Mezzogiorno, the rate of unemployment in the South switched from 15 per cent of 1992 to 20 per cent of 1998 (in North Italy it dropped from 7 per cent to 6,7 per cent).
