The Hindu Business Line : All’s not well with Italy

At various times in history, different countries in Europe have been labelled with the epithet, ‘sick man’. Mr Berlusconi now needs to make sure that the appellation is not given to the country under his charge.

C. Gopinath

Italy’s union of transport employees, which includes rail, bus, subways, and so on, went on a 24-hour strike from 9 p.m. on July 6. They were supposed to maintain a minimum level of service to avoid throwing public life out of gear.

But what that meant was that you went to the station and stood there looking at the display board praying each time it flashed changes to see if there was a train to your destination.

You stood there waiting, in frustration, not knowing if there ever will be one because there was no announced schedule of the minimum level of service. Buses and trains seemed to run at the whim of the driver.

I know, because I stood in front of the departure announcements board, with hundreds of others, looking for a train to Pisa from Florence. I had a reservation to go up the famed Leaning Tower at an appointed time.

Finally, when I realised I will not be able to get to Pisa, and called the booking office at Pisa to cancel my reservation, the clerk reminded me that as per rules I needed to cancel 10 days in advance. Yes, they knew about the transport strike, but that was not their problem.

Visiting at the height of the tourist season in Italy, I was forewarned that I had to make reservations to visit museums and other tourist spots due to the rush. My friends did not warn me that the transport union also thought it would leverage the tourist season to raise its contract demands.

A lot on Berlusconi’s platter

Dealing with the unions on work issues is one of the many reforms that await the new Prime Minister, Silvio Berlusconi. Winning a majority in April this year, he has now ruled Italy for 16 of the last 19 years. He leads a right-of centre party but whether the left or the right have governed the country, reforming the economy is something that does not seem to move to the top of the agenda. The IMF has forecast a 0.3 per cent growth this year, putting Italy’s growth below the average for the EU. Mr Berlusconi’s power base is his Mediaset communications empire through which he controls most of private Italian television.

Now that he has control of the state-run television, he is the media but has been unable to change the public perception of him as a polarising figure in Italian politics.

During the recent G8 meeting in Japan, the US administration committed a major diplomatic gaffe by referring to him, in an official release, as a ‘controversial leader’ of a ‘country known for government corruption and vice.’ Apologies followed!

There are several corruption cases against Mr Berlusconi although he has not yet been found guilty in any. He charges that the courts are out to get him and has set himself up as a victim of the judiciary.

As a counter offensive, he has been promoting legislation that would give him breathing time by categorising cases dealing with the kind of charges he faces as having lower priority, thus ensuring that it would be a long time before they are heard.

The justification for this action is presumably to ease the backlog of cases in the courts. This has, of course, created another round of controversy.

The political and other minus points against him should not distract him from paying attention to the serious challenges that he faces with regard to reviving the economy. Areas that are crying out for reform include the protections that exist for small businesses, the poor infrastructure, and the stifling bureaucracy.

Mounting problem of garbage

The ongoing problem of garbage in Naples is indicative of the inefficient and corrupt administration that Italy seems to suffer from. Garbage has been piling up for months now, and quite often it is just carted away and dumped along the sides of the streets on the outskirts of the city.

Locals set fire to the piles and pictures of smouldering garbage circulate on the Web. The various reasons that have been advanced for this mess include the influence of the mafia in the waste management industry, insufficient incinerators and resistance from communities for new ones, and a lack of sufficient planning for creating new landfills.

Typical Third World problems that are not expected in a EU member. Mr Berlusconi made it a part of his election campaign that he would sort out the garbage mess but when I asked a resident of the city if it had been solved, he rolled his eyes. “You can add that to the other problems,” he sighed.

These include indifferent power supply, and inefficient public agencies that run utilities and are most unresponsive to consumer complaints. Alitalia, the national airline, is another example of a public enterprise that continues to operate due to life support from the state and in spite of mounting losses.

Some shining examples

In spite of these problems, private industry has been doing well and many companies have become leaders in their fields. Examples are Benetton in textiles, Luxottica in eye glasses, and Natuzzi in furniture. Even Fiat, the automobile manufacturer, has turned around successfully.

The northern part of Italy became famous as an example of how industry clusters can prosper. These clusters, for many years, were examples of how small firms can individually and collectively benefit, with vertically integrated production relationships, and drawing on shared infrastructure and a pool of skilled workers. This model is now undergoing some change.

The composition of the clusters is changing, as also the skills required to survive in the current era of globalisation. A few firms within each cluster have become larger and more competitive, and outsource not just within the cluster but across the world.

This is going to require some rethinking of the regional development model. Other reforms that would allow easier FDI would leverage the dynamism of the clusters and prove a boost to the economy.

Tourism – slipping down the list

Immigrants from Third World countries continue to flock to Italy looking for better opportunities. The Chinese community attracted attention recently in Milan when there was a flare-up between Chinese traders who are growing in importance in the wholesale and retail sectors, and the locals.

As I walk around the museums and other tourist spots, the large number of South Asians working in the souvenir shops becomes obvious. Haroon, whom I met on the streets of Venice, is one person, among many, looking forward to Italy providing more opportunities for all.

He is from Bangladesh and arrived just eight months ago, he said, after paying a dalal in Bangladesh of about Rs 8.6 lakh for getting him over here. After four months without a job, he now manages to eke out a living selling stem roses to the tourists, priced at Rs 130 for Italians and Rs 330 for tourists, he told me.

Italy has been a popular destination for tourists. You only need to walk around the streets of the renaissance towns such as Venice and Florence to believe that perhaps all the world’s tourists are here. But statistics show that even this industry has been slipping in rankings.

Mr Berlusconi has a lot on his plate. At various times in history, different countries in Europe have been labelled with the epithet, ‘sick man.’ Mr Berlusconi now needs to make sure that the appellation is not given to the country under his charge.

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. He can be reached at cgopinat@suffolk.edu)

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