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Investment Confidence in Italian Manufacturing Faltering


Italy is a beautiful country and is often thought of as the cradle of Western civilization, but the last century has not been kind to the country’s political and business scene. It has had more than 80 governments since World War II and the volatile political environment does not generally inspire confidence in outside investment. Moreover, Italy has been in recession since 2000, and the turmoil that Brexit has unleashed in Europe is hampering its recovery. It seems that the country just can’t catch a break.

Hopes Dashed

There seemed to be hope on the horizon—recovery was happening, and reports in July 2016 show that manufacturing confidence and consumer sentiment were rising. The International Monetary Fund said that this year, the Italian economy would expand 0.9 per cent, and 1 per cent in 2017. At the time, Prime Minister Matteo Renzi projected upbeat messages claiming that that “Italy is back” after years of recession. However, Italy’s weak productivity and economic bottlenecks, which have slowed growth for the last 20 years, are not conditions that can be easily removed by words alone.

And unfortunately, Renzi has resigned in the aftermath of a referendum on the constitution. The new Prime Minister, who is heading the same coalition that Renzi is a part of, is likely to continue with similar policies, but it is currently unknown whether this will be enough to stop the economy from falling into recession again. The much-vaunted rising confidence in the economy has fallen again to its lowest level since the middle of 2015, as the turmoil around the referendum result continues. With all of this uncertainty, it is little wonder that investors are loath to put their money into an economy that now doesn’t seem like such a safe bet.

What Went Wrong?

So what was the referendum about, and why did its result send economic shockwaves through Italy, Europe, and the rest of the world? The premise of the referendum was to reform the turbulent Italian political system, in the most comprehensive manner since the end of the monarchy in 1946. The new system was designed to increase governmental stability by giving the ruling party more control over legislation and weakening the power of the Italian Senate. The effect in the case of a ‘yes’ vote would be to increase investment confidence and shore up a shaky political system famous for falling apart every few years.

But that didn’t happen. Opposition parties and constitutional law scholars attacked the plan, claiming that it gave the government too much power and took representation away from Italy’s regions, concentrating power centrally instead. As a result, almost 60% of the population voted ‘No’, in a decisive rejection of the government’s plans. It seems that the plan fell victim to the same economic populism that is rising across Europe and the world, from Brexit Britain to the election of Donald Trump in the United States: people rejecting a status quo that they feel is being pushed on them from above with no accountability.

Ways Forward

It’s not all bad news for investors, though it certainly seems so at the moment. There is much fear and uncertainty in the world, with people understandably upset about stagnant wages and the lack of good jobs. However, as the world transitions to a more automated future, there are opportunities for investment in companies and machinery that will require a skilled, highly technologically literate workforce to build, operate and repair. Self-driving cars and trucks are already being extensively tested and are almost ready for rollout; automated checkout machines in supermarkets are ubiquitous; and robots in factories are on the increase.

While a lot of this new technology is worrying for workers, there are opportunities here for them too. For example, changing careers to be an Electronics Technician, or training as a robotics technician—especially through the use of online technology courses—has never been a better bet for a more secure future. With any luck, economies like Italy’s will be able to transform themselves and become surer, safer bets for investors as the automation economy marches forward. It’s a lesson that not just Italy, but the whole world, will have to heed in the coming decades.


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