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Industrial renaissance: digital disruption and the post 4.0 economy

Turin, 27/10/2017 - 28/10/2017, International Conference

A report on "Digital disruption and transformation of Italian manufacturing", which focuses particularly on the case of Piedmont within the context of Northern Italy, was presented at this International Conference as a catalyst for discussion on the topic of "digital disruption", examining both the great opportunities as well the risks and social costs that this entails.

It was noted that in Italy, as elsewhere, the wholesale introduction of digital technologies in production processes carries many implications for firms, but also for consumers, and thus for market regulators. Digital technologies are an essential ingredient for competitiveness and productivity – hence, also for improved and innovative services – and have decidedly lowered the technological barriers to entry into markets. Yet while acknowledging that this has been to the benefit of a large number of startups, it was stressed that these nevertheless require an ecosystem that is fit for purpose, both in terms of infrastructure (including physical amenities) and in terms of capital (especially venture capital) and regulation.

The risks – both real and perceived – of such forms of continuous innovation in any event present a challenge for economic and fiscal policies, but more broadly speaking for democratic processes as well, since consumers are also voters and can staunchly voice their fears and dissatisfaction. A vicious circle can thus be created of government choices geared to the short term, dictated more by the fear of losing a support base than by any genuine understanding of medium- to long-term socio-economic needs. At any rate, protection and support measures for those sections of society most at risk, and especially moves aimed at ensuring individuals are not abandoned to their own devices in managing the impact of major impersonal changes, were deemed indispensable in the face of the instability created in the workplace by market forces. At the same time, there was a perceived need to make the most of the opportunities offered by digitalization in its various iterations, with a view to furthering competitiveness and innovation. A specific tension cited as having emerged in more advanced societies and characterized as generational-based involved the challenge posed by youth unemployment, set against an overall backdrop of an aging population. It was submitted that such demographic issues are closely linked to the sustainability of new capitalism models vis-à-vis the demands of liberal democracies.

The participants emphasized that more equitable and sustainable innovation should translate into real social gains in standards of living. In this regard, it was acknowledged that many efforts are being made – especially in major urban centers, where technological expertise is for that matter often concentrated – to improve mobility and promote close-knit interpersonal networks through hyper-connectivity. However, there are market forces at play which, precisely due to new production and business models, are firmly pushing towards inequalities in income and, therefore, lifestyle. Careful attention must thus be paid to the physical distribution of infrastructure, skills (and hence, also specialist training centers), and large network "hubs", since after all it is not the case that geographic barriers have been overcome or made irrelevant by the various processes of globalization and by transnational value chains. This – it was felt – emerges distinctly in the case of industrial clusters, which remain an important component of innovation even with reference to relatively traditional sectors. Indeed, interchange between start-ups, large corporations, and human capital was seen as essential for the success of an economic system, and as also increasingly needing to involve the public administration in the push towards full digitalization.

It was considered that the projects being pursued in Italy in all these sectors, under the umbrella concept of "Industry 4.0", are moving in the right direction but suffer from delays and inefficiencies on the part of both institutions and the business community. There is now widespread awareness of the complexity of the transition, as well as a realization that many measures need to be taken at the EU level or, at any rate, on a continental and international scale. In this respect, standards and best practices were held up as well-known for benefiting fully from adoption on a European scale, albeit with responsibility for any necessary adaptations remaining first and foremost national. It was stressed that, in this process, the country’s economic system should play to its strengths and remedy its weaknesses.

Lastly, the participants highlighted a specific area of difficulty for institutional decision-making (whether at the European, national, or local level), namely: the choice of sectors in which to invest more resources. More particularly, the speed and manner of technological change call for ample scope to be given for experimentation, whereas there is often a temptation to focus efforts on individual "flagships”. It was acknowledged that it is not easy to find a balance between these two positions. Likewise, it was urged that a good balance needs to be struck in the field of cultural policies, in order to safeguard and capitalize on the traditions and historical roots of communities, whilst modernizing the means of cultural enjoyment and production. The participants pointed to the existence of virtuous examples of this approach in Italy, which could serve as the requisite impetus for a broader application of successful models.