Today’s global scenario calls for a strategic reflection on Italy’s role in the world: the country needs to address system-level challenges related to demographics, competitiveness, innovation, and social cohesion. These dynamics hinge upon territory, understood not just as a physical space but as a system based on relationships and identity. Italy’s resilience and its forward-looking capabilities derive from the development and enhancement of the country’s unique features: small and medium-sized enterprises (SMEs) with strong local roots, an intergenerational business culture, human capital, cultural heritage, and a pervasive sense of belonging.
The Italian economy is based on a business system that, while fragmented, has broad local reach. SMEs are one of the country’s distinguishing features, but the small numbers employed in them – an average of nine per company in the food sector, for example – limits their capacity for innovation and scale. A paradigm shift is needed: aggregation, networking, advanced business districts and networks must be viewed as strategic factors, thus breaking down traditional cultural resistance. In parallel, the creation of new, more structured enterprises with the capacity to meet the challenge of global competition should be encouraged, including through selective incentives and models of public-private collaboration.
In a post-globalized world characterized by aggressive US and Chinese industrial policies, Europe and Italy must construct their own route to technological and economic productivity. The innovation gap is clear: in 2023 Italy filed just 24,000 patents compared with Germany’s 133,000 and China’s 1.65 million. And yet sectors like pharmaceuticals and agri-food clearly show that Italy does have spheres of excellence. The country needs to invest in research and development, internationalization, and training. It also needs to cut red tape, develop and build upon local supply chains, and optimize its skills and expertise at all levels.
One of Italy’s most serious problems is the demographic emergency. It has lost more than 500,000 young people to emigration in the last ten years, with the resulting economic harm estimated at 134 billion euros. In the case of students, the migration balance has improved but where foreign students are concerned the retention rate is low (15% compared with 60% in Germany). The country has well-qualified human capital; its people seek prospects such as mobility, international experience, and organizations where they can develop and hone their skills. It is an illusion to think that Italy can retain its young people without providing them with clear, transparent and inclusive opportunities.
Young people’s expectations have changed: less corporate fidelity and a keener quest for meaning, impact, wellbeing and flexibility. Geographical mobility and housing, the quality of services, local welfare, and participation in public decision-making have become stronger “pull factors” than pay alone. What is needed is an integrated vision that places young people at the heart of urban, employment and cultural policies. Parma, which has introduced generational impact assessments in its municipal decision-making procedures, could serve as a model.
Sustainable development cannot be merely economic: it must also include social, environmental and cultural dimensions. The relationship between businesses and their localities can thus become a virtuous one: not philanthropy but “interested altruism”. Corporate academies and “for-benefit” enterprises are examples of innovative models that combine training, shared values and social impact, and which are open to local suppliers and communities. Cohesion is built on networks, dialogue between business and the institutions, joint investments and an overarching system-level vision.
In addition to heritage, culture consists of the ongoing ability to make, to regenerate, and to create value. When used to good effect, culture can be a driver of economic development and social cohesion, as in the case of Emilia Region’s food and drink tourism. The link between culture and business can provide new identity-based narratives with the ability to attract investment and talent. Italy has the opportunity to transform its unique qualities into competitive leverage. But the system needs to be easier and simpler for external actors to read.
Innovation is not just technological but also cultural and organizational. The pervasive presence of artificial intelligence (AI) poses profound challenges for governance, skills and expertise, public services, and economic systems. Italy must therefore take immediate, dynamic action, including at an extra-curricular level, to anticipate the changes AI will bring. Lifelong – or adaptive – learning must become a priority for the entire system.
Today’s Italy has two faces. GDP is concentrated along a narrow axis (Milan-Bologna), with huge areas of the country lagging behind. Even in some marginal areas of the north, dynamics typical of the south are being seen: few jobs being attracted, young people leaving, fragile infrastructure. A national project is needed, one that builds upon regional diversities and can integrate local economies in a shared vision. Universities in particular must leave their ivory towers and operate as international poles of attraction with links to the business community and to social networks. Businesses, for their part, must innovate not just their products but also their organizational models. They must open up to international dialogue and the expectations of the new generations.
The demographic transition is inevitable, but it can be managed if Italy undergoes a makeover to become a more attractive, fairer and more easily understood country. It must not limit its ambitions merely to being “the most beautiful country in the world”; it must also become the most desirable place to live, work and invest. The challenge is collective, systemic and – above all – urgent.