University of Wisconsin Center for Cooperatives
The Nation
May 13, 1996 (pp. 18-21)

The cooperative economics of Italy's Emilia-Romagna holds a lesson for the U.S.
In Bologna, Small Is Beautiful 

By Robert Fitch

This fall's contest between Bob Dole and Bill Clinton may offer Americans concerned about corporate power the narrowest and most conservative range of alternatives since 1924, when Silent Cal Coolidge faced J.P. Morgan's attorney John Davis. Today's Republicans argue that government has become irrelevant in the age of the global economy. Pensions, environmental regulations, welfare -- all must shrink or disappear to allow corporations to compete better in the world marketplace. Digital Democrats like Labor Secretary Robert Reich disagree. Government can play a constructive role, they argue, by offering tax breaks to kindly, "responsible" corporations that work hard and play by the rules.

To see that there are other options, you have to travel to the richest city in Italy: Bologna -- Communist Bologna (six years ago the Italian Communist Party renamed itself the Democratic Party of the Left, or P.D.S.). Polls confirm it as the favorite city of all Italians. The historic center, with its soaring medieval towers, Renaissance palazzos and Baroque porticoes, is among the best-preserved in Italy. And perhaps even more remarkable, working-class Bolognese continue to live there. Since the anti-Fascist resistance came down from the hills and took power fifty years ago, Bologna and the surrounding Emilia-Romagna region have been transformed into a working left-wing model of a future Italy, an alternative to the alliance of media mogul Silvio Berlusconi and neo-Fascist Gianfranco Fini [see Daniel Singer's editorial, "Italy's Olive Tree," this week]. Here is a place where the left came to power and didn't make a mess.

Emilia-Romagna begins just south of Milan. Emilians live in the ancient cities of the Po Valley: Ferrara, Parma, Modena, Piacenza and, of course, Bologna. Neighboring Romagna stretches east along the Adriatic from the working-class resort city of Rimini to Ravenna, the former capital of Byzantine emperors. Emilia-Romagna is a region of small companies and high wages; of Communist administrators and intense local democracy. It evades altogether the easy dualisms of U.S. political discourse. We've been trained to believe that economics, politics and technology demand irreconcilable choices. In technology, when you choose your scale, you choose your standard of living. Rich areas have giant banks and global corporations while poor areas must make do with small firms. Smallness simply signals a lack of development. Politically, leftists may provide jobs and spread income more equally, but their egalitarian regimes wind up monopolizing power and bureaucratizing every area of life. You must choose freedom or equality. Finally, in economic systems, it's either competition or cooperation. Cooperation dulls the competitive instinct. Competition dissolves common bonds. The two mix like sugar and gasoline.

The Emilian model, however, shows that there's more to life than what's been dreamed of in our cold war philosophies. Local cooperation and the ability to produce for highly competitive international markets needn't be mutually exclusive -- the two can blend like oil and vinegar. There are more than 60,000 workers employed in some 1,800 "red" Emilian co-ops. But co-ops haven't prevented the region from increasing its share of international exports. Emilia-Romagna's small and medium-sized companies -- both craft-based and high-tech -- compete internationally, and work cooperatively within industrial districts that have produced the fastest growth of any region in the country. Unemployment, at just 4.7 percent, is even lower than the jobless rate in Lombardy and Piedmont, Northern Italy's corporate heartland. Emilia-Romagna was once a desperately impoverished agricultural area. Now the region ranks second among Italy's twenty regions in median per capita income. And it stands tenth among the 122 regions in the entire European Community.

What about political life under a Communist regime? As Bolognese P.D.S. secretary Sergio Sabattini observes, "There was never Communism in Bologna." What there was and what there is now, as Harvard's Robert Putnam has shown in his award-winning Making Democracy Work [see David L. Kirp, "Tocqueville in Italy," (The Nation) November 8, 1993], is a regime that has surpassed all Italian regional governments by every objective measure. Not just once, but consistently over the past twenty years, Emilia-Romagna has led in the responsiveness of its bureaucracy; the scope of its public services and the efficiency with which they're delivered; and -- not surprisingly given its performance -- in popularity. Just look at the election results since the war. What party anywhere -- not just in Italy -- has been returned to office regularly, in free elections, for fifty years? And with increasing electoral margins: from 34 percent in 1945 to the 57 percent won by Governor Pier Luigi Bersani in the 1995 spring regional elections -- the second-highest share won by any of the twenty governors in Italy.

The success of the Emilian model challenges the political dualisms of the U.S. left. For us, political power and left principles are mutually exclusive. So the point is to stay away from mass politics. Stay fragmented; focus on single issues; just write about how bad everything is; organize only in emergency coalitions to defend the status quo you just finished denouncing yesterday. Yet the pillars of the Emilian model rest on principles that aren't so different from those that have helped define the U.S. left since the sixties -- participatory democracy and industrial democracy. Somehow this experiment got off the ground. And while it may have lost some momentum, it doesn't seem to have crashed. What's gotten the Emilian model this far?

The answer is political action. Some observers lament the decline of the old Bolognese political passions. Yet even in the mid-nineties Bologna's political participation is off any scale Americans are used to. In 1994, when Berlusconi tried to cut back the welfare state, demonstrations broke out in cities all across Italy. More than a million people protested in Rome. In Bologna 250,000 turned out. A demo of comparable size to Bo's in New York City would have to rally 5 million protesters. But far more inhumane cuts in the city budget never produced more than 20,000 demonstrators. It's not that we feel so much less compassion and outrage than the Bolognese, it's that we lack a complex and powerful political structure to engage and express our feelings.

Look for the office of the P.D.S. in the Bologna telephone book and there are eighty-five separate listings. These are overwhelmingly neighborhood organizations. As University of Illinois professor Raffaella Nanetti has shown, Bologna's citywide planning successes in preservation, housing and child care have been made possible by these active, volunteer, decentralized organizations with real local power.

But leadership matters too. To meet the top local party officials, you are escorted up a marble balustrade staircase in one of Bologna's most sumptuous palaces -- the Palazzo Marescotti Brazzetti. There the blue-jeaned, mustachioed party secretary, Sergio Sabattini, discourses on the benefits of municipal socialism under a stunning Baroque fresco. The palazzo, occupying a full block along the famous Via Barbieri, has been declared a "house of the people," but the people you meet in the beautifully appointed and electronically up-to-date offices -- L'Unit, the party newspaper, and the Istituto Gramsci have their headquarters here too -- are mainly party workers.

Recently, the city turned over many government functions to local nonprofits, including care of AIDS patients. "The Keynesian phase in Emilia-Romagna is over," says Sabattini. Progressive regional government can't be a matter, he explains, of creating a giant public sector that taxes the industrial monopolies to drain off income to provide jobs and welfare. There are no monopolies to tax. The left, instead, has the more complicated task of promoting the creativity of a region capable of competing on a world scale because tens of thousands of small companies cooperate intelligently on a local level.

The government provides what Bolognese economist Sebastiano Brusco calls "real services" -- not just those that make up for market failures, like unemployment compensation and welfare, but services that enable people to work. Emilia-Romagna's female participation in the labor force is the highest in Italy. In part this is because there is a century-old Emilian tradition of women working outside the home, but it is also the result of a strong, independent female workers' movement for adequate daycare. (Today in Modena, about two-thirds of children are in nursery school, as opposed to 4 percent in Naples.)

The beneficiaries of "real services" are people working in small and medium enterprises. In the United States, we usually think of small businesses not only as firms that pay low wages but as especially hostile to any government intervention. Neither is true in Emilia-Romagna. With only 3.9 million people, the region has an amazing 68,000 manufacturing enterprises. (New York State, by contrast, has 18 million people and about 26,000 manufacturing enterprises.) No invisible hand provides Emilian firms with financing, daycare, urban planning, technical assistance, research institutes and specialized laboratories. Small companies can't be expected to devote much capital to research and development. They can't even afford to hire marketing consultants. The regional government arranges for these services -- chiefly by contracting with nonprofit economic research agencies like the internationally respected NOMISMA.

Small businesses in Emilia-Romagna are also structurally different from the typical small business in the United States. They're not simple suppliers of components to a big companies that lay down the law. In Emilia-Romagna, small firms compete for contracts. But, as a matter of custom and practicality, the winners hire the losers as subcontractors. And there is none of our famous industrial dualism, where workers in small firms must put up with low wages and slim benefits. In exchange for Italy's highest benefits and wages, workers are flexible: They move easily among firms. Similarly, skills and marketing information travel easily among local suppliers.

In U.S. cities, urban planners have tried to make industrial workers and manufacturing go away as fast as possible so they can be replaced by upscale professionals and office buildings. Not surprisingly, the number of our manufacturing jobs has shrunk. In Emilia-Romagna, where there is no higher economic priority than keeping manufacturing, industrial jobs have grown. In the past twenty years, the region's overall economy has grown faster than that of any state in the United States; 17 percent of its income is from manufacturing. That's more than half again as high as the U.S. share.

Emilia-Romagna's small manufacturing companies don't require tariff protection to survive. Roughly half of the regional agricultural and industrial output is exported, chiefly in the form of machinery -- $14 billion worth. But innovative agricultural products also swell the export total. Worldwide, the region's best-known brand name may be Parmalatta -- milk from Parma that doesn't need to be refrigerated and has a shelf life of around six months. Sales are $1.7 billion worldwide.

It's not enough, though, to create exports. To avoid the formation of a U.S.-style urban underclass and the contrast between low-paid service workers and comparatively highly paid workers in manufacturing, government must help all workers share in the prosperity. In Emilia-Romagna that means a government that supports militant trade unionism. "You know the McDonald's across the street from Il Nettuno?" asks Sabattini. "The guy who holds that franchise is an Italian-American. He came here in the eighties thinking he was going to run that place American-style -- with low wages. It was a hard struggle, but we disabused him of that illusion. Now he pays his McDonald's workers the scale earned by every other worker represented by the Commercial Workers Union." It's a wage scale three times what their Manhattan fast-food counterparts earn.

But why don't Emilian firms simply leave to avoid the region's high wages? One reason is that a significant minority are producer co-ops; the point of self-management is to stick around to insure that you receive the value you produce. But more important, Emilia-Romagna has created a whole economy that, while not formally cooperative, is based on small and medium-sized enterprises that do depend on one another. Small businesses are constituent parts of an economic organism that's developed over the past fifty years with government infrastructural assistance: financing, low rents and real services. If a small firm were to move outside the region, it would be like a hand suddenly detached from its body.

The more you examine the cooperative, interdependent Emilian model, the less resemblance it has to other "industrial districts" U.S. economists try to compare it to. Relations between companies in Emilia-Romagna are nothing like those in Veneto, a conservative Catholic region to the north. Income is high and enterprise is small in Veneto. But the aim of Veneto's small-business owners is to emulate local firms like Benetton, now a multinational giant that maintains profitability by contracting out manufacturing to cheap overseas labor. Nor is there any of Silicon Valley's chronic entrepreneurialism, where big firms splinter into new start-ups by former employees who peel off with key ideas and contracts, who in turn get sideswiped by trusted employees who themselves split off with valued customers.

But then, why should Emilia-Romagna's industrial culture resemble Veneto's or Silicon Valley's? Power in Silicon Valley was never wrested from Fascists by a Communist-led resistance movement. Nor was Veneto ever isolated from the rest of the country by a central government that sought to undermine its local leadership by withholding loans and credits. The resistance in Emilia-Romagna drew in nearly everyone: the farm laborers and the professionals, the workers and the artisan owners of the region's myriad small factories. It was the only region in Italy where workers actually seized the big factories from their owners. The resistance, however, consciously sought to play down class differences. Fascism had come to power, C.P. chief Palmiro Togliatti argued, in part because the left scared the small-business owners into Mussolini's arms with its empty threats to seize power and its total lack of a transitional program that defended small business against banks, landlords and big business.

With the rapid departure of Allied forces, Togliatti was faced with a historic choice: Either seize power in Northern Italy, like Tito in nearby Trieste, or join a national governing coalition with the Christian Democrats as a very junior partner. Togliatti chose Rome. Resistance fighters from Emilia-Romagna set about transforming themselves into urban activists. Not only did they face a centralized Christian Democratic regime soon to become world famous for its corruption, clientism and bureaucratic indifference but the governing philosophy of the national Communist Party upheld the values of political centralism and economic concentration. Without these outside pressures, the unique resistance culture would have probably dissipated in Emilia-Romagna as it did everywhere else. Instead it was preserved and transformed into a go-it-alone, "us versus them" spirit that helps explain much of the novelty and persistence of the Emilian adaptation -- and also its isolation.

How portable is the Emilian system? How could the Bologna model possibly play out in Milwaukee, Toledo or New York City? There are actually some surprising structural similarities between the underdeveloped Bologna of fifty years ago and the deindustrialized cities of the United States today. Decades of capital flight and planning disasters have produced an urban America characterized by many small businesses hanging on precariously in the shadow of a dominant, domineering, FIRE (finance, insurance and real estate) sector. Small merchants face extortionate rents from landlords. Small businesses can't get credit from giant banks. Together, merchants and small manufacturers may have more leverage than the poor in City Hall, but less altogether than any important landlord. At best, the city ignores small-business needs. So small business pursues a low-wage, high-exploitation strategy.

Instead of leaving African-American shopkeepers to the likes of Minister Farrakhan and white small-business owners to the mercies of the Republican right, the left might consider pursuing an Emilian united-front economic strategy. Build and reform the workers' movement in small firms. Overthrow corrupt, undemocratic trade union leadership that has quietly adapted to low wages. Promote high wages and high productivity, but support small and medium-sized enterprise against FIRE. What's needed is commercial rent control and credit with no collateral, and a new producer co-op sector with state aid drawn from taxing commuters, elite nonprofits and the FIRE industries. Finally, we must promote a political culture of participation and solidarity.

What Emilia-Romagna shows is that people may not always be able to choose their leaders, but they can never avoid choosing their political culture. People either opt for solidarity and participation or they choose indifference and clientism. The left here must stop counting its failures like rosary beads and grasp the possibilities of the present. We see where mass political disorganization leads -- to the South Bronx -- and where solidarity and mass political organization can lead -- to Bologna.

Robert Fitch is working on Digital Delusions, to be published by Common Courage next year. 
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