Wednesday, July 9, 2014

Italy: adapting to collapse


The new San Lorenzo mall in Florence, Italy. An American style food court designed mainly with international tourism in mind. It is an example of the attempt of the Italian economy to adapt to the ongoing collapse of its traditional manufacturing sectors, trying to exploit new sources of revenue. So far, this brand new set of restaurants seems to have been successful. Unfortunately, however, even foreign tourists may be an unsustainable resource. 


If you happen to visit Florence, these days, you may notice the brand new food mall on the upper floor of the ancient downtown market. It is a major restructuring of what used to be a vegetable market, patronized mainly by locals. Now, it is a typical American style, "food court" with many different restaurants sharing the same tables.

From my personal experience, I can tell you that the food in this place is of medium quality; overpriced, but not terribly so. It is the kind of food that foreign tourists have come to expect in Florence, I'd call it fusion food with a Florentine veneer. Not that I want to discourage you from trying this place. On the contrary, it is at least a way to avoid the many abominable tourist traps you may be unfortunate enough to stumble upon in Florence (you may also like to take a look at some notes of mine on the ancient Florentine cuisine). I just wanted to note how it the new food court is an example of the present trends of the Italian economy.

I have already discussed the Italian collapse in previous posts (one and two). The collapse keeps going and the latest results from the Italian Statistical Institute (ISTAT) indicate that Italy has lost 25% of its industrial production after 2008, with no signs of improvement in view. Politicians are screaming about "restarting growth" but there is little that anyone can do facing such a disaster. The best they seem to be able to conceive is to trick the statistics in order to create the appearance of a non-existing recovery.

The collapse is mainly the result of the increasing burden on the Italian economy of more and more expensive imported mineral commodities. This extra burden has destroyed the competitivity of the Italian manufacturing industry. As a consequence, the Italian economic system is actively re-adapting, trying to find new resources. It must find "light" market niches, areas which don't need large amounts of energy and minerals to be run. It is finding them mainly in the fashion and the food industries.

If you live in Italy, and especially in Florence, you can't avoid noticing how the fashion industry is prospering; you can see that also from highly debatable initiatives such as "dressing" the Baptistery church in Florence as if it were a gigantic foulard. Gone are the traditional manufacturing power centers, and with them there went much of the traditional financial power in Italy. The Monte dei Paschi Italian bank survived the Black Death during the Middle Ages, but it may not survive peak oil! Even the celebrated new prime minister of Italy, Mr. Matteo Renzi, is a consequence of the new balancing of the economic power in Italy.

Tourism is also quickly gaining a new status of fundamental resource in the Italian economy. Tourism has always been a traditional Italian industry, but now it is becoming something new: with impoverished Italians traveling less and less, International tourism is becoming dominant. But it is not any more the time when international visitors would stay in Italy for months or years, to explore the ancient culture and landscape. Now, tourists stay a few days at most and have little time and interest to explore things other than the standard sightseeing tours in the art cities: Venice, Florence and Rome. The result is the concentration of tourism in areas where it can be efficiently exploited by initiatives such as the food court in Florence I was reporting about. Outside these centers, tourism is in trouble, too.

So far, the expanding economies of some countries, primarily China, are providing an increasing flux of tourists to the main touristic centers of Italy. However, it takes little to expose the fragility of this small economic boom in Italy. Think of the possibility of a new financial crisis, such as the one of 2008, and you can imagine what's going to happen. Will the upper floor of the San Lorenzo market return what it used to be? Maybe, and my impression is that we really lost something by dismantling the old vegetable market.










6 comments:

  1. Ugo
    "The collapse is mainly the result of the increasing burden on the Italian economy of more and more expensive imported mineral commodities."

    Your theme is echoed recently in the UK Guardian
    http://www.theguardian.com/environment/2014/jul/08/raw-metal-prices-warning-uk-manufacturers-volatility

    Manufacturers urge action over raw metal prices amid supply worries
    "...Theprice of some materials, such as the metals crucial to modern electronics and car manufacturing ...[in Britain]... has doubled in the past decade, and there is greater volatility in prices for some commodities than at any time in the past century, ..."

    best
    Phil

    ReplyDelete
    Replies
    1. Commodity prices are only a partial vision of the problem.

      If all in the planet work with the same resources, this high prices should be easy to pass to consumers, at least until demand lowered. For now, demand, although it could be slowing, the principal problem is a fail in competition, because other countries, mainly China, use directly their own resources to manufacture (plus is more permisive to polution), so it could sell the finished, and more valuable, product cheaper displacing other countries production.

      Delete
    2. Which is exactly what's happening, except that in Italy we have already passed "peak demand"

      Delete
    3. Supply and demand?
      Well ... first you must extract the investment from the economy?
      This extract from a UK D. Telegraph piece.
      http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10957292/Fossil-industry-is-the-subprime-danger-of-this-cycle.html

      “What is shocking is that upstream costs in the oil industry have risen threefold since 2000 but output is up just 14%,” said Mark Lewis, from Kepler Cheuvreux. The damage has been masked so far as big oil companies draw down on their cheap legacy reserves. “They are having to look for oil in the deepwater fields off Africa and Brazil, or in the Arctic, where it is much more difficult. The marginal cost for many shale plays is now $85 to $90 a barrel.”

      Phil

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  2. Hi,

    thanks for your post.

    Did you somewhere, or could you substantiate the (for Italy) most important raw material price increases, in relation to unit costs, and to other countries, or give a link to such a substantiation? I know it sounds impudent.

    Another idea (sounds quirky, but is it really so?): introduce a raw material entropy generation tax, or even more sophisticated, an entropy generation certificate system, may be based on the energy necessary to get the covered varieties of material back into concentrated state. This could then be linked to CO2-emissions costs as long as high value energy generation (electricity) is burdened with CO2 - emissions.

    A utopy, but i can imagine it in 100 years or so become reality.

    Dominik

    (posted twice as i did not get any confirmation that the first post arrived anywhere.)

    ReplyDelete
    Replies
    1. I am working at this - I have only preliminary results, but the picture is already consistent. What I can say is that the data for various countries clearly indicate a correlation between the fraction of GdP that goes to imports of mineral commodities - in particular fossil fuels - and the other economic indicators. So, Greece has a ratio of about 6%, Italy more than 4%, Germany 3.8%, Switzerland less than 3% and you see what is the trend! Some of these data are reported at:

      http://cassandralegacy.blogspot.nl/2013/11/plundering-planet-status-report.html

      The problem is that I have been searching to finance a complete study of these data, but nobody seems to be interested.

      Delete

Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)