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Industrial Districts, Cultural Identity and Economic Excellence by Phil Cooke

Introduction: Achieving Economic Excellence

Economic excellence has always been unevenly distributed. In the past, islands of excellence gave rise to the wealth from which modern economies developed. But these islands were nearly always based on natural resource advantages. Take the Welsh tinplate industry, the focus of study for Britain's leading economist of the last century, Alfred Marshall (1919). For him, it was an exemplar of the industrial district, along with Sheffield cutlery and Manchester for cotton. Why? Because, as well as local resources, each place had these basic ingredients, but importantly, they had an extra "booster-ingredient".

The three basic ones comprise the "3Es".

But, in addition to these essentials, these areas had:

Over the decades, the special qualities of these industrial districts declines as firms were acquired, some closed, others expanded, and the large corporation, possibly foreign, came to dominance.

Today, however, it is large corporations that face crisis often because they have lost touch with the 3Es and they devoted insufficient attention to hidden extras to be found in "industrial atmosphere". Many of the leading business thinkers of today point to the following imperatives of the successful firm:

These "4C" imperatives, distilled from a study of the strength of German and Japanese firms by Nobel prize-winner Robert Solow (1989), are remarkably similar to the 3Es plus industrial atmosphere. However, one of the key differences between now and then is that, as Lester Thurow (1992) another leading American economist puts it:

"In the 21st century a lack of natural resources may in fact be an advantage. The Japanese ....can buy wherever quality and price are best."

The key resource for future success, he continues, will be:

"the education and skills of the work force".

Some places are fortunate to be possessed of firms that are already there. Often they have developed the old 3Es plus industrial atmosphere into the new 4Cs. They are usually in manufacturing regions, away from capital cities and seats of government - a good example of a group of such regions is the Four Motors of Catalonia, Baden-Wuerttemberg, Rhone-Alps and Lombardy - and their firms have become exemplars to the new high priesthood of business economics. Michael Porter's (1990) celebrated "diamond" of firm strategy, production factors, demand conditions and support industries was based partly on the study of such regional economies.

Industrial Districts

Japanese business methods signify a revival of an early modern, neo-paternalist method of incorporating the worker into something approaching an industrial 'community' with its own distinctive character. Other features of post-Fordist flexibility also go, to some extent, 'back to the future' for inspiration. The casualization of labour working on temporary contracts is a case in point, as is the revival of subcontracting, thought only a decade ago to be an anachronistic survival from pre-Fordist days; and the move towards matrix structures of management points to a recognition of the importance of communication across hitherto sacroscant boundaries within the corporation, as do the networks of strategic alliances outside it.

Many of these motifs combine in what is perhaps the most remarkable development of the post-Fordist era, a revival of the eighteenth- and nineteenth-century phenomenon of the i n d u s t r i a l d i s t r i c t. Nineteenth-century industrial districts, as described by Alfred Marshall, were systems of small, craft-based companies specialised in the production of a particular set of products, interlinked by tight networks of sub-contractors, often organised around family relationships, dependent on starting finance raised within the community and capable of producing customised products, often for a luxury market. Such districts would be localised in particular regions or even within towns or specialised areas of cities. The best example of industrial districts were the Sheffield cutlery, tools and special steel district, the Birmingham armaments and jewellery quarters, the Lyons silk manufacturing district, the New York garment district and the Roubaix and Kortrijk textile towns of France and Belgium.

In recent years it has become apparent that such localities not only survive in the contemporary period but they are amongst the most dynamic, fast-growing centres of production in the 'post-modern' space economy. Nowadays industrial localities tend not to be found so commonly in their classic nineteenth-century locations because of capital concentration and the move towards satisfying mass market demand by Fordist production methods, though this is by no means universally true. The new industrial localities are more frequently to be found in southern Europe, though their discovery has led to the search for them elsewhere, and it seems that new ones are also to be found in parts of northern Europe and even North America.

The most prominent contemporary industrial localities are those of north-central Italy where the phenomenon first drew attention. Similar, though less developed, versions exist in the Aveiro region of Portugal which specialises in metal goods, the Barcelona and Basque regions of Spain where there are specialists in cotton and woollen textiles and machine-tool manufacture respectively, and, to a limited extent, in Greece near Missalongi on the Gulf of Corinth and the northern provinces Macedonia and Thrace where textiles and leather-working specialists are concentrated. In northern Europe, the Jutland region of Denmark has become an important centre of small-scale, luxury clothing production relatively recently, while in West Germany the Baden-Wuerttemburg region has numerous such localities specialized in the production of textiles, machine tools and motor vehicle components.

In the contemporary context, the small firms comprising these industrial localities tend to be characterized more pronouncedly in the northern European and Italian cases by their use of the most advanced computerized technology from automated laser cutting machines to the use of programmable assembly for the production of small batches of manufactured goods, often designed to order. In the Italian case, as we shall see, these specialists have progressed merely from the use to the manufacture of such computerised technologies and diversification of skills into software and specialist systems engineering expertise associated with such innovations. Probably the most advanced new industrial localities, from which such micro-electronic products and expertise originated, are the high technology complexes of Silicon Valley and Orange Country in California and the Route 128 axis around Boston, Massachusetts.

The Italian industrial localities are found in a swathe from Veneto in the north-east to Marche on the borders of the Mezzogiorno. Knitted goods are concentrated in Treviso and Carpi, textiles in Como and Prato, special machines in Parma and Bologna, hydraulic devices in Modena, ceramic tiles in Sassuolo, agricultural implements in Reggio Emilia, and shoes, tableware and musical instruments in Ancona. Some of these localities are old and well-established, some have emerged quite recently, the level of technology used can vary within and between them, and the markets they supply can be local, but more normally are national, even international. They often correspond with the areas where, historically, the 'putting-out' system operated. This, of course, was a characteristic form of industrial organisation preceding the onset of the modern era where an entrepreneur provided raw materials to family businesses and then supplied the finished product to the market. In areas where expertise in small-scale business management was retained despite the advance of modern, Fordist industrial methods, the traditional system could be adjusted to the demands of the more segmented markets of the late modern period.

In simplified terms, and if for convenience we ignore the widespread existence of the traditional artisan, found everywhere in Italy, there seem to be two main models whereby industrial localities emerge. The first is where dependent sub-contractors change from serving principally a local market to becoming part of a large corporation's vertical disintegration plans. This type of development was typical of the first stage of growth in the engineering localities of Emilia-Romagna, the region centred upon Bologna. This model later developed into the second model, where a system of sub-contracting small firms link into a network specialised in a specific industry and their market is immediately national, then international. This is more typical of developments in the Veneto region where different clothing sub-markets exist for each stage of the production process (-weaving, finishing, cutting, stitching of garments, for example).

There may also be relevant political differences in the regional culture which hasten the progress from one to another or within a particular model. Veneto, for example, is a Catholic, conservative or 'white' region. The attitude of local and regional government is non-interventionary, enabling entrepreneurs to develop as and where they please and with relatively little concern for environmental controls or wages and conditions of workers. It is in this context that the most celebrated small-firm 'multinational', Benetton, based in Treviso, has grown. It is a family-owned firm which produces only designs; every other aspect of production is sub-contracted locally, nationally and even internationally. Its sub-contractors often use the most advanced textile production machinery and the company franchises its retail outlets, now found in most countries of the world. The company is thus a highly integrated network with marketing data being relayed back from the shops to headquarters on a daily basis.

By contrast, the engineering industries in Emilia Romagna, a Communist, or 'red', region began to take off in the 1960s and 1970s when large Fordist industries, notably Fiat, experienced severe labour relations difficulties and sought to disintegrate the production of parts vertically to dependent sub-contractors to keep costs down. They found the local agricultural machinery companies of Bologna, Modena and Parma ideal for their purposes. However, such companies tended, as with most small firms, to operate an overexploitative form of labour relations, with low wages and poor conditions. The local and regional governments began to intervene to improve conditions but in exchange offered financial aids and a range of services such as assistance in co-operative developments, provision of industrial parks and infrastructure, employer advice on marketing, technology and accountancy, workforce training and software development. In addition, land use development and pollution have been controlled such that quality of life is relatively unaffected by the development process.

The development of industrial localities containing firms using and advancing the sophisticated machinery more normally associated with large corporations, accruing economies of 'scope' through flexible specialisation and integration, which when successfully exploited can turn into economies of 'scale', as in the case of Benetton or its smaller rival, Stefanel, points to the remarkable innovative capacity of the post-Fordist organisation of production. For, not only are such industrial localities able to out-compete their more Fordist neighbours, they are causing them to copy these more flexible arrangements. Capital concentration is, however, occurring as large firms acquire some of the more successful small firms. But the interventionary role of local and regional government in aiding and controlling the negative aspects of industrialisation is suggestive of a possible future development of localities as relatively autonomous defenders of their own identity, and even the revival of a contemporary, proactive concept of community.

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