New governance, new crisis. The case of Turin. Warwick, june 2009

1. New governance, new crisis. The case of Turin.Warwick, june 2009 Angelo Pichierri Università di Torino Valentina Pacetti Università di Milano Bicocca

2. *The presentation is largely based on the Capright (WP 4) Report:Situated public action. New urban governance and new urban agencies in Turin. Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

3. Table of contents • “Old” and “New” Governance • The “old” mode of Governance: separation and domination between the Factory and the City • The transformation of the local production system and the “new” mode of Governance: • Actors • Agencies • The present crisis • The consequences for Agencies • The consequences for the new mode of Governance Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

4. The old and the new governance Part one

5. The mode of regulation of the local system from the ’50s to the 80s: “organisation”? • The notion of “governance” can hardly be used for a local system in which • the political-administrative system and the economic system are clearly separated • the local government, politically weak and unstable, performs completely traditional tasks • among the local actors, the economic big player is the dominant one and has the decisive say in non-economic issues too • industrial conflict is (perceived as) the only effective possibility to influence the big player’s behaviour Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

6. The pervasive role of big business • Fiat is in this phase the main producer of • local collective competition goods (vocational training, internationalisation) for the firms belonging to the system • with the logic of “club goods”, affecting however a significant quota of the local production system • even certain categories of public goods (e.g. health, leisure) for a city with many characteristics of a company town Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

7. Separation and domination • The relationship between the company and the city is also physically and symbolically visible: • the plants are an enclave in the city, they are a huge closed world: the rules regulating the life of the city do not count in the factory; • the city is an environment that must be functional to the factory: urban planning and public transport answer to its needs. Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

8. The crisis of Fordism • Fordism imprints both the factory and the city • The crisis of Fordism impacts then on the industrial organization and the social order Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

9. Key words for understanding the recent evolution of the local production system: • Diversification • Innovation • Internationalization Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

10. 1. Diversification /a During the long decline and the radical crisis preceding Fiat’s turnaround diversification took place • in the automotive sector. • Piedmontese automotive component’s and systems producers were able to “survive the fall of the King” (Enrietti/Whitford) • in the industrial organization. • The growth of a remarkable group of dynamic and successful medium-size firms, sometimes pointed out as “pocket multinationals” Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

11. 1. Diversification /b • At sectoral level. • The urban/regional economy diversified in sectors different from the original industrial/automotive specialisation • Turin is also a remarkable location for banking and insurance activities, which both show a contradictory process of growth and shifting towards Milan of headquarters and “intelligent functions”. The most impressive example are the mergers concerning the two main banks, CRT (now Unicredit) and S.Paolo (now Intesa San Paolo) Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

12. 2. Innovation • The “local collective competition goods” that firms need in order to innovate (the opening of new markets is also an innovation) were provided in Turin by the market but also by the “organisation” (Crouch et al.) • As far as R&D activities are concerned, the region and the city show then two specific features that they have in common with technologically advanced regions such as Baden-Württemberg and Rhône-Alpes: an important share of the national expense, and the fact the the majority of these investments are private ones. • the regional government made a remarkable effort (e.g. with a recent act on research) to promote the relationships between firms and universities. Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

13. 3. Internationalization • Piedmont is an exporting region and, although the services’ export has been growing, the largest share of export is still made of industrial products, especially automotive and mechanical ones. • Another indicator of Piedmont’s internationalization is its position in the flow of foreign direct investments. Both innovation and internationalization are now a decisive field in which the local governance (and especially the regional government) try to show their capacity to improve the regional competitiveness. Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

14. The “new” mode of Governance: From government to governance Actors Agencies

15. From government to governance • the new mode of governance is characterized by • increasing pluralism (new actors) • increasing cooperation (e.g. partnerships, “negotiated planning”) • new forms of institutionalized cooperation (agencies) the new mode of governance was effectively fostered by European action, through material (e.g. structural funds) and immaterial (discourse) incentives Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

16. 1. Actors • Local government • Associations • Functional autonomies Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

17. Local government • Increasing competences at regional/local level • regions significantly increased their competences and action’s capacity since the 90s and the significant industrial policies concerning SMEs are by now regional ones • the recent attempts of the regional and urban governments to deal directly with Fiat, involving a global player in local cooperative games, are especially interesting. • the province of Turin also had an important role in fostering certain forms of “negotiated planning” such as territorial pacts, and in the production of LCCG via the control of minority shares in different Agencies. The growing relevance of the urban government can also be read as an indicator of the new central role of “medium-sized cities” (Bagnasco/Le Galès 2000). This is especially true for Turin, where the interventionism of the city in economic and foreign policies was an innovation of the 90s. Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

18. Associations /a • Fragmentation • is a factor of weakness for (Turinese) trade unions • the division is also an internal one, taking the form of a sort of “political” and “functional” specialization, according to which territorial organisations take seriously the participation in the “new” local governance, while the behaviour of industrial unions is much more “path dependent” from their Fordist past Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

19. Associations /b • Lack of representativeness • increasing percentage of retired workers in Unions’ membership • lacking unions’ representativeness of self-employed and knowledge workers • as far as the employers’ association (Unione Industriale) is concerned, the most important factor hindering its representativeness used to be its dependence on Fiat. Today the association has serious difficulties in representing the interests of both innovative and dynamic sectors of its constituency (i.e. the mentioned medium-sized firms) and traditional ones, especially micro- and small firms. Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

20. Functional autonomies • Public policies are increasingly carried out through non-elective self-governing bodies, performing public functions provided by the law, even if, unlike other “Agencies”, they are not a part of the public administration. • In the language of Italian jurists, such bodies are “autonomie funzionali” and their growing importance is a characteristic feature of the new mode of governance. Examples are: • the Chamber of Commerce • the Public Utilities • the Foundations of banking origin • the Universities Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

21. Functional autonomies:Chamber of Commerce • Chamber of Commerce • increasing investment in fostering and support to the firms, through the production of local collective competition goods • the Chamber of Commerce becomes an important actor in the governance of the local production system: a “principal”, so to say, and not an agent Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

22. Functional autonomies: Public Utilities • Public Utilities • the autonomy of such organisations is growing, especially when they are economically successful • considering public utilities mainly or only in terms of financial gains or losses can have the unintended consequence of a de facto abandoning of the local government’s role as a policy maker (again, does the agent become a principal?) Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

23. Functional autonomies:Foundations of banking origin • Most Italian banks had a public character, and then also “social” functions, often performed in a fragmented and sometimes clientelistic way. • The “social” functions of banks were devolved in the 90s to foundations. • Their role covers needs (starting from local welfare) that communes and regions hardly fulfill at the moment because of their fiscal crisis. At the same time, their role as shareholders of big banks allow them to play an important role both in the local and in the national economy Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

24. Functional autonomies: Universities • their character of “functional autonomy” is by now more clearly marked since universities got from the legislative reforms of the 90s a larger measure of autonomy • the results of this “autonomy without control” (Kern 1999) were for certain aspects rather negative • the strengthening of the cooperation between the university and the other local actors concerns both other functional autonomies (especially banking foundations) and local government • this kind of cooperation certainly had a positive influence on the production of local collective goods even if the intensified interaction between university and other local actors produced some perverse effects Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

25. 2. Agencies The new mode of governance involves increasing interaction among actors of different nature. This interaction often occurs in new agencies for the implementation of specific local policies and strategies. Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

26. Interpretative keys In the new mode of governance, local Agencies can be read as : • implementation structures of innovative tasks (e.g. in the field of technology transfer, internationalization, etc.). According to the theory of agency, the principal delegates to the agent tasks he is unable to perform • conversion factors, transforming resources into capabilities (collective capability approach) • organizational relais. The principal delegates to the agent the relations with “third parties” (firms, associations, other economic actors, citizens…) Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

27. Agencies: some examples Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

28. Agencies: some examples Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

29. Agencies: some examples Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

30. The present crisis Part two An interpretative key… The consequences for Agencies The consequences for the new mode of Governance

31. An interpretative key: organizational slack • Both inside the single Agency and in the organizational network of which it is a knot, redundant resources (=slack) have been accumulated • According to organization theorists, • slack is not (only) waste to eliminate, • but (also, possibly) redundant resource to mobilize in order to fulfill emerging needs Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

32. Possible consequences for Agencies most important consequences of the crisis could be: • The decision to give up the Agencies in order to “reduce costs” (by closing or re-internalising Agencies) • The growing resort to (more rigorous) evaluation processes (in the principal-agent theory, one possible shortcoming of the relationship is the inadequate information of the principal on the agent’s product quality) The renounce to an expensive structure can produce the weakening or abandonment of the strategy it was dedicated to Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

33. Renouncing innovative strategies Renouncing the cooperation among different “worlds” Renouncing the creation of new capabilities (renouncing differentiation) Lack/uselessness of implementation structures(ex. TNE) Lack/uselessness of organizational relais(ex. Torino Internazionale) Lack/uselessness of conversion factors: the priority is to maintain existing resources The consequences for Agencies and Governance Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

34. The mobilization of slack: a possible alternative? • In an (over)optimistic interpretation, some recent decisions of the regional government can be read as an attempt at using the organizational slack of Agencies whose effectiveness has been strongly questioned (e.g. Torino Wireless and a few technology parks should be the “strategic agencies” of the new “innovation poles”) • In this perspective, the presence of agencies could represent a strength point in overcoming the crisis Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

35. Conclusions (and open questions) • changing configuration of the actors’ network • changes in strategic priorities • choice of “less Governance” and “more Government” Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

36. Actor’s network • changing configuration of the actors’ network: some are weakened by the crisis, while others grow central: • Local government must take fast decisions in front of growing needs and decreasing resources • Associations experience an even deeper crisis in representativeness • Functional Autonomies decreasing but vital resources and increasingly requested by other local actors (possible redefinition of priorities) Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

37. Change in strategic priorities • since different actors have different institutional goals, the change in the configuration involves a change in strategic priorities • competitiveness vs welfare, welfare vs “culture” etc. • e.g. banking foundations, traditionally very active in the field of art and cultural goods, can reduce their investment in this field Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

38. From Governance to Government? • since crisis requires fast decisions and rapid interventions, this could suggest the choice of “less Governance” and “more Government” • E.g. radical crisis of negotiated planning and local concertation, including urban strategic planning Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)

39. Post Scriptum(another open question) • The “local” Global player (Fiat) is playing increasingly global games. • Which consequences for the local system? • Risk of marginalization of the local system • Increasing internationalization of the local system • Decreasing involvement of the global player in local development processes (or weaker interest in cooperative initiatives already started) • Increasing involvement of local components of the global system • Risk of a new “separation” (without “dominion”) • New opportunities coming from the belonging to a global system (not only in terms of market , but mainly in terms of transition towards knowledge economy) Angelo Pichierri, Valentina Pacetti – New Governance, new crisis (Warwick, june 2009)