Characteristics of the Post-Industrial Transition of Milan

In the Italian national context, Milan, a city with a great manufacturing tradition, has played and continues to play a vital economic role. After the enormous change that affected the city and its hinterland in the 20 years from 1951 to 1971, a trend away from big-company capitalism to a form of “district” capitalism based on small and medium-sized enterprises (SMEs) and specialized service activities began to gather pace. This form of capitalism drove national economic development from 1970 to 2000 and delegated to the city of Milan a large proportion of the specialized service functions it needed, exceeding the skills generated at local level by the industrial development of the districts^[1]. The city in fact provides managerial and professional skills involving a high intensity of knowledge and creativity, i.e. highadded-value activities, for many enterprises supplying material products, some of them located in the urban and metropolitan area, and a large number in other districts of central northern Italy, which look to the service sector of Milan for intellectual and relational input (Rullani, 2012). Since the 1970s, we have therefore seen the consolidation of a functionally complementary relationship between Milan's conversion to service activities and the development of manufacturing industry in the various districts of its urban region^[2] and the Centre North. It is on the strength of this relationship that the city has become an indispensable nexus of the national production system and had established its role as a laboratory of change and of Italy's interconnection with the global economy.

The drastic scaling down of the weight and functions of Milan's manufacturing base (according to census data, the number of persons employed in manufacturing in the province fell by nearly half between 1971 and 2001, from 805,529 to 477,841) has been largely compensated for by the expansion of the service sector (281,000 new jobs, largely in business services, where employment increased from 35,000 in 1971 to 126,000 in 2001) and by financial and insurance services (with an increase over the same period from 45,138 to 89,300 employees). The latter services, operating in conjunction with the multinationals based in Milan, constitute the country's largest and most internationalized system and have helped to establish the city as a leader in this field (Table 1).

This metamorphosis of the economic base of the metropolitan area is closely

reflected by the significant change in employment in manufacturing and in the service sector as a proportion of overall employment in the province which

Table 1 Employment by economic sectors in the Province of Milan, 1951, 1971, 2001 (employees in absolute figures and changes 1951–1971, 1971–2001, in %)

Source: Rullani (2012, p. 46)

occurred in the second half of the twentieth century: while the percentage of workers employed in manufacturing decreased from 64 to 36 % between 1951 and 2001, those employed in services increased from 27 to 56 %.

This was in the context of an overall employment situation in which the number

of jobs increased rapidly in the first 20 years, then remained virtually stable for the next 30. While, the phenomenon we are describing is, on the one hand, symptomatic of the model of territorialized capitalism, which has undergone a radical transition in its urban form, on the other it is a manifestation of an equally profound change in the social composition of the metropolitan area (Bonomi, 2008).

The city, which has maintained its strong local centre of gravity, has also begun to trade and do business over a vast national and international area, thanks to its location at the confluence of the principal mobility infrastructures, becoming the “network city” of an interconnected and pluri-localized production system, as well as a “gateway”: an economic and commercial platform exercising a strong capacity of attraction on the macro-regional scale (Magatti, 2005).

Since 2000, Milan has extended its gateway role, presiding over trade and exchange with the wider world, which is much to the advantage of the industrial interests of the whole of Italy's Centre North. This role is both physical, where its logistical function is concerned, and financial and symbolic-relational, on account of the city's abundance of venues (trade-fair centre) and its concentration of events and communication services (Rullani, 2012). In addition, Milan has become one of Europe's most competitive metropolises and, nationally, is the city that has most benefited from globalization, having consolidated its function as a focal point of the global network (Taylor, 2011).

Because of Milan's international vocation and entrepreneurial dynamism, incomes are much higher than those of people in other metropolitan areas and provinces.

The Milan area is the principal crossroads of financial and productive flows, concentrating more than 42 % of the enterprises active in the Lombardy region, and this has enabled it to maintain a high level of productivity, local GDP accounting for 9.5 % of Italy's GNP in 2009 (Milan Chamber of Commerce, 2012; Monza and Brianza Chamber of Commerce, 2010). The city retains its national primacy in advanced services and the biotechnology sector and, internationally, has established itself in electronics, photonics, the production of new materials and, above all, in the creative industries sector, in particular in fashion and design (Camagni et al., 2008). The labour market that takes shape around the agglomeration of producers of these latter systems, which generate outputs with high levels of aesthetic or semiotic content, has acquired “a patina of place-specific colour”—as Allen Scott (2006, p. 7) defined it—in that it has become a locus of peculiar traditions, sensibilities, and norms that hang like an atmosphere over the local community. This atmosphere continues to be of prime significance as source of unique competitive advantages.

Although the manufacturing sector has continued to lose jobs, the city retains a diversified productive structure and still has strong links with the production system of its urban region, organized in a polycentric network and characterized by a number of strategic sectors. This system remains competitive, being able to draw on an abundance of local resources and the presence of the most important national university institutes and research centres, mainly concentrated in the central urban area, as well as a variety of specialized services and the headquarters of many international companies. It forms a kind of “archipelago economy”—to quote Pierre Veltz (1996)—made possible by its enhanced integration of economic activities and consisting in the co-habitation of forms of inter-relationship and interdependence, with both short and long networks interconnecting the poles of the district-based territorialized production systems and the large centres that function as systems of proximity.

The Milan areás specialization in advanced services, within the network of interchange with the other cities of the urban region and the Centre North, gained strength after 2000, as shown by the pace at which industrial workers moved into business services (approximately 0.5 % per annum in the years 2000–2007). At the same time, the added value contributed by business services, compared with added value for Milan as a whole, increased from 30 % in 2000 to 35 % in 2007, an incidence many percentage points higher than that recorded in most of the territorial systems more affected by the development of district-related capitalism, like those of the North East (Rullani, 2012).

The structural shift in the economy of the Milan metropolitan area has been even more intense in the central urban area, characterized by an economic base increasingly orientated towards advanced services for production, which have grown significantly since 1991 (in terms of both the number of enterprises and of employment). The sector providing high-intensity knowledge and creativity services accounts for a large part of this process of internationalization.

In the city of Milan, prior to the 2008 crisis, service activities as a whole, excluding commercial activities, accounted for more than 41 % of employment, residual manufacturing industry for only 14 %, while the metropolitan area and region still retained a significant manufacturing base, with respectively 22 % and 30 % of workers engaged in industry (Necchi & Mariani, 2009).^[3] The volume of employment in advanced services—information and communication, finance and insurance, professional scientific and technical services, production support— increased even more markedly in the following period (2001–2008), reaching 30 % of total employment in 2008.^[4] The concentration of activities in this services sector (according to the localization index) confirms that the metropolitan area is specialized in information and communication services, and in insurance and finance. As a proportion of all private service activities, employment in financial intermediation accounted for 13.5 % at metropolitan level. Seventy-six percent of those engaged in this activity are concentrated in the urban core, a figure which provides further evidence of the role assumed by the financial sector, which more than any other identifies Milan as a focal point of the global economy. Milan in fact hosts the main Italian banking groups and several foreign banks, and is the home of the Italian Stock Exchange, with 225 financial companies and about 130 national and international intermediaries.

If we examine the territorial distribution of employment in the creative industries—industries which are distinguished by a high degree of coexistence of different activities, are especially active in the process of cross-fertilization (Lazzaretti, 2008) and give meaning and value to the new technologies—in 2008 the Milan Metropolitan area presented a high concentration of creative workers, with an incidence of employment in this category of more than 16.6 % and a location quotient of 2.08, an indicator that set the area apart, not only within Italy but also from other European metropolitan areas. In this case, too, the central urban area has absorbed a high percentage of employees working in creative enterprises, particularly those that form the design and fashion “ecosystem”.

Another important aspect of the changes that have affected the production system of Milan is the replacement of medium and large-scale enterprises by a dense network of small and very small businesses (entities with fewer than ten members of staff), which in 2006 accounted for 94 % of the total. This type of entrepreneurship, consisting to a large extent of one-man businesses (which account for 40 % of the total) is distinctive of the productive fabric of the metropolitan area. Even so, there continues to be a far from negligible presence of large companies, which still account for a significant share of employment (Camagni et al., 2008), especially in the telecommunications and communication sectors, as well as in large-scale retailing. We are therefore seeing a polarization of business systems: on the one hand, big players, largely globalized, which have developed standard platforms; on the other, micro-firms which are developing innovative products and services and performing high-added-value activities and having recourse to external platforms for only some of the activities in the value chain. Compared with other European metropolitan centres, Milan does not, however, seem to have developed the same capacity to produce and use ICT technologies. It lacks its own ICT platform and its innovation-oriented services are poorly differentiated and lack the organizational structure that would enable them to develop, not only locally but also in the sphere of global flows (Verganti, 2012).

In the central urban area, the presence of micro-enterprises is much more marked, especially those that supply services geared to innovation and highintensity knowledge activities. This phenomenon, which has gathered pace over the last decade, highlights a further aspect of the shift to service activities in the economic base of the urban area: the driving role assumed by “knowledge workers” and by creative enterprises supplying services geared to innovation.

The high-knowledge-intensity micro-services which previously supplied innovative services to local enterprises and had little place or importance in the processes of innovation and in generating development have become an autonomous economic reality, quantitatively important and central to the growth of employment, developing both product and process innovation and performing high-added-value activities for manufacturing enterprises, as well as operating directly on the global market. For the actors involved in shaping these fragmented and highly atomized eco-systems of creativity and innovation, very much akin to craft enterprises, the main concern is not so much potential clients as the environment in which they can operate. Increasingly, this environment is the urban milieu, now confirmed as a factor that can exercise a profound influence over professional development and the formation of new businesses.

• [1] The external acquisition of factors of production (materials, energy, components, processing by third parties, services, consultancy and knowledge), measured in terms of the relationship between added value and turnover, on the part of small enterprises in various sectors of industry increased from 69.3 % in 1990 to 80.4 % in 2008, according to data supplied by Unioncamere and Mediobanca, based on the turnover of a sample of companies (see F. Coltorti, “Tra il piccolo e il grande. Ruolo delle imprese di dimensione intermedia in Italia e in Europa”, report submitted to the Union Chambers of Commerce and the Industrial union of Turin, 24 October 2011, Mediobanca, Milan)
• [2] Among the various industrial districts of the Milan urban region, three have specially benefited from their territorial proximity to Milan: Brianza, East Milan and Lecchese. The first one is the oldest and more competitive Italian furniture district and has developed several synergies between furniture, mechanical and textile industries. The second is a relatively young district specialised in the production of electric, electronic and medical equipment and it developed mainly thanks to FDI and the location choice of two giants in ICT (IBM and ST Microelectronics). The third has long-standing expertise in the metal-engineering industry
• [3] The data reported in this study have been combined with Asia data for 2008
• [4] Source: Statistical Register of Active Enterprises, Asia 2008