That crazy transfer of wealth from labour to capital

To know the framework in which to move in 2025 and to approve the budget, this time companies do not have to wait until the last day of the year. The fact that the government has presented a plan on the budget structure already agreed with the European authorities reduces uncertainty. Moreover, the sacrifices have been reduced to little compared to what Italy would need to rise from last place in the world ranking of public finance and fiscal policy. In the past four years there was so much uncertainty: pandemic, expansionary economic policy inflation, Ukraine, energy, the Middle East. Entrepreneurs appealed to theiranimal spirits and got by. Industry workers, on the other hand, have been penalised a little, in fact a little too much. This could be a big problem in the coming months, not least because the collective agreement has expired for 75 per cent of the Confindustria member companies and needs to be renewed. Organisational and technological innovations will also have to be discussed. This and more emerges from a report on the dynamics of incomes of the Osservatorio delle Imprese della Sapienza.

The aggregate balance sheets of medium-sized and large Italian industrial companies published a few days ago by Area Studi Mediobanca show that, mainly due to the effect of inflation, net turnover 2023 was 34% higher than in 2019, as was added value, and exported turnover returned close to 40% of the total. Instead, the distribution of the wealth produced by companies has been distorted. In the last four years, between 2020 and 2023, on the one hand the share of value added that goes to depreciation, financial charges, tax charges has changed little, on the other hand the share that goes to labour costs has lost 12 percentage points and the share that remunerates shareholders' risk capital (net profit) has increased by 14 percentage points.

The transfer of wealth from labour to capital has been insane. The shareholders have taken 80% of the net profit as dividends and left 20% as self-financing for new investments, when it should be in their interest to grow the capital in their own company. Moreover, the stingy investments of the companies were only 40% material in the factories and 60% financial in participations.

The Sapienza study shows, however, that industrial companies enjoy, on average, excellent management efficiency and financial health. For example, over the past four years, stock coverage has always been around 75-80 days, deferment to customers around 65 days, and deferment from suppliers around 80 days. The dry liquidity ratio has always remained at a very good 0.9 with a record high of 0.93 in 2020 after the introduction of an excessive, non-deployable money supply into the system. The ratio of financial debt to equity always remained at a more than good 0.7.

The distribution of profits and the excellent financial health confirm that if industry does not expand its debt, it is not because of a shortage of credit, but rather because of a disaffection to business risk, probably motivated by uncertainty and the country's loss of competitiveness. This is what we wrote about on 12 July in Il Sole and this is what Confindustria is talking about today.