By DAVID SEGAL BIELLA,


Experts fear that high-quality artisanship cannot sustain Italy’s economy forever. The clothier and designer Luciano Barbera in his mill with thread.


BIELLA, ITALY WOOL FROM THE Carlo Barbera mill undergoes a 15-step process that the owner, Luciano Barbera, calls “the nobilization of the fabric.” Any shortcuts would harm the fabric’s “performance,” says Mr. Barbera, who named the mill for his 99-year-old grandfather. As insiders of the fashion world will confirm, the bolts of wool and cashmere produced at this mill can indeed be described as high-performance, among the finest in the world, sold to dozens of luxury brands like Armani, Zegna and Ralph Lauren.

The financial performance of the mill that creates this fabric, on the other hand, is far from stellar. Like much of the Italian economy, the Carlo Barbera factory is struggling and for reasons, according to academics, that say just about everything you need to know about what ails Italy. Since the European economic crisis began, Italy has regularly turned up on the informal list of Nations That Worry Europe. Italy’s finances are not as precarious as those of Greece, Portugal or Ireland, because it is far larger ? the Italian economy is the seventh largest in the world.

But its troubles are more frightening. As a recent report by UniCredit, a European banking group, put it, Italy is “the swing factor” in the crisis, “the largest of the vulnerable countries, and the most vulnerable of the large.” Study the numbers and you will find symptoms of distress that look a lot like those of Greece.

But dig a little deeper and the similarities end. The Italians, unlike the Greeks, are born savers, and much of the Italian debt is owned by the Italians. Italy is basically indebted to its own citizens. Like Italy, Mr. Barbera has debt woes - he owes his creditors roughly $5.8 million. And orders are drying up. The Barberas have long been small, niche players, the family that high-end designers turn to when assembling sales for Luciano Barbera clothing and Carlo Barbera fabric have drastically slowed in recent years. In the late ‘90s, the mill enjoyed record annual sales of what amounts to about $15.5 million, Mr. Barbera says.


Experts fear that high-quality artisanship cannot sustain Italy’s economy forever. The clothier and designer Luciano Barbera in his mill with thread.


Last year, the figure was half that sum. When describing the ills of his businesses, Mr. Barbera tends to focus on one issue: the “Made in Italy” label. For the last decade, he says, a growing number of clothing designers have been buying cheaper fabric in China, Bulgaria and elsewhere and slapping “Made in Italy” on garments, even if those garments are merely sewn here. Until recently, there weren’t any rules about what “Made in Italy” actually meant, but that will change when a new law goes into effect in October.

It states that if at least two stages of production - there are four stages altogether ? occur in Italy, a garment is made in Italy. To Mr. Barbera, this is an outrage. He says the law will wreck the national brand . Labeling is just one of many obstacles standing between Mr. Barbera and profitability. To understand why his factory, and so much of Italy, is stagnant or worse, requires a bit of geopolitical history and a look at the highly idiosyncratic business culture here.

It is defined, to a large degree, by deep-seated mistrust ? not just of the government, but of anyone who isn’t part of the immediate family ? as well as a widespread aversion to risk and to growth . It has economists here worried not about a looming fiasco so much as a gradual, grinding decline.

“There is no sense of what a market economy is in this country,” says Carlo Altomonte, an economist with Bocconi University in Milan. “What you see here is an incredible fear of competition.” At roughly 41 euros a meter ($48.75 a yard), the average price of the fabric that the Carlo Barbera factory produces today is almost double that of competitors in Biella, a town in the foothills of the Alps that has been renowned for centuries as a textiles hub.

The problem is that fewer designers have been willing to pay this premium, and factories in other countries have been copying the Barberas’ methods, with results that may not be as good but that cost a small fraction of the price. Mr. Barbera says he has no qualms about globalization. In his opinion, Italy can’t compete when it comes to low-skill labor and shouldn’t try.

“But I say that Italy, with its 20 million workers, can be the boutique of the world,” he says. That will never happen, he adds, if designers can buy fabric outside Italy and tag it “Made in Italy.” Economists say that worrying about the labeling issue is unnecessary.

They see a country with a service sector dominated by guilds, which don’t just overcharge but also raise the barriers to entry for the millions in ill-fated manufacturing jobs who might otherwise find work as, for instance, taxi drivers. The protectionist impulses of the guilds are mimicked throughout the Italian labor market. The rules are different for small companies, but in effect, people with a full-time job in a company with more than 18 workers have what amounts to tenure, even if they don’t belong to a union.

This makes managers reluctant to hire . A sclerotic job market is a major reason that the Italian economy has been all but dormant for the past decade, growing far more slowly than its European peers. Also not helping: a timid entrepreneur class. And a political system in the thrall of the older voters who want to keep what they have, even if it dooms the nation to years of stasis.

And a society whose best and brightest are leaving . To Francesco Giavazzi, an economics professor at Bocconi University, the future here doesn’t look like Greece. It looks like Argentina. “Before World War II, Argentina was rich,” he says. Today, he says, you can compare the per capita income of Argentina to that of Romania. “Because it didn’t grow. It took them 100 years to realize they were becoming poor. And that is what worries me about Italy.

We’re not going to starve next week. We are just going to decline, slowly, slowly.” So how does Italy keep going? One answer is the black economy. Roughly one-quarter of Italy’s G.D.P. is off the books. When you inquire about the cause and persistence of this longstanding fact of life, people here say that most Italians have little sense of national identity, an obstacle to a system of national taxation.

The suspicion of Italians when it comes to extra-familial institutions explains why many here care more about protecting what they have than enhancing their wealth. The first goal of many entrepreneurs here isn’t growth, so much as keeping the business in the family. For a company to really expand, it needs capital, but that means giving up at least some control. So thousands of companies here remain stubbornly small. Mr. Barbera himself is working with a bank to allow him to pay off creditors and he has reduced his payroll .

Best of all, he says he thinks he has found a large group of new customers in an improbable place: China. In the meantime, he continues to fight the “Made in Italy” law, which he is hoping that the European Commission will overturn. Until then, garments in the collection that bears his name will be labeled “Entirely manufactured in Italy.”


Experts fear that high-quality artisanship cannot sustain Italy’s economy forever. The clothier and designer Luciano Barbera in his mill with thread.