In Italy's 'Red Emilia,' Socialists Mean Business Policies Foster Small Manufacturers in Region near Milan

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TEXTILE-FACTORY owner Graziano Daviddi has just gotten a complaint from a customer that the cloth is too thick. With a few taps on his computerized weaving machine, Mr. Daviddi corrects the problem and the new, multicolor wool cloth comes tumbling out.

"You notice the noise level is also quite manageable," Daviddi says, "because we installed special baffles in the ceilings and inside the machines themselves."

State-of-the-art equipment and flexible production methods account for much of the success of more than 2,400 textile and knitwear garment factories in this small town 100 miles southeast of Milan. Small shoe manufacturers and ceramic floor tile businesses enjoy similar success here in the province of Emilia Romagna. The region enjoys a 6 percent annual growth rate and virtually no unemployment at a time when Italy faces 11 percent joblessness nationwide. Emilia Romagna is certainly an Italian success story, says Federico Galdi, director of International Relations for the national employers trade group Confindustria. "One of the secrets of Italian fashion," he says, "is that by using small scale production rather than the big factories with 3,000 workers, they are capable of introducing a new collection in only two weeks." Another secret is that for years Emilia Romagna has been governed by the Communist Party of Italy (PCI) and by its successor organization, the Party of the Democratic Left (PDS). While the ruling Christian Democratic and Socialist parties in Rome promoted large-scale industry such as Fiat and Olivetti, the communists sponsored co-ops and small factories. In one of the ironies of the post-cold-war era, large industries face serious problems in the former Soviet Union and Italy, while communist-inspired, small-scale capitalism is thriving in "red Emilia. From cheap labor to high skills German companies first opened garment factories in Emilia Romagna in the late 1950s, seeking low-cost labor. That surge coincided with layoffs and political purges of communist workers from some large factories, according to Angelo Orru, head of La Fenice Garment Company in Carpi. Unable to find other work, some of those communists set up small factories. "They transformed themselves into entrepreneurs," Mr. Orru says. "They were not investing and speculating; they were working hard." By the late 1970s the Communist Party was voted into office in Emilia Romagna and many of its cities. The PCI was determined to show that it could effectively govern in Italy and started a campaign to promote economic growth. …