In 1971 Italy produced as many fridges as the rest of Europe combined. Why so many fridges?

by tiredstars

In Postwar, Tony Judt says:

In 1951 Italian factories made just 18,500 fridges; two decades later Italy was producing 5,247,000 a year - almost as many as the USA, and more than the rest of Europe put together.

I think he also mentions that Italy produced a very large number of TVs, but I can't find that statement right now.

So what made Italy such a major manufacturer of fridges, and possibly other domestic appliances, in the 70s?

gnikivar2

I can't per se answer this question. However, I can provide some background to the rise of Italian manufacturing. Italy has economically very divided nation. The south is famously known as a relative economic backwater, and the major northwestern cities such as Turin and Milan had major modern capital intensive industries such as Fiat and major capital goods manufacturers. However, the regions that drove much of Italy's economic miracle during the 1950s-1980s was "Third Italy" Third Italy refers roughly to central and northeastern Italy, especially reigons like Emilia-Romagna and Veneto. Manufacturing in this region is marked by a lot of small and medium sized family owned firms. It's telling that though appliances have long been one of Italy's most important industries, none of the companies listed in the main Italian stock indexes are home appliance manufacturers and none of largest home goods manufacturers according to Forbes Global 2000 are Italian. Admittedly, this is in part to the decline of the Italian white goods industry over the last 20 years, but I suspect this would have been the case 20 years ago as well when the industry was at it's peak.

Some of the features of this home appliance industry in Italy was the predominance of small firms that would compensate for their lack of scale by geographic clustering. The main home appliances cluster was in the area around Varese, in the north central province of Lombardy although there were other cluster in Italy. A handful of major manufacturers such as Candy were based in the area, supported by dozens of smaller parts and components manufacturers. A similar ecosystem of legal and accounting firms with specialized knowledge of the appliance industry grew up in the area. These smaller firms were less burdened by internal bureaucracies and could move faster than their competitors. Labor tended to be employed on flexible contracts so that production could easily be scaled up or down depending on market trends, and since the firms were constantly interacting with each other they built up a level of trust that helped them avoid legal quagmires and breach of contract.

Unfortunately, I am not knowledgeable about the specific history of refrigerator manufacturing in Italy and couldn't find a case study focusing on home appliance making in particular. That said, Blaise provides a series of case studies on similar industries where firms fro "Third Italy" thrived. One pattern I would mention is that there was usually an initial firm that acted as a pioneer. Former employees of that firm would go to start their own smaller companies, and other local businessmen would be inspired to enter a new market. This process would start a chain reaction resulting in the creation of an industrial cluster.

The industrial rise of the Third Italy: open window of locational opportunity?

Networks, districts, cities, regions: eyidence from the third Italy, PMM Blaise

http://etheses.lse.ac.uk/2076/1/U528556.pdf

Edit: I had a couple of complete brain freeze moments with Italian geography that have been fixed.

CalculusKing

While I am not familiar with the specific circumstances of 1971 Italy, it is important to note that the more general phenomenon of certain industries being heavily concentrated in certain places is, in fact, very common and relatively well-understood. The response by /u/gnikivar2 is instructive, but I feel that it would be enhanced by describing how the conditions he cites may have caused the concentration of fridge manufacturers in Italy. The first economic "force" to take note of here is agglomeration. A place which has certain industries will, by virtue of lower start-up costs and easier access to sellers of inputs and/or buyers of outputs, tend to develop related industries in increasing size and quantity. Therefore, the presence of a concentrated industry, or related industries, will tend to increase, even becoming extreme. The extreme imbalance of fridge production in 70's Europe is akin to, and caused by similar forces, to the dramatic imbalance of where modern day American tech companies do most programming (Silicon Valley), or the extreme imbalance in where today's shipbuilders are located (East Asia). This explains the relative lack of fridge manufacturers outside of Italy in the 70's, as a would-be foreign competitor would have to do without the benefit of such agglomeration.

Another, closely related, economic "force" is comparative advantage: in plain English, a profit-seeking firm will specialize in the activity at which it has the greatest relative advantage (meaning the area where it is most superior (or least inferior) in efficiency to any other competitor). German or Swiss industry would likely have been more efficient, given the historical superiority in productivity per man hour those countries enjoy to this day, but those industries would have been focused on making other products where their advantages were greatest.

Sources:
Krugman, Paul. Increasing Returns in a Comparative Advantage World.
https://www.princeton.edu/~pkrugman/deardorff.pdf
The Atlas of Economic Complexity
http://atlas.cid.harvard.edu/

Edit: I suck at formatting