**2. Access to capital and credit: Central and local intervention**

"The most interesting question [...] is to what extent industrial families are recruited directly from the working class and, to that extent, form no more than the upper layer of that class." (Schumpeter, 1955:129-130)3.

Indeed Schumpeter's remark seems to apply perfectly to the character of entrepreneurship in the Brianza, a sort of working class entrepreneur as most of my informant-entrepreneurs "had risen directly from the working class". The downsizing of large factories in Brianza was partly responsible for the creation of most of these small firms and for paving the way for the further development of the industrial district. Being vertically integrated, these factory 'raised' skilled workers of all sorts: tool-makers, mould-makers, designers, welders, milling-machine operators, lathe operators and so on. When several of these highly specialized workers and foremen were made redundant during the cyclical restructuring periods, several of them were able to become self-employed and set up their own workshop, often in partnership with former co-workers and the substantial help of kin. The lay-offs that ensued, instead of generating massive unemployment, stimulated local energies for the formation of several small manufacturing activities. The specific technical skills acquired in the large factory moved outside and initiated a process of small scale industrialization that continues today.

Class barriers are not insurmountable, as my informants' stories seem to show, but there have to be a few necessary and crucial pre-conditions, social, material and ideological, for vertical movements across classes to happen. In this respect, my informants' life histories put much emphasis on the importance of land ownership and of skill formation, and on how these 'assets' were obtained through the mobilization of resources that were not equally accessible to everyone. In this section, I will present some of these stories to illustrate the actual passage from wage labour to small-scale entrepreneurship. Yet, these stories stretch ahead of this specific moment in my informants' work experience to examine how such a newly achieved position needs to be sustained through the mobilization of new and old social relationships. These relationships create the ties necessary to bring into being or actively participate in subcontracting networks and to increase the potential to access capital and credit. This aspect, too, should be understood in terms of resources mobilized by the use of formal and informal relationships, even as the institutional framework appears to formally guarantee equality of access.

Linda Weiss (1988) has argued that one of the most remarkable features of Italian petty capitalism is its strong partnership with the state. Central and regional governments have always been financially and politically involved in creating the conditions for small business to come about and develop: "Italy's small business economy expanded and prospered because it had something its European counterparts lacked: a highly sympathetic state.

<sup>3</sup> The implicit assumption in Schumpeter's statement is Weber's theory of free labour, which is at the centre of his economic sociology: modern capitalism would not have been possible without "the rational capitalistic organization of (formally) free labour" (Weber, 2001,p. 21). Like Weber and unlike Sombart (1982, 1967), who strongly believed in an elitist idea of the entrepreneur, Schumpeter conceives the market in terms of competition between 'free' individuals. He sees a completely fluid society in which the opportunity for advancement or the possibility of downfall is open to all. It is in the entrepreneur, though, that Schumpeter identifies the most visible protagonist of this social dynamism.

"The most interesting question [...] is to what extent industrial families are recruited directly from the working class and, to that extent, form no more than the upper layer of that class."

Indeed Schumpeter's remark seems to apply perfectly to the character of entrepreneurship in the Brianza, a sort of working class entrepreneur as most of my informant-entrepreneurs "had risen directly from the working class". The downsizing of large factories in Brianza was partly responsible for the creation of most of these small firms and for paving the way for the further development of the industrial district. Being vertically integrated, these factory 'raised' skilled workers of all sorts: tool-makers, mould-makers, designers, welders, milling-machine operators, lathe operators and so on. When several of these highly specialized workers and foremen were made redundant during the cyclical restructuring periods, several of them were able to become self-employed and set up their own workshop, often in partnership with former co-workers and the substantial help of kin. The lay-offs that ensued, instead of generating massive unemployment, stimulated local energies for the formation of several small manufacturing activities. The specific technical skills acquired in the large factory moved outside and initiated a process of small scale industrialization that

Class barriers are not insurmountable, as my informants' stories seem to show, but there have to be a few necessary and crucial pre-conditions, social, material and ideological, for vertical movements across classes to happen. In this respect, my informants' life histories put much emphasis on the importance of land ownership and of skill formation, and on how these 'assets' were obtained through the mobilization of resources that were not equally accessible to everyone. In this section, I will present some of these stories to illustrate the actual passage from wage labour to small-scale entrepreneurship. Yet, these stories stretch ahead of this specific moment in my informants' work experience to examine how such a newly achieved position needs to be sustained through the mobilization of new and old social relationships. These relationships create the ties necessary to bring into being or actively participate in subcontracting networks and to increase the potential to access capital and credit. This aspect, too, should be understood in terms of resources mobilized by the use of formal and informal relationships, even as the institutional framework appears to

Linda Weiss (1988) has argued that one of the most remarkable features of Italian petty capitalism is its strong partnership with the state. Central and regional governments have always been financially and politically involved in creating the conditions for small business to come about and develop: "Italy's small business economy expanded and prospered because it had something its European counterparts lacked: a highly sympathetic state.

3 The implicit assumption in Schumpeter's statement is Weber's theory of free labour, which is at the centre of his economic sociology: modern capitalism would not have been possible without "the rational capitalistic organization of (formally) free labour" (Weber, 2001,p. 21). Like Weber and unlike Sombart (1982, 1967), who strongly believed in an elitist idea of the entrepreneur, Schumpeter conceives the market in terms of competition between 'free' individuals. He sees a completely fluid society in which the opportunity for advancement or the possibility of downfall is open to all. It is in the entrepreneur, though, that Schumpeter identifies the most visible protagonist of this social dynamism.

**2. Access to capital and credit: Central and local intervention** 

(Schumpeter, 1955:129-130)3.

continues today.

formally guarantee equality of access.

While governments elsewhere celebrated its contradiction or encouraged its elimination, the Italians created a distinctive category of small capital and set about populating and replenishing it" (1987, p.9).

The Artisan Fund (*Artigiancassa*), a public national program of loans for artisan workshops4, and a variety of more recent regional programs, such as *confide* and *vaucher*, tailored to the specific needs of small businesses are clear evidence of the long standing interest that the Italian state has had in this matter. In contrast with Weiss' view of an active central state, Trigilia (1986; 1989) has put emphasis on the local dimension of the political context which, strengthened by a high level of ideological consensus - either Catholic (in Northern Italy) or Communist (in Central Italy) - has implemented local policies favouring small-scale industrialization to compensate for the shortcomings of the central political economy. He writes: "[...] This process was largely unplanned, though it was influenced by political decisions or, more frequently, non-decisions. In the absence of effective long-term economic policies at the central level, the growth of small firms has, in fact, been based on certain economic, social, political resources which were widely available in some local areas" (1989:174). According to Trigilia, the activity of Church institutions in the north east of Italy and of the Communist Party in the centre have contributed to creating and reproducing 'subcultures' that mediate successfully between social classes with potentially conflictual interests. Moreover, the dominant role enjoyed by the parties5 representing these 'crossclass subcultures' "may have contributed to increasing the stability and decision-making capacity of the local governments" (1989:189). The implementation of urban policies in support of small-scale industrialization is an example of this kind of local intervention. However, as Weiss would justly argue, these types of policies are not *per se* sufficient to stimulate development. A financial apparatus is also required to provide liquidity for investments in shop floors and machinery.

 4 I use the words artisan and small entrepreneur, or "small firm", "small enterprise", "artisan firm", and "artisan workshop" interchangeably. However, a clarification of these terms is needed. In Italy 'artisan firm' is a legal classification (as stated by Law n. 443/1985) which encompasses a wide range of activities; basically most professions fall into such a category: a baker, a barber, a truck driver, an electrician, a mason, if self-employed, are artisans and have to register to the Chamber of Commerce, Industry, Artisan and Agriculture (CCIAA). In the case of manufacturing enterprises, Law n. 443/1985 an update version of the Artisan Statute introduced in 1956 (n. 860/1956) - may apply to plants with a maximum of 10 employees, when the work involves mass assembly, namely standardized production, provided that this is not completely automated; a maximum of 18 employees in firms not involving mass assembly, and a maximum of 32 employees in workshops of traditional productions such as tailoring, artistic productions and so forth. The recruitment of apprentices may raise the number of employees up to 12, 22 and 40, respectively. These dimensional limits are not applied to co-operatives. Law n. 443/1985 also provides a legal definition of the word artisan, defined as "the owner or co-owner of the firm personally involved in the work". The companies that exceed the dimensional limits as stated by the law are to be treated fiscally and juridically as industrial firms. As manufacturing technology becomes more affordable and available to an increasing number of small enterprises, it is more difficult to trace a neat line between the labour process in artisan workshops and small (industrial) factories. The companies that exceed the dimensional limits as stated by the law are to be treated fiscally and juridically as industrial firms.

<sup>5</sup> These were the Christian Democratic Party and the Communist Party. Since the early 1990s they have disappeared from the political arena and have been replaced by different political parties.

Small-Scale Entrepreneurship in Modern Italy –

more articulated, complex, and multifaceted reality emerges.

commitments beyond formal contracts both in production and in credit.

until a specified time has elapsed from the date of his/her prior loan.

**3. Multiple resources of credit for investment** 

residing locally.

An Ethnographic Analysis of Social Embeddedness in the Access to Capital and Credit 243

the blanket of cultural homogeneity advanced by Trigilia, or beyond the financial mechanisms of institutional resources analyzed by Weiss. In other words, when I draw attention to the details of my informants' everyday life and to their personal accounts, a

What I hope to achieve here are three things. First, to present evidence of the variability of credit resources that transcend the model of an institutional credit system (banking and public programs of funds); second, to demonstrate that there is an interesting practice of credit which emerges as ethnographic analysis considers the institutional access to credit; third, to provide ethnographic material in order to shed new light on the meaning of entrepreneurship outside the economic models of rational individual behaviour. The focus on credit in a micro-scale study of an industrial district may suggest interesting and broader implications for the ways in which we normally connote entrepreneurial behaviour in society. Moreover, it may contribute to bring back to the debate economy and culture as a form of "embedded" exchange. The notion of embeddedness will be used precisely for this reason, that is, as a conceptual framework to challenge theoretical preconceptions on the entrepreneurial process, to show the interrelation among family-based entrepreneurship, social and economic institutions, and cultural setting. A crucial point is to consider the economic relevance of cultural and social bonds as a key factor in maintaining mutual ties among entrepreneurs and constituting the prerogatives to build trusting relationships and

"Let's be frank: banks always help you if you have an umbrella and it isn't raining" (Mr. Lucio Lanieri, entrepreneur). In the irony of Mr. Lanieri's statement we find condensed a collective concern about the contradictory financial role of the local banking system. As the main financial intermediaries in the region, local banks put people's surplus of capital at risk in order to grant money to those with a shortage of capital. The 'side-effect' of this very simple mechanism is that borrowing money may become extremely difficult when banks regard this operation too risky, that is, when a loan has no guaranteed return. Since risk is always present in this kind of transaction, it follows that the request for collateral becomes necessary to protect the investment. Moreover, to reduce risk, the transaction is limited in place and time, that is, by limiting the loans to a specific span of time and to applicants

A worker who quits his/her job and wishes to set up a workshop is inevitably caught into the contradiction of that mechanism. Without personal property as collateral, a request for investment capital is unlikely to be granted. The *Artigiancassa* and the *confidi* through all their financial products may assist the small entrepreneur, but the application for funds has its own rules and limitations. First, it might not be accepted; second, the value of the loan while varying according to the financial product requested - may not entirely fulfil the business owner's individual necessities. This is particularly evident in the case of the replacement or expansion of the pool of machinery. For one thing, normally the loan is barely enough to purchase one single machine; for another, once the loan is granted, the business owner cannot submit a second loan application until s/he has repaid the first or

These two viewpoints on small-scale industrialization are merely superficially divergent, because they tend to disclose two complementary dimensions of the same phenomenon. If anything, they capture remarkably well the methodological differences between a political scientist who privileges the complexity of the macro dimension of national policies, and a sociologist whose concern is to draw attention to the articulation between local governments and interest groups in small-firm areas.

It is easy to see how both aspects may fit into the development of small-scale industrialization in the Brianza and elsewhere in Northern Italy. To begin with, historically, these areas have been predominantly Catholic. As I will explain later (see section 4) the interaction between Catholic hegemony and the development of capitalism has favoured the creation of Catholic-based movements and institutions. As for local policies, one of the most important has been the creation of several industrial parks which have sprung up on confiscated agricultural land. Throughout the 1980s and early 1990s, the municipalities carried out the expropriation of several hectares of cultivated and uncultivated land with the prospect of creating industrial zones in order to move factories and workshops away from residential areas. In fact the land now converted into industrial estates was then assigned to co-operatives of small entrepreneurs and to private companies. In some municipalities the construction of industrial parks is still in progress. In the town where I carried out most of my early research, a group of entrepreneurs founded two co-operatives in the early 1980's and using government credits funded the construction of a few industrial compounds on the confiscated municipal land. Each participating entrepreneur obtained ownership rights after 10 years, as in the case of two informants of mine, Mr. Cedretti, and Mr. Colciago, each owner of a metal tool grinding and sharpening workshop . The success of this initiative encouraged other small entrepreneurs to do the same. At the start of the 1990s the synergy between the municipal government and the local artisan association helped four co-operatives create as many industrial compounds. At present the total number of workshops in the industrial park area is about 50, and plans are under way for future construction. Yet, without the public national program of loans that was originally provided by *Artigiancassa* - the Artisan Fund designed to provide low-interest credit for artisans who are otherwise unable to mobilize sufficient monetary resources for investments - the setting up of these industrial compounds as well as the investments in state-of-the-art machinery could have been much more difficult to achieve. By means of these loans, Cedretti and Colciago, for example, were able not only to move their workshop from a house basement to a modern shop floor, but also to purchase new machinery while still making payments on loans they had taken out for the construction of their compounds.

However, many other artisans, such as Mr. Faloni - a typical skilled metalworker who became self-employed (he is a turner, but he is able to operate a whole range of machinery) have not been touched by these urban policies of local intervention for reasons that were probably related to his reputation, as I will explain later. Somehow, they were also excluded by the opportunities of funding provided by the Artisan Fund. My analysis, therefore, cannot limit itself to simply registering the applicability of Weiss and Trigilia's viewpoints with reference to this area of the Brianza. For obvious methodological reasons, their approaches are reluctant to engage in the analysis of the details of the everyday life of individuals and institutions. By contrast, ethnographic analysis does exactly that. It deals with an endless series of embedded social relations and particular variations that lie beneath

These two viewpoints on small-scale industrialization are merely superficially divergent, because they tend to disclose two complementary dimensions of the same phenomenon. If anything, they capture remarkably well the methodological differences between a political scientist who privileges the complexity of the macro dimension of national policies, and a sociologist whose concern is to draw attention to the articulation between local governments

It is easy to see how both aspects may fit into the development of small-scale industrialization in the Brianza and elsewhere in Northern Italy. To begin with, historically, these areas have been predominantly Catholic. As I will explain later (see section 4) the interaction between Catholic hegemony and the development of capitalism has favoured the creation of Catholic-based movements and institutions. As for local policies, one of the most important has been the creation of several industrial parks which have sprung up on confiscated agricultural land. Throughout the 1980s and early 1990s, the municipalities carried out the expropriation of several hectares of cultivated and uncultivated land with the prospect of creating industrial zones in order to move factories and workshops away from residential areas. In fact the land now converted into industrial estates was then assigned to co-operatives of small entrepreneurs and to private companies. In some municipalities the construction of industrial parks is still in progress. In the town where I carried out most of my early research, a group of entrepreneurs founded two co-operatives in the early 1980's and using government credits funded the construction of a few industrial compounds on the confiscated municipal land. Each participating entrepreneur obtained ownership rights after 10 years, as in the case of two informants of mine, Mr. Cedretti, and Mr. Colciago, each owner of a metal tool grinding and sharpening workshop . The success of this initiative encouraged other small entrepreneurs to do the same. At the start of the 1990s the synergy between the municipal government and the local artisan association helped four co-operatives create as many industrial compounds. At present the total number of workshops in the industrial park area is about 50, and plans are under way for future construction. Yet, without the public national program of loans that was originally provided by *Artigiancassa* - the Artisan Fund designed to provide low-interest credit for artisans who are otherwise unable to mobilize sufficient monetary resources for investments - the setting up of these industrial compounds as well as the investments in state-of-the-art machinery could have been much more difficult to achieve. By means of these loans, Cedretti and Colciago, for example, were able not only to move their workshop from a house basement to a modern shop floor, but also to purchase new machinery while still making payments on loans they had taken out for the construction of their compounds.

However, many other artisans, such as Mr. Faloni - a typical skilled metalworker who became self-employed (he is a turner, but he is able to operate a whole range of machinery) have not been touched by these urban policies of local intervention for reasons that were probably related to his reputation, as I will explain later. Somehow, they were also excluded by the opportunities of funding provided by the Artisan Fund. My analysis, therefore, cannot limit itself to simply registering the applicability of Weiss and Trigilia's viewpoints with reference to this area of the Brianza. For obvious methodological reasons, their approaches are reluctant to engage in the analysis of the details of the everyday life of individuals and institutions. By contrast, ethnographic analysis does exactly that. It deals with an endless series of embedded social relations and particular variations that lie beneath

and interest groups in small-firm areas.

the blanket of cultural homogeneity advanced by Trigilia, or beyond the financial mechanisms of institutional resources analyzed by Weiss. In other words, when I draw attention to the details of my informants' everyday life and to their personal accounts, a more articulated, complex, and multifaceted reality emerges.

What I hope to achieve here are three things. First, to present evidence of the variability of credit resources that transcend the model of an institutional credit system (banking and public programs of funds); second, to demonstrate that there is an interesting practice of credit which emerges as ethnographic analysis considers the institutional access to credit; third, to provide ethnographic material in order to shed new light on the meaning of entrepreneurship outside the economic models of rational individual behaviour. The focus on credit in a micro-scale study of an industrial district may suggest interesting and broader implications for the ways in which we normally connote entrepreneurial behaviour in society. Moreover, it may contribute to bring back to the debate economy and culture as a form of "embedded" exchange. The notion of embeddedness will be used precisely for this reason, that is, as a conceptual framework to challenge theoretical preconceptions on the entrepreneurial process, to show the interrelation among family-based entrepreneurship, social and economic institutions, and cultural setting. A crucial point is to consider the economic relevance of cultural and social bonds as a key factor in maintaining mutual ties among entrepreneurs and constituting the prerogatives to build trusting relationships and commitments beyond formal contracts both in production and in credit.
