EDITORIAL

WHAT ABOUT THE NEW BALANCE BETWEEN SOCIETY AND ECONOMY?

Andrea Farinet, President of the Socialing Institute

Introduction and the pandemic drama

The economic, social and values crisis we are currently experiencing has revealed obvious contradictions in the social functioning of markets in advanced economies.

Indeed, the greatest supranational drama our civilisation has ever experienced in peacetime economies is emerging. One figure above all. In April 2020, the region of Lombardy has five times more civilian deaths than in the five years of the Second World War,relatives cannot bury their loved ones, bodies are cremated, mass graves are seen in different cities in different parts of the world. Lombardy, unfortunately, has more deaths from Covid19 than the whole China. Grieving people cannot embrace each other to mourn their dead. Everyone is confined to their homes, in a sacrosanct collective quarantine to limit the devastating effects of the epidemic.

The minds and hearts of Italians, of Europeans, of all peoples, are filled with bewilderment and unbearable sorrow. We are experiencing together, in different latitudes and longitudes, the greatest curtailment of individual freedoms in peacetime. The war against the virus is as bitter, painful and confusing as a military war between peoples. In some cases, it presents unprecedented and almost paralysing aspects of inhumanity. Never would we have imagined that after such a crisis we would see a dramatic geopolitical crisis like the one in Ukraine, an energy crisis like the one in 2022, a humanitarian crisis like the one in Israel and especially in Gaza in 2023 and 2024. Let us think back for a moment to the pandemic crisis. Every social, economic, productive, relational activity that does not have the requirement of urgency has been suspended or postponed. Schools, universities, courts, public administrations, all places of meeting and exchange closed. Our society is in a mysterious and disturbing limbo. The new stable order is social distance. The term itself is disturbing and should be corrected to ‘physical distance’. In the social sciences, social distance refers to the socio-economic hierarchy that exists between different strata of the population. We are a people who, as an Italian and European identity, have made interpersonal relations a way of life and, in some cases in the past, a way of survival. Our individual and collective suffering is total.

Survival and priorities

The main questions each of us has asked ourselves during these terrible months revolve around three basic questions: Will I survive? Will my loved ones survive? What future awaits us? Survival, affection and the need for certainty are the three great unresolved knots for each of us. Life is the absolute value above all others. It is of course right to limit oneself in relational behaviour in order to protect oneself and others. The price has been and will continue to be very high.

For many weeks, our domestic dimension has played the role of bunker, defensive casket and almost house arrest.

Suddenly, almost overnight, we woke up, unable to believe in this new reality that was emerging. This reality is not ‘thinkable’. The human being is in a traumatic emotional shock that the mind, as commonly understood, cannot easily process. The frenetic hyperactivity that characterises our lives has given way to an abrupt rethinking of our priorities. Despite everything, in many cases the most common reaction has been, and still is, a substantial selfish withdrawal: I have to save myself, I have to protect my life and my affections, I have to think about my work. I will think about the rest when I am saved, or likely to be saved, both physically and economically.

It must be fully understood that a new social cohesion is needed, one of solidarity and fraternity. We never imagined that such a drama would be over in such a short time and that we would be talking about the Third World War. How is this possible? All the efforts made after the Second World War to exorcise the spectre of war have dissolved in a few months of international crisis. Let us reflect for a moment on the shock of the pandemic. Again, by way of example, let us consider this figure together. According to the Censis analysis of Istat data, 48% of economic activity in Italy was suspended in April 2020. More precisely, taking into account the reference universe of the Structural Business Statistics (SBS) system, the activities̀ formally suspended concerned 2.1 million enterprises (just under 48% of the total), employing 7.1 million workers (of which 4.8 million employees). These enterprises generate – based on data referring to 2017 – 1334 billion euro in turnover (41.4 per cent of the total) and 309 billion euro in value added (39.5 per cent of the total).

Collective trauma and opportunity

Are we really so short-sighted as not to grasp the radicality of this unimaginable collective trauma? Do we believe that a circumstantial analysis with known logics can really lift us up? What has happened to our civilisation, which has made huge investments in biotechnology, genomics, predictive diagnostics and new medicines, to leave us so unprepared? All that is needed is to humanise artificial intelligence and direct it towards the social growth of collective well-being. Should we not observe the harshness of the reality we are experiencing and then roll up our sleeves, as Italy has been able to do in so many different phases of our history? Can we not learn from this civil and economic trauma to configure a new shared social architecture that is truly humanistic? We at the Socialing Institute have clear ideas and have tested our models and technologies through years of careful, critical and continuous experimentation.

Let us consider the scope and content of this new dramatic scenario we are experiencing and try to draw possible ways out of it: individuals, even as potential consumers, have begun to fear seriously, as we have said, for their own lives and those of their loved ones. This unexpected precariousness is at odds with certain pillars of modern and postmodern society, such as trust in science, innovation and our health systems. We are all stunned by our essential helplessness. Without certainty and confidence in the future, we suspend or thwart almost any purchase or investment decision (widespread feeling of great insecurity).

Meanwhile, a new awareness is spreading: we live in a civilisation that is destroying itself. Pollution, environmental degradation, the risk of nuclear conflict, feelings of fundamentalism, sectarianism, involutionary retreat into obsolete models.

Back to primary needs

The whole of society has fallen back to primary needs (physiological and safety) in Maslow’s pyramid, and confidence in the future is at an all-time low throughout the West. In the face of extreme risk, salvation has been sought in individualism, which has very often degenerated into egocentrism, into a sterile anti-historical and nostalgic sovereignty. This trend is confirmed by the research carried out in recent months by the most authoritative opinion polling and market research companies on the social classes most affected by the current crisis.

Among other things, Italian families are among the most philanthropic in Europe, having donated around 9.1 billion euros to social and charitable activities in 2017. This emergency has shown, without any need, the big heart of Italians. Italians have been extremely supportive during this emergency. We have therefore witnessed an extraordinary competition of solidarity in these times. In Italy, philanthropy, understood as the support of socially useful activities through the disbursement of monetary resources, moves a total of 9.1 billion euros, placing our country in third place in Europe, after the United Kingdom with 25.3 billion and Germany with 23.8 billion (source: FERPI 11/10/19). Italy ranks second in Europe for individual donations and fifth for corporate donations. According to UBS, with €86.2 billion in philanthropic assets managed by 6,222 foundations, Italy ranks fifth in the world, after the US, the Netherlands, Germany and Switzerland – the latter data coming from ASVIS. (Philanthropy is becoming a social aggregator).

Volunteering as a social aggregator

Italians devote a lot of time to social work and volunteering. There are 350,492 active non-profit organizations in Italy – 2.1% more than in 2016 – and they employ 844,775 people (+3.9%) (Istat data for 2017). It is estimated that in 2018, again according to Istat, almost 6 million Italians devoted a significant part of their free time to the approximately 350,000 social enterprises on a monthly basis. According to the national average, there are 911 volunteers per 10,000 inhabitants in our country. By 2023, the third sector will be the fastest growing economic sector in Italy in terms of economic size and employment. The backbone of the considerable resilience of our socio-economic fabric owes a great deal of gratitude and recognition to those who have done their utmost to help those in greatest need. Altruism, empathy, generosity are genetic qualities in our anthropological heritage and values. We must know how to channel and direct these energies. Italy’s trust rating in the annual report published by Eurispes, which measures, among other things, the index of citizens’ trust in certain institutions or social actors. In 2023, trust in volunteering will increase to around 70%.

The Italian economy in 2020, according to the World Economic Forum, recorded a contraction in gross domestic product of more than 9%, Germany by 7%, the entire Euro area by 7.5%. Italians arrive at this crisis greatly weakened by more than ten years of substantial stagnation in our economic system. The World Economic Forum also estimates that unemployment increased by 30% during 2020. We found ourselves a year after the crisis, at the end of February 2021, with perhaps one in five Italians unemployed. The strategies of institutions and companies, based on cyclical adaptation approaches, can no longer work. It is necessary to find new forms of collective protection of work.

Saving as a socio-economic shock absorber

After the physiological recovery of our economy in 2022, we find ourselves in authoritative realities and growth forecasts for the three-year period 2024-2026, in which Italy is back in the zero/virgin syndrome. With our public debt, with the reintroduction of the Stability Pact in 2024, despite the PNRR funds, our economic system needs to be thoroughly rethought.

On the other hand, Italian households are the most capitalized in the world. In 2021, between financial, patrimonial and real estate assets, we will have wealth equal to 8 times our gross domestic product. French families, in second place after Italy, will have a multiplier of 7; American families will be stuck at 1.5 times their GDP. According to Censis, in 2022, in the composition of the financial assets portfolio of Italians, the item cash and bank deposits wins with 1,390 billion euros, or 33 percent of the total, and a growth of 13.7 percent compared to ten years ago.

The problem is that before the crisis, everyone was at the window waiting for the recovery. Now many have closed the window, feeling that the recovery is too far away to even be seen. Perhaps we should start thinking and talking more about rebirth or reconstruction than about the long-awaited recovery. But the social rebirth that can really serve us is the shared and ethical one.

The agri-food system as an accelerator of renewal

Italy has some areas of excellence in its production specialization, among which the entire agri-food chain stands out. The added value of agriculture in Italy, according to Istat, is 31.9 billion euros. Italy is confirmed in first place in the EU28, ahead of France (31.0 billion euros) and Spain (26.5 billion). We organized EXPO 2015 in Milan, among other reasons, because we have the most virtuous agriculture in the world: our added value per hectare is generally twice that of the French and four times that of the Germans. In 2008, we had the Mediterranean diet recognized by UNESCO as an intangible cultural heritage. Agricultural values, the culture of the agricultural entrepreneur as a social entrepreneur who protects the land, the landscape and natural resources, should guide us in the cultural and value-based search for possible ways out.

Our pharmaceutical and biomedical production is among the most advanced in the world, with some districts specializing in the manufacture of high-tech equipment. The economic and qualitative value of these skills is extremely high. For example, the extraordinary Italian Institute of Technology in Genoa is moving in this direction (predictive medicine and diagnostics, nanotechnology, new materials, etc.) in terms of applied research. In fifteen years of activity, we have almost caught up with MIT Boston in 2020 in terms of citation impact in the most prestigious international scientific journals. Scientific research, innovation, health, environmental prevention, new technologies, new devices, new applications can guide our evolutionary path.

Distribution as an accelerator of economic recovery

Our large distribution, traditional and specialty retailers have made a great show of seriousness, timing and adaptability. In the space of a few months, sales at the point of sale collapsed, especially in hypermarkets and large stores in general, demand for e-commerce and home delivery exploded, and mandatory smartworking imposed new operational, communication and logistics models. According to the Ministry of Labor, 554,754 workers will be working from home in 2020. The numbers are growing by the day: major telephone operators report that data traffic on fixed lines will increase by an average of 20 percent in the spring of 2020, with peaks of 50 percent. Completely new and unexpected operational, logistical and organizational models will emerge. In this context, cooperation is definitely more effective and efficient than competition, at least in the short term.

In March 2020, 75 percent of people who have made an online purchase will have experienced this type of purchase for the first time. The digitalization of businesses and professions will increasingly become a pillar of our recovery. It is necessary to initiate a collective effort for the all-round literacy of our society. (Digital transformation and e-commerce as the new evolutionary frontier in many markets).

Digital transformation and the media

Traditional media audiences, especially television, have broken many records in various time slots, proving to be an indispensable means of communication for many segments of our population. At the same time, social networks are becoming an increasingly important channel of communication and socialization in our “distant” interpersonal relationships. However, the use of social networks needs to be made more supportive and more respectful of users’ privacy. It is necessary for Europe to respect, as soon as possible, the intentions expressed at the beginning of December 2019, when the new Commission took office.

This brief reconstruction of the analytical framework necessary to give substance and contour to the crisis we are experiencing allows us to identify some elements on which our attention should be focused in the coming months:

• Widespread sense of great insecurity.
• Frequent resort to individualism.
• Philanthropy as social aggregator.
• Volunteerism as a relational aggregator.
• Unemployment as social disruptor.
• Savings – capitalized labor – as a socio-economic shock absorber.
• The agribusiness system as a revival accelerator.
• The pharmaceutical and health system as an accelerator of recovery.
• Distribution as an accelerator of economic recovery.
• Digital transformation and e-commerce as the new evolutionary frontier in many markets.
• Media as an integral part of crisis management.
• Artificial Intelligence as a challenge for new foundations of Made in Italy creativity.

A new balance between society and the economy

Among many of these new phenomena, it is interesting to note the new active role of demand. For too long, demand has been the weak link in socio-economic theory. Barely framed from a monodisciplinary point of view (demography, cultural anthropology, economic sociology, social psychology, statistics, political economy, industrial economics, business economics, etc.), demand has often been relegated to a subordinate position to supply.

The statement “We live in a market economy” predicts the fact that there is an informational and cognitive balance and symmetry between the two forces that make up the market itself (supply and demand in continuous interaction through dynamic innovative competition). In fact, many markets develop collusive rather than competitive behavior among the firms and economic agents that populate them. The welfare of customers/consumers is thus often diminished by the lack of a real comparison of the quality/price ratio of each firm’s offer.

Some recent profound social transformations help us to better understand the collective sentiment that is emerging, such as:

• The deep economic crisis, more than a decade old, and its effects on purchasing behavior;
• The crisis of real wages, which in twenty years in Italy have decreased by 3 percent, while in Sweden, for example, they have increased by 66 percent;
• The significant increase in schooling. In Italy, the educational level of the population is rising sharply, although it is still below the European average; the gap is affected by the low share of tertiary degrees. In Italy, the share of 25-64 year olds with at least upper secondary education is estimated at 61.7% in 2018 (+0.8 points compared to 2017), which is much lower than the European average of 78.1% (+0.6 points compared to 2017);
• The new social and relational protagonism of the female component of our society;
• The strong development of new media and social networks, which have significantly changed the media habits and the information and cognitive buying processes of Italians.
• The increasing diffusion of Artificial Intelligence and Quantum Computing in our working, professional and relational life.

All of these phenomena, among others of course, have gradually led to a new and widespread awareness of the social role of each of us. In parallel, there has been a widespread realization that in many cases “we live in a supply economy rather than a market economy”. Consequently, the main “way out” stems from these realizations: the solution is primarily cultural and value-based. Institutions and companies must prepare a new analytical, descriptive and interpretive paradigm. In 2019, the Reputation Institute found that in the United States, about 50 percent of a purchase is driven by intrinsic elements of the quality and price of a given offer. The other 50 percent is made up of consumers sharing the values/purpose that the company itself believes in and is concretely committed to. This intangible component of value will become increasingly important. The company will not be able to lock itself into the short-term economic paradigm that very often underlies frequent socio-economic disparities and inequalities.

The need for a shift from a marketing strategy to a socialing strategy is therefore obvious. Let us compare the possible answers of these two approaches to the questions listed above:

– Are we really so short-sighted as to overlook the radicality of this unimaginable collective trauma? Socialing, as an economic-social discipline, places the individual, the person and his or her actual well-being at the center. Marketing helps companies sell more and better, often by moving away from people’s real needs. Today we need attention, empathy, sobriety, solidarity – in other words, great compassion for the extreme hardship experienced by tens of thousands of our fellow citizens. These people are waiting for a new approach that takes into account the health, work, employment, and economic drama we are facing. In the face of an unimaginable drama, it is anachronistic to say: it is over, or the worst is over. The unexpected, surreal, and lonely death of loved ones never passes in a lifetime.

– Do we think that circumstantial analysis with known logics can lift us up? Socialing does not use social and endoscopic research to find new needs, it does not use superficial techniques like neuromarketing to manipulate minds. Analytical Socialing uses deep psychology through imagery/metaphor to deeply understand the real and symbolic experience of potential consumers. The extraordinary studies of Gerald Zaltman’s team at Harvard University’s Mind, Brain, Behavior (MBB) Center dictated a breakthrough in this field that even a great expert like Philip Kotler had to contend with. The goal of Socialing is to serve people with an ethical and transparent rate of profit. The goal of marketing is, unfortunately, more and more often to “use” people’s needs to achieve the highest possible profit. Customer Life Time Value is the prime expression of this economicist and mercantilist paroxysm.

What has happened to our civilization, which has made major investments in biotechnology, genomics, predictive diagnostics and new medicines, only to find itself so unprepared? By placing the true well-being of people and the environment at the center of its activities, Socialing ensures that no company can neglect the true top priority. This is the life of human beings, animals, plants, water, atmospheric and geological resources. In the coming years, we cannot make such serious mistakes of underestimation. Unfortunately, there are invisible enemies, such as viruses, against which we can defend ourselves by joining forces in a supranational effort of research, innovation and prevention. Market analysis showed business analysts that researching and preventing Covid19 was unprofitable in the face of other investment alternatives. When the socio-economic damage we are experiencing is hypothesized and calculated, one will find that the zeros to the right of the number are not enough to make it realistic.

– Should we not observe the rawness of the reality we live and then roll up our sleeves, as Italy has been able to do in so many different phases of our history? Society does not avoid or tame reality. It observes it in order to improve it, to transform it, to direct it towards the common good. The spirit of service that animates Strategic Socialing involves a logic of moral, spiritual, psychological and social reconstruction at all levels. Businesses have a crucial role to play in this reconstructive process. With respect to all internal and external stakeholders in their organizational and distribution chain. The plan of reconstruction and rebirth can come from companies: ethics, transparency and reciprocity are the real pillars and certainly not the generic and smoky claim of putting the customer and his “experience” at the center.

Exchanges will be less and less point-of-sale based, e-commerce will come to the fore in new habits, as it did in China for the Sars crisis, new ethical digital brands, new comparison and shopping behaviors, and new competitive scenarios will emerge. There will be great infrastructural dependence on cloud-delivered technologies. Had they been more widespread, many e-commerce sites would not have gone out of business. New communication, logistics and negotiation supply chains will emerge. Business matching platforms will emerge to match supply and demand, especially in business-to-business markets. All institutions and businesses will have to come to terms with artificial intelligence, with big data, with predictive socialing, with new ways of connecting internal and external skills and expertise.

– Perhaps we can learn from this civil and economic trauma to configure a new shared social architecture? It is clearly time for the Third Way. The direction is clear: green economy, digital sovereignty, social responsibility, corporate socialing strategies to bring demand closer to its essence, risk sharing, meritocracy at all levels. The Third Way can never be an unnatural mixture of the more palatable elements of capitalism, especially digital capitalism, with those of more developed social democracies. The latter are anachronistically depressive in their attempt to fraternise fellow citizens who are at odds with each other in vocation, talent, and aspiration.

THE THIRD WAY