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CNAPTER II

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The iaperative becaie, fpr firas as we 11 as for govern«ent8, that of becoaing aore coapetltive than the others. Although It acąuired a dlfferent set of aeanlngs and lBpIications for the firas, for the governaents, and for the attltudes and behavlours of ordlnary people.

Por the firas it iaplled the beginning of a process of technoioglcal and organlzatlonal restructurlng. Thls process was at the saae tiae wlde,. deep and long lasting. Coapanies changed the strategies concerning lndustrlal relations, hiring and upgrading procedures, and, aore ln generał, personnel aanageaent. The divlslon of tasks and roles between firas changed; larger firas started ' to reduce their eaployaent, while the vertlcal integratlon of the productlon processes was dlalnished. Firas started to adopt strategies based upon the coapleaentarlty of network of dlfferent saaller firas. Labour-saving techniąues were widely invented, through dellberate actlvltles of research and developaent, and adopted. In aany seętors the strategy of coapetition becaae lncreasingly based upon contlnuous lnnovation.

One of the aggregate result of thls effort was a structural decllne ln the aaount of laported prlaary goods. Thls contributed to re-establish a balance in the International trade, with respect to the countrles exporting prlaary Inputs. The restoration of aore favourable teras of trade between Industriallzed countrles and prlaary goods producers was partly the result of thls structural adjustaent and partly added its own effects to It.

The consequences upon governaent policies deserve aore attentlon, sińce they are rather counter-intuit1ve. As we recalled earller, the tendency of the teras of trade was, ln the aain and ln the long run, to realign to the parlty which existed before the first oll shock.

Qovernaents on the one hand had to flght agalnst a ralslng ratę of inflatlon and, on the other hand, they had to proaote the adjustaents, consldered earller, to the new teras of trade between industriallzed countrles and raw aaterlals and prlaary goods producers. In prlnclple they alaed at obtalnlng thls result through a aixture of restrictive and regulatory policies: Increase of taxes, lowerlng of publlc expendlture, aonetary restrictions, wagę aoderatlon. In practlce governaents aet dlfflcultles ln lowerlng publlc expenditure; a good deal of the publlc expendlture, in fact, depended upon decisions- undertaken aany years earller, durlng the period in which aore progressive legislation was adopted and expansive expectatlons appeared to allow (and to reward, both econoaically and polltically) generous publlc provislons and the growth of eaployaent ln the publlc sector.

Wagę aoderatlon was pursued because of two distinct but converglng goals: controlling Inflatlon and lowerlng the' cost of labour, in such a way as to laprove International coapetltlveness.* In other words, the control of inflatlon and