The Western economic system under strain: how we got here, and how we can get out of it

In the West, we need a pact of responsibility between businesses, workers, citizens and institutions, one that puts the quality of work, the dignity of people and the care of the places where we live and produce back at the centre.

By Valerio Giunta, CEO of Startup Italia and Founder of Banking People

The crisis of the West did not emerge overnight. It is the result of choices, habits and deeply rooted beliefs that for years seemed functional and rational, but today reveal their true cost. We have quickly entered a historical phase marked by major geopolitical tensions, technological revolutions and social fragilities, and the result is that global balances, once clear and sharp, are now very precarious. Therefore, to understand where we are and chart a path forward, we must look honestly at our responsibilities.

Short-term policies - Over recent decades, our economic system has rewarded those who achieved immediate results. Entrepreneurs replaced by managers with short-term mandates, annual targets, bonuses tied solely to share-price growth; all logics that push people to “squeeze the present” at the expense of future developments. In this way, cuts were made where it was easiest: research, training, healthcare, advanced industry, and the most convenient shortcut was chosen, namely moving production elsewhere to reduce labour costs. Yet offshoring, far from being a long-term advantage, has proved to be a weakness of the Western economic system.

After all, we have moved from the power generated by old colonialism to supply-chain dominance, and power today no longer comes from occupying territory, but from controlling production/distribution chains and know-how. Indeed, we have shifted factories, skills and technologies abroad, convinced that decision-making would remain in the West, but the exact opposite has happened: the peripheral economies that, in the minds of the champions of offshoring, were supposed to remain depressed and cheap have instead become the protagonists. China and other Asian countries (the broader BRICS in general), for example, have used the expertise brought by so-called Western countries to build their own industries — modern, integrated and autonomous.

As a result, globalisation has turned against us. For years the United States guaranteed a world order aligned with its own interests: secure sea routes, the centrality of the dollar, control over raw materials and energy, and a widespread military presence; today that model is creaking for three main reasons:
- the technology gap is no longer what it once was;
- deindustrialisation/offshoring has weakened the domestic economic base;
- military power alone is not enough to govern a world full of new economic giants and labour power.

From this perspective, even the countless “peripheral” wars, justified as the "export of democracy", were attempts to control a world that no longer allows itself to be controlled. Faced with China, Trump was forced to negotiate, and Europe, clinging to its much-vaunted (and decrepit...) cultural superiority, is discovering that it has no strategy of its own. The result is that the social cost is being paid at home. Indeed, when production is moved elsewhere, labour disengagement is encouraged, and citizens pay the price: factories closing, jobs disappearing, wages stagnating, and public services becoming ever harder to sustain. The middle class — the true pillar of Western democracies — is growing poorer every year and consuming less and less. Precariousness is rising, anger is rising, distrust is rising, and protests are rising (which have delegitimised the ruling class).

The prosperity built after the war rested on domestic production. Once that disappeared, the whole edifice began to wobble. The new technological frontier, namely process automation and artificial intelligence, is darkening the horizon. Indeed, today’s technological revolution does not only affect repetitive tasks, but reshapes the entire structure of work. This is already happening in Asian countries: Western executives who visit Chinese factories return shocked by the level of technological progress achieved.

Ford CEO Jim Farley said that BYD (in the automotive sector) is 25 years ahead, describing the experience in its plants as “the most humbling thing I’ve ever seen”; the Chinese advantage stems from rapid innovation, production efficiency, supply-chain control (especially batteries) and a clear long-term industrial vision. Other Western automotive executives interviewed by the London daily The Telegraph said the same. The article’s headline is telling: “Why western executives who visit China are coming back … terrified”. They are “terrified” by the level of efficiency achieved by Chinese plants and by the speed with which the country is climbing the auto value chain, which there is now dominated by electric cars. Andrew Forrest, founder of Fortescue Metals Group, says that after seeing the automated Chinese plants he abandoned his company’s plans to produce electric-vehicle powertrains in-house.

With more than two million industrial robots installed in their factories over the past ten years, China has now overtaken Germany, the United States and Japan in manufacturing automation density. The number of robots per 10,000 manufacturing workers is now estimated at 567 in China, compared with 449 in Germany, 307 in the US and 104 in the United Kingdom. The result is that a Chinese car can roll off the line every 60 seconds, and new models are developed in half the time required by European manufacturers. As a result, those who do not automate risk losing more jobs than those who do, and the threat does not concern workers alone: today artificial intelligence is putting technical, administrative and financial professions into question, so much so that for the first time in history, those who work with their hands may be safer than those who work with their minds.

According to Jim Farley, the United States will not be able to achieve its ambitious goals in AI unless it has qualified personnel to expand the infrastructure needed to develop this technology. With market growth in artificial intelligence forecast to reach $4.8 trillion by 2033, Farley warned that the United States has neglected the workforce needed to build and support data centres and manufacturing facilities. “If we are not the ones governing technology, then technology — developed elsewhere — will govern us,” he said.

We need to rebuild “good work” - The work crisis is not only about numbers, but about meaning. Indeed, employment is growing, but so are burnout, stress and voluntary resignations. Those who can leave do. Those who cannot, stay and suffer. The causes are well known (in no particular order): difficult relationships with colleagues and managers, lack of participation, opaque pay structures, an ever more fragile work-life balance, skills that are not updated, environments where everything matters except the person. Breaking out of this vicious circle means putting back at the centre the idea that work builds the human being. Therefore, we need a business model that:
- values the person rather than just the role,
- genuinely involves people in decisions,
- supports reconciliation with family life,
- rewards merit rather than seniority,
- invests in continuous training and growth,
- sees well-being as a productive factor, not a cost.

“Good work” is not a moral luxury: it is the condition for a sound economy and a healthy society, which today means proposing a pact of responsibility under which putting the quality of work, the dignity of people and the care of the places where we live and produce back at the centre is not a return to the past, but the only way to build the future. Indeed, a productive system that looks only at the quarterly result is not capitalism: it is self-consumption. A system that does not prioritise School and Public Healthcare leads citizens to stop believing in the State, which is perceived as “dead” or absent. Without a pact of responsibility — between businesses, workers, citizens and institutions — the West will continue to import goods and export well-being.

For this “rebirth” to be sustained, a new direction for investments is needed from the worlds of politics, finance and business. It is not enough to allocate capital; the country must be steered in two concrete directions. The first is to support Italy’s strengths, namely craftsmanship, agriculture and tourism - worlds in which the person makes the difference, and in which we can be leaders - not as “traditional” sectors, but as platforms to be strengthened with technology, training and modern organisation. The second direction is to invest in the culture of selling, because without relationships, without trust, without strong commercial networks, no business grows. Even the most innovative economy needs people capable of explaining, listening and guiding the customer through the sales process, which is by no means secondary if it becomes a cultural infrastructure for the country.

In conclusion, the West has built the crisis with its own hands, but today it can also build its rebirth, provided it has the courage to put real work, competence, responsibility and the dignity of the person back at the centre. Without this change, the only alternative will be to go back to calling the defence minister a “war minister”, because that is the direction under-illuminated leaders take when an economic system can no longer stand on its own: using force to overwhelm populations and resources. Yet after 80 years without major world conflicts and with the affirmation of a culture of peace, very few are willing to fight. There, too, so to speak, specialised labour is lacking.