Will shrinking regions be left to fade away?

The Royal Palace, Godollo, venue of the ESPON seminar

Should shrinking regions be abandoned? This was a key question raised during the final day of the ESPON Open Seminar in Hungary (the opening day is covered in my previous blog this week). It is clear that many European regions face a difficult future in which their population is aging and people are moving out, especially young women. Should such regions be sustained by public investment – or left to gently fade away, as key services are withdrawn, infrastructure is not maintained and only those prepared to live in such conditions are left?

I chaired a workshop today that explored these and related questions about demography and migration. The ESPON “DEMIFER” project has pointed to the demographic challenges of an aging Europe, and the implications this has for pensions, family policy and attitudes towards migration. In the workshop the findings from the DEMIFER research were supplemented by a closer look at the process of change in two other projects, one on Territorial Performance Monitoring and the other on the gender dimension of migration in rural regions. This showed the need to look behind the aggregate data at the actual process of in and out migration. Mats Johansson from Sweden’s Royal Technical University (KTH) savaged the use of net migration as a key measure: “I’ve never met a net migrant”, he quipped.

Has the crisis changed things?

I was part of the Roundtable that closed the 2 day seminar. I argued that neither ESPON nor the Territorial Agenda had yet been able to fully adjust to the regional development situation that is now emerging. Agglomeration economies tend to concentrate people and economic activity. For a long time in Europe, universal provision of public services then smoothed and narrowed some of the discrepancies between places that market forces had created. During this period regional policy was invented as a compensatory mechanism, transferring resources to sustain “lagging regions”.

This approach to regional policy was abandoned in the 1990s and a “new paradigm” emerged, strongly backed by the OECD. At a time of increased global and inter-regional interdependence (and crucially at a time when the economy was strong) it was argued that economically weak regions had latent potential. Endogenous development was possible by mobilising their territorial assets. Cohesion funds were allocated to regions that could show they wanted to engage in this process and knew how to do it. Handouts were no longer necessary.

But could it be that this “new regional development paradigm” was in hindsight just a transitional phase, affordable in good times but shunned when the economy dived? Of course regional development money in whatever guise is just one small part of the total flow of public money. As deficit reduction policies kick in across Europe we are seeing the withdrawal of important streams of income to poorer regions: welfare payments and poorer pensions are two examples. Furthermore, sector ministries like those concerned with higher education are juggling reduced budgets what facing understandable pleas from elite research institutions that they need extra funds to be able to compete on the global stage. Are we then seeing some uncoupling of the global players from the more marginalised institutions and people?

The banks were deemed to be “too big to fail”: the territorial consequence in the UK was in essence that the regional economy of the South East of England was also “too big to fail”. In saving the banking system, the economic powerhouse that is London was also saved, but at a price. Part of that price is the being paid by reduced public investment and a reconsideration of spatially universal provision of and access to services.  As Roberto Camagni, the eminent Italian regional scientist pointed out in an intervention, territorial capital can be destroyed as well as nurtured.

When times are tough and the pressure of completion from outside Europe increases, will we still cheerily back any region to grow in the knowledge economy? Research in the ESPON project KIT on shows that many regions are way below the Europe 2020 target of investing 3% of their GDP into R & D. The aim is simply unrealisable and unhelpful.

Development despite the state

I argued that increasingly the economic development efforts of less prosperous regions within Europe might rely on practising forms of endogenous  development that are undertaken “despite the state”. This echoes a theme in my new book on Regional and Local Economic Development, which points to many innovative examples of pro-poor and inclusive economic development, mainly from the Global South, which are led by third sector bodies, as the state it too weak, or corrupt or disinterested in the needs of poor and marginalised groups. Europe may need to learn from the South.