How do you escape economic stagnation? On Wednesday 22 March, the European Parliament’s Committee on Regional Development (REGI) examined the factors leading to the “development trap”, a challenge identified by the 8th Cohesion Report (see EUROPE 12887/2).
“Although regional disparities in the European Union have decreased in the last two decades this slowed after the [2008] financial crisis”, acknowledged Peter Berkowitz of the European Commission's Directorate-General for regional policy.
For the experts invited to the hearing, the ‘convergence machine’ must take into account all of the regions that are losing growth and all of the factors that make a region attractive.
Leave no one behind
In the EU, “a region can be said to be in a development if the prosperity of its residents does not improve relative to its past performance and the prevailing economic conditions in national and European markets”, explained Andrés Rodríguez-Pose, Professor of Economic Geography (LSE).
This does not only relate to transit (middle-income) regions, but also high-income regions that are losing ground. However, in his opinion, “there is a policy gap”. Indeed, the EU has focused on the less developed regions, many of which have caught up. While these should continue to be supported, the regions experiencing decline, especially if prolonged decline, should also be given special attention. Beyond the economic loss, “the places that are being left behind [...] are the ones that are leading the rebellion against the EU”.
“We need to think about policy responses which are [...] potentially across many different types of regions”, Berkowitz agreed. He argued that less developed regions caught in a development trap would benefit from measures seeking to improve their governance, while more developed regions should look to innovation. “Human capital investments, investing in people, would benefit all types of regions in development traps”, he concluded.
Improving attractiveness
For her part, Claire Charbit, an expert on regional attractiveness at the OECD, said that tackling the development trap requires “place-based approaches” and an understanding of a region's attractiveness as a multi-factor equation.
Indeed, six dimensions contribute to attractiveness: economic dynamism, infrastructure, affordable housing, good living conditions, good digital and transport connectivity and quality of the environment. “So one of the secrets to improve your attractiveness and exit any development trap is of course to adopt a good governance strategy: multi-level, cross-sectoral, and in agreement with private actors”, she summarised. The implementation of Cohesion policy must therefore be accompanied by a reflection on how to “manage trade-offs” between these dimensions.
More broadly, she called for a better consideration of local demands at national and supranational level, but also for more regional economic diversification and increased communication efforts on Cohesion policy. (Original version in French by Hélène Seynaeve)