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Grzegorz Gorzelak

EU regional policy: North vs. South, West vs. East. Economic disparity and imbalances in development: lessons and outcomes of the global financial crisis. Grzegorz Gorzelak. Europan integration.

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Grzegorz Gorzelak

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  1. EU regional policy: North vs. South, West vs. East. Economic disparity andimbalances in development: lessons and outcomes of the global financial crisis Grzegorz Gorzelak

  2. Europan integration • Free trade zone, customs union: no trade barriers within the integrated system, joint trade protection toward the outside world. • Common market - free flows of commodities, capital, services, information, people. • Economic, monetary and political union: supra-national institutions with wide competencies over unifies territory • Fiscal union: unification of fiscal rules (taxation, social security and pension systems etc.). • Political-military union: creation of common military forces and introduction of common foreign policies. • Federalization: creation of common government, moving of more and more competencies form national government to the supra-national government.

  3. (Short) History of European integration • July 1952. European Coal and Steel Community: France, Germany, Belgium, The Netherlands, Luxembourg and Italy. For 50 years. • 1957 the "Treaties of Rome" were signed, establishing the European Economic Community (EEC) and the European Atomic EnergyCommunity (EAEC), entered into force on 1 January 1958 for an unlimited period of time. • Single European Act, 1987, - strengthening European institution, uniting the Structural Funds, introducing common market since 1992. • European Union (EU) by means of the Treaty of Maastricht, 7 February 1993 • Treaty of Lisbon, 2007 - 2009.

  4. Treaty of Rome: foundations of regional policy „ANXIOUS to strengthen the unity of their economies and to ensure their harmonious development by reducing the differences existing between the various regions and the backwardness of the less favoured regions.”

  5. Evolution of European regional policy 1 • In the beginning: harmonisation of national regional policies • 1972: goals of European regional policy, financial means. Why? • First enlargement: Great Britain, Ireland, Denmark. • Strengthening g the competition policy – not always congruent wit the actions of regional policy. • Establishing the European Regional Development Fund (1975). • Since 1979: own regional policy of the EC. • In 1980: one of the main common policies of the EC: - assessing the territorial results of other policies; - not only investments, but also enterprise development; - delimitation of territories needing assistance.

  6. Evolution of European regional policy 2 • 1981-1986: second enlargement (Greece, Portugal, Spain). Doubling the share of population living in regions with < 50% of GDP/person average. • Further strengthening of regional policy (Integrated Mediterranean Programmes, reduction of negative outcomes of Single European Act. • Since 1988: integration of the ERDF, Social Fund, European Agricultural Guidance and Guarantee Fund - the Guidance Section). • 1994: Cohesion Fund, on national level for the Cohesion Countries

  7. Goals of Europan regional policies • Assisting the underdeveloped. • Assisting those who lose economic (industrial) base. • Assisting rural regions. • Later (after third enlargement in 1995) assisting the sparsely populated. • COHESION – the key word.

  8. Disputes • How much to the common pot? From 1.25% of the EU GDP to 1%. • How much for innovations and growth – and how much for agriculture and the poor? • Nationalisation of regional policy – or continuation of its „Europaisation”? • How much for „phasing out” regions?

  9. Evolution of spending priorities

  10. GDP/inhabitant, 2005

  11. Growth centres

  12. Dynamics in metropolitan regions 1995-2004

  13. Convergence of countries – divergence of regions

  14. And here comes the crisis….

  15. A crisis of what? • Two contradicting hypotheses (with strong ideological underpinnings): • a crisis of underconsumption. The employees are underpaid since the remuneration for capital is too high. Insufficient demand leads to a crisis; • a crisis of overconsumption. Rich societies consume more that they should, indebting themselves in the poorer ones and in the future generations. Attempt to bring down consumption to the „proper” level triggers a crisis.

  16. = 349.5 per cent Debt: 49,014 billion USD GDP: 14,190 billion USD = 349.5 per cent Debt: 49,014 billion USD GDP: 14,190 billion USD Clearly a crisis of overconsumption

  17. Whose crisis? GDP losses 2008-2009

  18. Europe – a general decline

  19. Convergence…. and Divergence Clear convergence among countries: less developed grow faster. However: mostly due to the new Member states. At the same time: divergence among regions in most of the EU countries.

  20. The crisis factors in the CEE countries • No universal pattern – neither on the side of causes, nor the side of policies. • The lethal combination: foreign ownership of banks, wage growth faster than productivity, overvalued currency and credit/housing bubble. • Also dangerous: high specialization in exports on sensitive markets of not highly innovative products. • Aggravating: pre-crisis imbalance of public finance.

  21. The crisis came in a new reality…. Shift form resource-based to innovation-driven economy, from quantitative to qualitative factors of development. Shift from „economy of places” to „economy of flows”. „Low” and „high” segments of global economy – only innovative may attain long-term competitive advantage. Metropolisation of development – from quantitative agglomerations (mega-cities) to qualitative metropolises (world-cities)

  22. Hierarchy of World Cities according to firm networks, GaWC Peter Taylor:"Measuring the World City Network: New Developments and Results

  23. Global scientific linkages, 2002-2004 Linkages within USA stronger than within Europe Matthiessen C. W., Schwarz A. W., Find S. (2006), World Cities of Knowledge: Research Strength, Networks and Nodality, „Journal of Knowledge Management” nr 10 (5), s. 14-25.

  24. Traditional approaches to Cohesion • Cohesion policy has been attached to „convergence”, i.e. to equalisation of international and interregional differences (incorrectly called „discrepancies”). • It has hardly acknowledged the new model of development where concentration prevails over deconcentration (the World Bank), mostly due to the process of metropolisation, but also to a new role of agglomeration economy (Krugman).

  25. Evolution of critical approaches to the EU Cohesion policy (directed to convergence) Cohesion Policy has mostly social meaning, and does not contribute to growth (Canova, Boldrin, 2001). Traditionally understood Cohesion policy (together with CAP) consume resources need for enhancing innovation and strengthening global competitiveness of the EU (Sapir Report, 2004). For less developed regions education is the strongest developmental factor. Traditional approaches may be even counterproductive (Rodrigues-Poze, Fratezi, 2004). In less developed regions high-edge innovation policies do not lead to sustainable growth (Rodrigues-Poze, 2007). Traditional approaches may even reduce development potential of countries/regions with poor institutional structure and not open enough (Ederveen, de Groot i Nahuis, 2006).

  26. The crisis and the new orientation The crisis is a wake-up call, the moment where we recognise that "business as usual" would consign us to a gradual decline, to the second rank of the new global order. This is Europe's moment of truth. It is the time to be bold and ambitious.

  27. Europe 2020: a new model of growth • Smart growth: developing an economy based on knowledge and innovation (should we learn form China?) • Sustainable growth: promoting a more resource efficient, greener and more competitive economy (here we are storng – not too strong?). • Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion (and here Brazil gives some clues).

  28. However…. there are dangers and challenges • The Euro and the South: will the European Union sustain the economic imbalances in its Southern member states? If Spain, Portugal and Italy follow the Greek path – no chance. • The European versus the national dimensions: the project „Integrated Europe” has lost a great part of its charm and appeal, and the national interests come to the fore (Common Agriculture Policy, the failure of Lisbon strategy to mention the most obvious examples). • The future Cohesion policy: will it be able to reorient itself towards promoting growth and development, will the member states allow for conditionality – or will it remain the policy of generous redistribution to the poorer member states? • Sector versus territory: will the horizontal approaches (Cohesion policy) be defended form the sectoral approaches?

  29. The future…? 2004 2030 GLOBAL TRENDS 2030. THE WORLD IN 2030 http://www.freeworldacademy.com/globalleader/trends.htm

  30. The chances are still there • Will Europe have the „will to power”? This would need a strong European leadership. • Will it be able to sacrifice some of its social standards for the sake of more efficient and more innovative growth? Some countries can (Central and Eastern Europe, Great Britain), some seem not to be able (France, Greece). • We still do not know the final outcome.

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