Western European Politics: Europe Of Regions Essay, Research Paper

Western European Politics

17/03/00

Assess the arguments for and against a ‘Europe of the regions’

A ‘Europe of the Regions’ seems to be a phrase, which encourages the dissolution of states in favour of smaller regional identities. A region can be defined by four criteria: a region does not have a limited size; it displays homogeneity in terms of specific criteria; it may also be distinguished from bordering areas by a particular kind of association of related features; and it should possess some kind of internal cohesion.

Since the passage of the Single European Act: “the goal of economic and social cohesion has become a central part of the debate on the prospect for an impact of economic integration and monetary union on member states and regions in the European Community.” The definition of cohesion, in the Single European Act, is the attenuation of the disparities between the well off regions and the least favoured ones. Some member states have shown more interest and have provided more freedom to regions than others. The importance and the autonomy of regions have been significantly increasing over the years. This implies that all regions in Europe are facing the need for adjustment and for instance they must develop their own response shaped by their social context. Therefore in response to the development of regional dimension of Community affairs, the Commission in 1988 decided to establish the Consultative Council of Regional Development.

Because of the sudden significance of regions, many sub-national levels of government have formed direct lines of communication with decision-making in Brussels. There are definite positive assets in a ‘Europe of regions’. However there are also lots of disadvantages for some regions. In this essay, I will be discussing the arguments for and against a ‘Europe of regions’.

There are a lot of positive aspects of a ‘Europe of regions’; here are some examples of such.

All regions are looking for competitive advantage. The most important factor for the latter is innovation. Therefore regions and the European institutions are now working together with national government to promote regional growth. Indeed there is a strong need for adjustment because of the new global conditions: no regions have been totally immuned to the pressure of global competition. The increase in globalisation of markets has changed the environment of the European companies, making them face intensive price, time and quality competition abroad but also at home.

To stay competitive regions have to innovate. This concept is used in connection with the analysis of processes of technological change. Once can state three different stages in technological change: invention, innovation and diffusion. “Invention is defined as the stage of production of new knowledge; innovation as the first application of the existing knowledge to production; and diffusion as the broadening use of new technologies.” An innovation system is therefore a social system. For instance they are the results of social interactions between economic actors. Hence it is an open system, which interacts with its environment.

It is technological progress, which initiates the process of economic growth. Technological progress usually reflects an improvement in the quality of capital goods and the efficiency with which inputs are combined. Technological advance includes not merely new production techniques but also new managerial methods and new forms of business organisation. It is generally linked with the discovery of new knowledge, which permits firms to combine a specific amount of resources in new ways to achieve a greater output. It is also important to mention that technological advance and capital formation are closely related; technological advance often requires investment in new machinery and equipment.

The European Commission seeks to maximize the innovation potential of firms in its leading technology: “the general move towards reflexivity and indigenous growth on the regional level has been further accelerated by the process of the European integration since the mid-1980s.”

The 1988 reform of the ‘Structural Funds’ helped the less developed regions of the Community by providing them new stimulus and additional support. While by the Single Act and the 1992 programme regulatory competition for direct investment was increased and incentives for interregional co-operation was provided for the better off regions. The new structural funds aim not only for redistribution of financial resources, but also for a “management of regional policy to enable regions themselves to take charge of economic development.” This results in a multiplier effect: more European money is aimed at specific areas, but the regions themselves are now spending more money on development. Economic growth is then generated. Some of the leading regions have shown a high annual growth rate and low unemployment with new regional industrial policies, particularly with regard to enterprise support for small and medium sized firms.

One of the other advantages of regionalized industrial policy is that they are more sensitised to and sensitive of the needs of regional firms. The money going into a member state’s region must be additional to the flow of national public spending into the region. The latter argument favours a ‘Europe of regions’. Regions try to attract both foreign and domestic investors to speed up the land use and to spur higher education, training and specialization. Labour specialization eliminates the loss of time, which accompanies each shift of a worker from one task to another. Managerial specialization means a better use of large-scale production. It is largely desirable because it results in more efficient production. The underdeveloped areas have a need to improve their comparative advantage versus the industrial areas. This process is done through industrialization. Comparative advantage is a lower relative or comparative cost than another producer.

“In this radically reshaped European Union, the sense of regional identity will be a healthy counter balance to the decision-making by Ministers which member states Governments will undertake at the level of the Union itself.”

National government policies aim at providing incentives to invest. Indeed attracting investment and capital flow from abroad, raising the skill level of the working force, protecting infant industries, and creating a positive climate for industries that wish to settle in a certain area. Those industries spur the economy of the region by creating employment.

Growth is concentrated by geographic area such as urbanised, metropolitan areas and the same applies to underdevelopment. In rural areas, urbanisation is low and there is a particular lack of economic infrastructure and of factors of production. There is a clear desequilibrium between rural and urban areas. Indeed industries look for low production cost, which they will find in urban areas. Consequently, the less favoured regions raise their production cost because they can’t allow themselves to reduce it because of economic reasons. Lower tariffs barriers then introduce increased competition; where increased pressure is applied on the depressed regions due to the lack of economies of scales. They are reductions in the average total cost of producing a product as the firm expands of its output in the long run or in simple words the economies of mass production (see table 1 & 2).

Government policies should create industries capable of mobilising a workforce from the surroundings, raising the standards of living and stimulating local entrepreneurship in the underdeveloped regions. There seems to be a clear point that the success of the better off regions is paid for by the reduction in the potential for development of the others. It is also important to mention that market forces do not bring about an equal distribution in the remuneration of production factors or of incomes.

Another problem is specialization: “ the use of the resources of an individual, a firm, a region, or a nation to produce one or a few goods and services.” In addition, specialization can also bring structural unemployment: a mismatch between their skills and the skills required by employers who are hiring workers. Structural unemployment occurs because the consumer’s demand changes over time. It is impossible to sometimes predict the consumer’s demand and it often results in structural unemployment.

Another negative aspect of a ‘Europe of regions’ is that the population moves where employment is. There is a geographical relocation. The population is deserting the less favoured regions and this results in killing economically the regions. They move to the developed regions to the detriment of others.

One should not forget to state that the indirect assault on non tariff barriers to intra European Union trade means that national and regional: “are now in competition to provide the best environment for the production and export of goods and services.” This implies that the developed regions will cut production cost and therefore attract more industries than the less favoured ones. Once again it will increase the gap between the two. A non-tariff barrier is a licensing requirement, unreasonable standards pertaining to product quality and safety, or unnecessary bureaucratic red tape, which is used to restrict imports. The European countries frequently call for their domestic importers of foreign goods to obtain licenses. By restricting the insurance of the licences, the imports can be restricted.

There is, as well, a differential degree of regional autonomy. For instance, federal states send Ministers from the regions to meetings of the Council of Ministers, whereas at the other end, regions in centralised states are largely lacking some regional authorities where they struggle to define and represent their own interests.

After assessing the arguments for and against a ‘Europe of regions’, one can become conscious of the fact that the European Commission is not in a position itself to judge the developments needs of peripheral regions. However national governments still have a major say in designating the regional actors that can participate. The policy process now includes representatives from the levels concerned with the substance of decision-making.

The trend is going towards a ‘Europe of the regions’: “The dynamics of regulatory competition and the demands of lobbying have led regions to establish independent agencies or private law firms that have the task of ensuring the co-ordination of domestic and external investment efforts.”

Despite the fact that there is a clear desequilibrium between the developments of the regions; there are some advantages in giving more independence to regions. Apart from the definite uneven development, which is caused by market forces, the single market project involved many new projects strongly impacting upon territorial authorities.

A ‘Europe of the regions’ could work if only they focused on the less developed regions. If the gap between developed regions and poor regions diminishes, then economically everyone will be better off.

? Cook et al.; Developments in West European Politics; edited by Rodhes, Heywood, and Wright; McMillan Press LTD; 1997

? Greenwood, Justin; Representing Interests in the European Union; Macmillan, 1997

? Leonardi, Robert; ‘Cohesion in the European Community: Illusion or Reality’; West European Politics; vol.16, no.4; 1993

? Mc Connell and Brue; Economics: Principles, Problems and Policies; Irwin, McGraw-Hill; 1999

? Nungent, Neill; The Government and Politics of the European Union; McMillan Press LTD; 1999