Here is the threefold inequality that Europe must fight. Notes by Fabrizio Barca on a new cohesion policy

December 1, 2017
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LUISS Open has met with Fabrizio Barca, an economist and former minister for territorial cohesion, who held a cycle of lectures as part of the Master in European Economic Governance organized by the LUISS School of European Political Economy (SEP).


Is inequality really more an “American” problem than a European one?

Over the last thirty years, Europe has lived the same story of the rest of the Western world, so it is not surprising that the continent is going through some strong economic and social inequalities, namely about the quality and accessibility to basic services such as the school and healthcare systems as well as the digital coverage allowing a modern communication. Europe is also characterized by significant “recognition inequalities”, that is to say recognizing the role of people. Recognition inequality is there when it hits those in manufacturing work in those countries where we forget that switching the lights on is made possible exactly thanks to that same manufacturing industry; that inequality is what workers go through when their central roles are lost in the excessive discussion about the advanced tertiary sector and automation. Recognition inequality has its roots today in those rural areas, in Europe as well as the United States, which feel like they don’t belong in history, like they’re far away from modernity, as if it was only cities that were inevitably made creative and pioneering thanks to globalization’s technological processes. Which is a false assumption, by the way, because climate change, innovation and a demand for diversity in today’s capitalism make rural areas potentially very rich. All of these three inequalities – income inequality, social inequality, and recognition inequality – creates territorial faults throughout the Western world.

However the issue of inequality, in its various facets, is now at the center of international debate. Is anything changing?

A renewed attention towards said territorial faults has also returned to the international agenda, even central to such media as the English weekly magazine The Economist, which hadn’t covered them in a very long time. The Economist has observed for instance how that in the twenty years leading up to 2014 “the gap in productivity level between the frontier regions of Europe and the bottom 10% ones increased by 56%”, adding that “unless policymakers grapple seriously with the problem of regional inequality, the fury of voters […] will only increase”. The three types of inequality mentioned above often contrast the suburbs with the centers, the rural areas with the cities, and they have become so blatant that they provoke an angry reaction towards modernity, globalization and the technological change. However, the fact remains that the ruling class has made mistakes, we have made mistakes. The reason why we find these inequalities in Europe, as per the skillful examination, for example, by  the economist Branko Milanovic, is not the one generally agreed upon by the authoritarian narrative; such inequalities are not, that is, the inevitable result of new technologies, of opening the markets to China or welcoming migrants. At the root of these imbalances there are some precise policies that have not been able to govern and direct change. For some time now, in fact, the ruling classes have had the feeling that they can no longer manage change. This attitude is uncalled for. Something becomes inevitable when it is the result of a process that you did not govern in the past. If you want to influence the future, then you have to govern the present. The message of helplessness that the ruling classes are sending out, in addition to being a wrong one, is unsettling to the public opinion. When you have been arguing for years that you can do nothing at local level if the regions do not intervene, then that at regional level you can not do anything if the state does not intervene, that even at national level you can’t do anything if Europe does not intervene… Then what else is left? This is pushing people towards a closed communitarianism, and towards authoritarianism.

Isn’t the so-called “cohesion policy” by the European Union an instrument designed precisely to remedy these social gaps? 

Cohesion policy – as it was originally intended by our very own Antonio Giolitti, a great European Commissioner, and by Jacques Delors and Tommaso Padoa-Schioppa, coincidentally another Italian – was a machine built to give to the citizens in the places and to the people in those places, the opportunity to take back their destiny. It was a policy designed to allow citizens to weigh their knowledge in directing the development. Progressively, however, with the spreading – in the 1990s and at the turn of the year 2000 – of a renouncing approach, according to which certain processes should only be supported because of their being natural and tied to the market, and in the face of the social tensions that have descended, cohesion policy has been given a different role, that is to say of compensating the damage caused by uncontrolled processes and of guaranteeing social peace. Cohesion policy has therefore become a compensatory policy. In other words, tons of money to struggling territories, whether they be in the south, the suburbs or in rural areas. These are territories that always had money, but lacking a strategy – with the exception of a compensatory one, which has been a disastrous one because it has encouraged local actors to become money brokers, of so-called “cantierabili” projects, meaning where commencement of works had already been approved, and they were never valued for their inherent quality. Therefore, job-creating worksites were opened and training was provided to employ their trainers. In short, it was mere welfare-ism. This drift has been understood at some point by some scholars and in particular by Danuta Hübner, Polish Commissioner for Regional Policies in the European Union from 2004 to 2009, also thanks to her geographical origin, from the new “periphery” of Europe. Commissioner Hübner therefore called me to work for the reform of Cohesion policy, together with the best of alternative thinking, and that is how an Agenda for the reform of Cohesion policy was born in 2009. The effective reform of Cohesion policy was carried out in 2013 on the basis of this project.

The European Cohesion policy was therefore reformed in 2013, but in what direction does it go? And what effects does it achieve?

The 2013 reform is not a badly designed one, meaning that it effectively implements a discontinuity with respect to the compensatory-welfare-oriented approach of recent years and moves towards what I like to called a “place-based approach”. The aim of this latter approach is to unleash knowledge, remove barriers towards innovation and encourage a lively exchange between local knowledge and global knowledge. In this sense, we are glocalists: knowledge of the territories must “speak” with the knowledge of the major centres, universities and corporations. But the latter cannot stand by itself without without a knowledge of the territories. The next question is: has the reform produced any effects? In a nutshell, I would say that the rules are well written, but we did not put our hearts in them. Rules count if you implement them by believing in them, and the ruling class and European politics at this moment is not made by the Giolittis, the Delorses, the Padoa-Schioppas. Improvements  can however still be made, also from a technical point of view, for example, given that the fragmentation of the five different Funds available for Cohesion policy still continue to hamper its effectiveness by creating sector-specific supply chains. Planning for training policy, for example, is different from the planning of policies aiming to give incentives to businesses, because there are two different funds behind it. Before we get back to the rules that were written in 2013, we should realize that it is way more serious that there are separate funds, that everyone is headed by a directorate and a different commissioner, that they fuel separate political-administrative-bureaucratic chains and that they need to coordinate among themselves first and foremost before they even get to start their work. It’s a useless complication.

Are there concrete examples from which to start implementing a Cohesion Policy in a more linear fashion?

 First of all, I would like to emphasize that the Cohesion policy is not a only concern of Europe alone. The United States, for example, are also implementing it. It has been estimated that at the beginning of the 2000s, the U.S. Federal Policy for Development – that is, the extraordinary policy triggered by Washington when the perception exists that a particular state or county is in serious difficulty – had a budget of  USD 197.2 billions per year. At the same time, European countries and the EU allocated USD 45.5 billion per year to reach the same target. That said, the method commonly used in the United States, where money is spent directly and compulsorily by Washington, does not convince me. It is typically roosevelt-ian, coming from a top-down planner – it worked a century ago but not so much in a society where knowledge is so widespread. The centre must be strong, let us be clear, therefore I recommend Brussels to pick up 500 new young experts, putting “troops” in support of ideas.

Speaking of practical application, let’s not forget the – positive, for once – Italian example. There is the case of OpenCoesione, a portal on the implementation of projects funded in Italy by the EU Cohesion policy. Here you can browse the data on allocated resources and expenses, localizations, themes, programmers and actuators, implementation times, and payments for individual projects. Everyone can therefore assess how resources are used in relation to the needs of different territories. There is also the example of the synergy with our “Inner Areas Strategy” which, through the existing regulations and pillars of the EU Cohesion policy, aims to counteract the demographic downturn while reviving development and services in certain areas of the country that are considered as “remote”. We are talking about a prototype of the 2013 regulations, that is the “place-based approach”. This is a procedure that covers 17% of the national territory and 2 million inhabitants, and has been pursued uninterruptedly by four different governments. This is an original strategy supporting what we call the “regeneration guardians” of a part of the Italian territory, whose governance has a direct effect on the lives of the remaining 58 million Italians. The Inner Areas Strategy in Italy is a practical demonstration that the Cohesion policy regulations work just fine. When one wants and knows how to value them.