Rural Development Prof. Michael Cuddy Dr. Catherine Murray

1. Rural Development Prof. Michael Cuddy Dr. Catherine Murray IDARI Training Programme September 2003

2. Module Objectives • Introduce theoretical concepts relating to rurality and rural development. • Highlight problems arising in rural areas of CEEC. • Aid students in the writing of a report on the existing conditions of rural CEEC.

3. Module Assessment • Written paper on the conditions of rural areas in their country (where the student will carry out research). • Limit of 5,000 words • The paper should form a ‘current situation’ paper.

4. Overview of Module • Theoretical considerations • Problems of Rural Areas • Market Failure in Rural Economy • Institutions of Rural Development • Issues arising in Central and Eastern European rural areas • Agreeing framework for student’s report

5. Theoretical Considerations (1) • Complexity of rural areas • ‘Rural’ • Spatial definitions (urban/rural divide) • Sectoral definitions (agriculture & traditional activities) • Rural idyll (conceptual) • Administrative definitions (OECD, NUTS)

6. Eurostat NUTS Classification • Densely populated zones : a population density greater than 500 inhabitants/km2,and a total population for the zone of at least 50,000 inhabitants. • Intermediate zones : these are groups of municipalities, each with a density greater than 100 inhabitants/km2,not belonging to a densely populated zone. The zone’s total population must be at least 50,000 inhabitants, or it must be adjacent to a densely populated zone. • Sparsely populated zones : these are groups of municipalities not classified as either densely populated or intermediate.

7. OECD classification • predominantly rural regions : over 50% of the population living in rural communities; • significantly rural regions : 15 to 50% of the population living in rural communities; • predominantly urban regions : less than 15% of the population living in rural communities. Also, according to their degree of integration with the national economy, rural areas can further be distinguished as: • Integrated rural area • Intermediate rural area • Remote rural areas

8. Ireland: Population change 1996-2002

9. Theoretical Considerations (2) • Rural Development • traditional economic definition of development refers to the ability of a country to generate and sustain growth in GDP; • The post-war definition of development has increasingly become concerned with the reduction/elimination of poverty, inequality and unemployment, as well as with economic growth. It advocates perceiving development as a multidimensional process involving the reorganisation and reorientation of entire economic and social systems. Aims of development must include: • Increasing living standards, and impact positively on quality of life • Expanding the range of economic and social choices available to individuals. • Reducing inequality and exclusion.

10. Theoretical Considerations (3) • Rural Sustainable Development Recognition that any development process must be able to be maintained; continuity of process through time. Extending concept of rural development to include: • Economic considerations • Social considerations • Environmental considerations.

11. Integrating Ideas on Rural Development

12. Emerging Problems in Rural Areas • Demand and Supply side Problems • Resource Markets (General Market Failure) • Physical and Social Infrastructure • Social Capital and Cohesion • Sustainability

13. Demand and Supply side Problems • Sectoral Dimension • Spatial Dimension • Spatial/Sectoral Interaction

14. Market Failure (Theory 1) • Allocative efficiency • Production efficiency

15. Allocation through the Market • Neoclassical paradigm (strict) • Neoclassical paradigm (liberal) • Alternative • Institutional • Evolutionary

16. Neo-classical Paradigm • General equilibrium • All markets in equilibrium • All markets cleared • Disruption of equilibrium • New equilibrium

17. Labour Market Equilibrium W L

18. Assumptions • Core assumptions • Methodological individualism • Rationality • Equilibrium • Non Core assumptions • Competition • Agents knowledge • Use of formal modeling

19. Traditional market failure • Public goods • Externalities • Competition

20. New Market Failure • Absence of markets • Imperfect information

21. Rural Issues 1 • Sectoral decline • Low income • Structural imbalance

22. Rural Issues 2 • Market failure • Capital markets • Labour markets • Externalities • Information

23. Rural Issues 3 • Centre/periphery specific • Centrifugal - Access - Transport costs - Telecommunications • Centripedal - Initial conditions - External environment (natural and policy created) - External economies (agglomeration) - Internal economies (of scale)

24. Social Infrastructure • Population decline • Ageing population and demographic dependence • Poor provision of services • Poor access to services • Reduced life opportunities • Rural poverty

25. Social Capital and Cohesion • ‘Social capital refers to features of social organisation such as networks, norms and social trust that facilitate coordination and cooperation for mutual benefit’ - Robert Putnam, 1995 • Resources available to people due to their association or membership with society or a community. • Investment required in social capital also.

26. Sustainability • Issue due to conflicts over what sustainable goals are or should be. • "Development that meets the needs of the present without compromising the ability of future generations to meet their own needs; not simply the use of resources at a rate which could be maintained without diminishing future levels, but development which also takes social implications into account". (Dictionary of Geography, Oxford university press).

27. Institutions of Rural Development • Institutions defined as ‘the humanly devised constraints that shape human interactions’ (North, 1990 p.8). • ‘Rule configurations or prescriptions that are commonly used or known to order repetitive, interdependent relationships between individuals, sets of individuals (stakeholders, actors) and between individuals and actors’ (Gatzweiler et al 2001). • Institutions are the essence of social change - redefining relationships among people and their environment.

28. Institutions of Rural Development • Distinguish between the ‘agencies’ (or organisations) and social norms. • These organisations are groups of people who are bound by some common purpose to achieve objectives. They provide a formalised structure for human interaction. • The social norms also provide a structure for human interaction, in a less formalised fashion. • Both are important in understanding rural development policy - operate simultaneously.

29. Relevance of Institutions to R.D. (policy-centric view of institutions) • Rural Development is a government/EU policy. • Politics and administration, or goals and means of governmental achievement, cannot be separated. • What links them are the dominant institutions in operation (both formal and informal). • Rural Development requires a change in the rural economy - which in turn implies institutional change within the rural society/economy.

30. Linking New Institutional Economic ideas and rural development

31. Institutions of rural development • There are many levels of rural institutions - here distinguish between two. • Formal - institutions based on existing legislation. Identifiable within the legal framework of the country/region. • Informal - institutions arising due to cultural factors or non-legal conventions between individuals. May be difficult to detect.

32. Formal Institutions of R.D (1) • Rural Policy as an institution • Intervention in the rural economy is itself an institution - rather than taking a laissez-faire approach. • EU policy • Change in rural development policy markedly since the (1988) publication of ‘The Future of Rural Society’; the (1996) ‘Cork Declaration - a living countryside’; the (1999) ‘European Spatial Development Perspective’ • Focus on ‘bottom-up’ development rather than previous ‘top-down’ strategy. • Focus on local capacity building/empowerment of rural communities. • Focus on ‘sustainable development’

33. Formal Institutions of R.D (2) • Implementation procedures • Who implements policy and how? • Subsidies - agricultural sector • Incentive Schemes - e.g. LEADER • State ownership of rural resources - e.g. National Parks • Development Control - e.g. Planning Laws • Property/Ownership of rural resources • Issue for CEECs • Land abandonment

34. Traditional and Informal Rural Markets?

35. Rural Markets in Urban Locations?

36. illegal rural markets - dumping

37. Policy to improve infrastructure

38. Formal Interventione.g.Transfer of monies to farmers

39. Institutional ‘lock-in’ in agricultural policy? (Data from 1997) REPS contracts as % of utilised agricultural area

40. Formal Institutions of govt. intervention - ‘farm improvement’ schemes

41. Formal institution of government ownership of land/rural resources

42. State ownership - codified ‘rules’ over how to use resources.

43. Informal institutions of Rural Development (1) • Rural Development Practice ‘on the ground’ • Factors affecting rural development policy implementation. • How is the policy communicated? • Role of information in rural development process. • Customs affecting rural development. • Traditional work practices which may (marginally) affect rural economy - e.g. practice of ‘rolling’ of grass in South England - has no environmental/ ecological benefit but has a cost (petrol & time). • Sheep farming in West of Ireland - economically unviable.

44. Informal institutions of Rural Development (2) • Culture affecting rural development. • Language (not necessarily verbal - codification) • Embedded Institution • No exchange without language - fundamental of any society • Administrative Language - relevant for farmers • Rural Local Institutional Setting • Consolidated behaviour of rural actors - climate of cooperation or non-cooperation. • Local history and traditions. • Local rules - existence of dominant local individuals/politicians.

45. Customs of self sufficiency gardening - Berry Picking in Ireland

46. Historical Tradition of burning heather -management conflicts

47. Local Custom Tory Island - Institution of land distribution by ‘King’ of Island

48. Historical set-up of villages

49. Aran Islands - Institution of land inheritance

50. Institutions and innovation