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Explore the links between EU Cohesion Policy and Rural Development, discussing two interpretations, rural challenges, successful strategies, and the potential impact of Coherence Policy in rural regions.
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Connecting Cohesion Policy With Rural Development? EU Workshop On Cohesion Policy and Rural Development Brussels, Sep. 30, 2009 David Freshwater, OECD Rural Development Programme
OECD Position • OECD broadly endorses economic flexibility and economic growth through: • Strong competition • More open markets • Technological innovation • Rural Development policy follows the New Rural Paradigm • Investment based approach • All regions have growth potential • Bottom-up process • Variety of sectors
Cohesion Policy • Fundamentally cohesion policy is about strengthening the bonds among the people in a community. • But what do we mean by community?, and • What types of bonds are we interested in strengthening?
Two Meanings of Community • Community of Place • Whole world – global village • European Union • Nation • Region • Administrative • Functional • Locality • Community of Interest
Types of Bonding • Economic Linkages • Trade flows • Access to technology • Capital Markets • Shared Social Values • Willingness to help disadvantaged • Desire to protect environment • Belief in democratic political system • Trust in members of the community
EU Cohesion Policy • Historically defined in terms of the EU as the community and with a strong emphasis on improving the economic well-being of people in those sub-national administrative regions which are furthest from the EU average in terms of GDP per person. • Cohesion Policy can be seen as a response to the adverse distributional consequences of enlargement and the shift to a more globalized economy that is driven by finance and technological change
Two Interpretations of EU Cohesion Policy • Redistributive • Grew out of the European Social Model where government taxes the “winners” to compensate the “losers”. • Part of the bargain in each round of enlargement to “buy-off” opposition. • Encourages rent-seeking behavior. • Efficiency Enhancing • Response to market failures that provides lagging regions with resources to enhance growth, thereby adding to aggregate output.
What Distinguishes Rural Places • Low density, prevalence of distance, and lack of critical mass. • The most crucial problem in rural areas is low density networks. Markets work best in dense networks (high connectivity, multiple pathways, low connection costs). • As a result of low connectivity, community in rural areas is almost exclusively community of place. • Distance makes it more difficult to get to critical mass – as you add more people the average distance among people goes up.
What We Know About Successful Rural Localities • Bottom-up process is key – people have to build local trust and local social capital. • There are capital gaps, but more commonly there are idea gaps and entrepreneurship gaps. • Not all rural places will be successful, but some rural regions can grow faster than most urban regions. • Average income in rural areas is rarely as high as in urban areas because the occupational composition does not include as many high skill jobs.
Can Coherence Policy Make a Difference in Rural Regions? • Coherence policy is mainly about bonding to the EU, but for rural development we need bonding at the locality or functional region. • Coherence policy seems focused on per capita GDP and convergence, but many rural areas are specialized in lower value, but necessary, functions. • Social cohesion may be a prerequisite for stronger economic cooperation. • Coherence policy is an inherently top down process, but rural development is bottom-up.