The economic development, social cohesion and political stability in the EU have been imperiled by the regional economic divergence. The last 50 years have seen increasingly rapid technological advances, globalisation and policy choices that gave rise to the so-called “great inversion” and “the new geography of jobs”. Once thriving rural and middle-to-small metropolitan areas are facing job losses, decreasing labour force participation or decreasing income-per-capita compared to the national average. In other regions an increasing employment might be observed on first sight, but in essence it is of low quality, concerning tedious and low-skilled occupations. On the other hand, a lot of large metropolitan areas along with their suburbs are ranking high as most vibrant places with lavish and lucrative employment opportunities.

Geography of discontent: regions “trapped within the cracks”

Intra-country territorial polarisation has broadened - with a tendency of accumulating economic activity and wealth in large urban agglomerations, frequently capital cities; and numerous regions being stuck in “development traps”. So far, the majority of economic policies and channeled funds have been directed towards two types of regions: the most prospective ones in terms of economic growth and development, and the indigent ones with a substantial need for all types of endowment. Many regions have “fallen between the cracks”, since they were “neither large nor dynamic enough to attract investment, nor were they poor enough to warrant attention”.

Geography of discontent—an emerging phenomenon—is observed in such cases, denoting the unhappiness and dissatisfaction of people living in these regions that experience a “development trap”. These “development traps” take different conformations. In the first place are areas that that were previously poor but started converging afterwards and their development stagnated when they reached middle income levels, such as regions in southern and western Spain. Second come territories which persisted to be on the halfway to be rich or poor for a prolonged period of time—like the East Midlands in the UK—unable to advance their situation often wise for decades. And last but not least, are territories that were once wealthy— like the North of Italy—but whose growth have stalled, or have experienced insufficient growth or negative growth rate in the last couple of decades. The progress and prosperity of these regions once used to impel the whole country to affluence, but nowadays they are not pertinent anymore and are thrown in the shadow of more dynamic, vigorous and prosperous areas.

Nevertheless, according to Iammarino et al., (2018) “the issue is not whether, at any particular moment, there is perfect regional convergence and equality in development levels: there never is. But rather whether the economy is spreading prosperity or concentrating it”.

Adding sustainability in the equation

Hitherto developments along with future political agendas and targets mark the 21st century as the century of prosperity, inclusion, partnership and sustainability. The environmental and climate-related concerns are positioning high in every political agenda, and related strategies addressing these pressuring challenges became intertwined with existing policies or stand-alone action plans.

The European Commission—aiming to turn an urgent challenge into a unique opportunity—put forward the European Green Deal. A new growth strategy, which among other things, (a) has the goal to “transform the EU into a fair and prosperous society”; (b) needs to ensure a “transition that must be just and inclusive. It must put people first, and pay attention to the regions, industries and workers who will face the greatest challenges”; and (c) is “an opportunity to put Europe firmly on a new path of sustainable and inclusive growth”.

Many conceivable questions are arising which remain unanswered at present. Is Europe’s new agenda for sustainable growth and Circular Economy Action Plan going to decrease regional disparities, narrow intra and inter-country territorial polarisation, restrain “development traps” and reduce geography of discontent? Or is it going to increase regional divergence, widen intra and inter-country territorial polarisation, impel “development traps” and upsurge geography of discontent? Is the Europe’s new agenda for sustainable growth and Circular Economy Action Plan going to spread prosperity or concentrate it?

Unleashing the untapped potential of each region

Focusing all the lights on the largest, most dynamic and promising territories—that can contribute the most to achieving the established targets—might seem the most reasonable decision right now, along with the special attention given to the most vulnerable and remote places. But on the long run, this might only widen the gap even more, and make the rich even richer and the poor even poorer.

As put forward by Rodríguez-Pose et al. (2018), territorially differentiated investment is needed - financing flows that will have nothing to do with the pretentious interventions which have dominated policy in last couple of years (i.e. mega-infrastructure projects that ultimately finish up as white elephants). Additionally, not stopping at fixed criteria (rich vs. poor) but taking into consideration more dynamic ones (thriving vs. declining)—when establishing and deciding on investment policies—will also be of benefit. This will target the untapped and unrealised potential of the territories that have fallen between the cracks. However, this will entail abandoning the “silver bullet” solutions and directing towards new type of place-sensitive interventions, which could unleash the full potential of each territory.

The best of both worlds?

Addressing development issues along with environmental concerns is indisputably a major challenge – and this is what Europe is trying to achieve. Concentrating efforts towards achieving cohesion, while combating climate change, is an uphill battle. Investment and policy focus on the frontrunners in this game will ultimately bring points only for the environmental scorecard. On the other hand, spreading the efforts to the developing and less developed regions—even though it will initially appear like having multiple battlefields—on the long run can contribute to scoring both development and environmental points. A low carbon and circular economy will differ in each European city and region, taking into account the geographic, environmental, economic and social dimensions, but also the institutional setting within each region. The industrial structure of the territories will also be a vital feature to be considered, with service and resource-intensive sectors demanding a distinctive type of support and investments. Therefore, the specifics of each region must be reflected in analogous policy objectives and investment flows.

By Sanja Arsova

January 2021

Sanja Arsova

Sanja Arsova is a PhD student at the University of Sheffield. She is an Early Stage Researcher within the ReTraCE Project, funded by H2020 EU's Marie Skłodowska-Curie Innovative Training Networks, at SEERC in Thessaloniki, Greece. Her work focuses on the development of regional policies that could foster and support the transition to the Circular Economy. Before commencing her PhD, she has been involved in a transnational research project to enhance research collaboration and cooperation between EU and India. Sanja has also held various positions at the European Central Bank.

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