Regional Development Reconsidered

It has become increasingly recognised that the location of economic activities cannot be properly understood in isolation from its wider socio-economic context, and, thus, we cannot understand regional development without linking it to the epochal transition to aknowledge-basedorlearning economythat we are currently witnessing (OECD, 1996).

The context of this chapter is set by the contemporary transition from an industrial to a knowledge-based economy. OECD (1996a) has documented the way in which the knowledge-based economy of learning individuals, organisations and economies is emerging out of the machine-based economy that determined advanced economies in most of the time in the 20th century. Although there is considerable debate on the precise nature of the restructuring that is taking place, there is wide agreement that knowledge creation and diffusion are increasingly significant processes in the innovation process. The innovation process involves the use, application and transformation of scientific and technological knowledge in the solution of practical problems.

The experience of recent decades in the European Union shows that the development of a regional productive system depends in a crucial way not only on the endogenous resources and abilities, but also on relationships with the international economy and the intensity of the integration with other regional production systems in terms of the flow of goods, production investments, financial investments or acquisitions of enterprises, the transfer of organizational abilities, the transmission of technological know-how and tourist flows.

The systematic development of human resources has for some time been an important consideration for national policy-makers throughout much of the developed world. It is reflected in the increased emphasis that is nowadays given to issues such as lifelong learning, equal opportunities, social inclusion, employability and what has come to be known as the knowledge economy. A recent White Paper published by the UK government is typical of the approach to human resource development that is now taken by policy-makers at a national level:

‘Successful modern economies are built on the abilities oftheir people. People are at the heart of the knowledge-driven economy. Their knowledge and skills are critical to the success of British business. People are the ultimate source of new ideas. In a fast moving world economy, skills must be continually upgraded or our competitiveness will decline’.(UK Government White Paper on Competitiveness, see Government, 1998, p. 28).

Historically, the notion of competitiveness has been associated with a relatively specific set of ideas and policies, in which public institutions are not given a central role. These earlier approaches are still the ones most familiar to many regional scientists. This chapter is focused on the role of public institutions in regional competition and begins by characterising regional competition and the role of public institutions [see Section 5.2]. Particular attention is paid to the issue of specifying regional competition among public institutions and a variety of models of political public regional competition are presented. Section 5.3 describes basic approaches. Section 5.4 moves to the case of political regional competition within an administrative sector, while Section 5.5 considers regional competition within a federation. Political fiscal regional competition and political competition of municipalities and public firms are discussed in Section 5.6. Section 5.7 concludes with a summary and a brief outlook.

Although the economic, social and political structures of many countries in the world are increasingly moving to a global pattern, there is still an immense disparity in the living conditions between poor and rich countries. All countries begin with an agrarian background and gradually move to manufacturing, services and eventually to a knowledge-based society. Many developing countries are lagging far behind. The rates of population growth in these countries are still substantial particularly due to steady birth rates and declining death rates. Agriculture is still prominent in many of these countries and at the same time there has been an explosion in urban populations with its associated problems. Energy has played a major role in the development process of rich countries. However, beginning in the sixties, it was found that excessive use of energy affected the environment and human health. It has now been realised that the availability of water will be the primary concern of the 21st century. Simultaneously, political systems are moving away from dictatorial and socialist economic systems to more democratic and capitalistic structures. There has also been a significant movement towards human rights and free trade.

Infrastructure is seen as playing a key role in the process of integration. Since infrastructure has typically been seen as a public sector responsibility, in its planning if not also in its finance, it has tended to reflect the priorities of the state. In a Europe of separate nation states this has implied the absence of a Europe wide set of infrastructure plans which has often been argued to lie at the heart of Europe’s increasing lack of competitiveness in world markets. This arises in two ways. First there is the lack of physical connections at an international level, such that the equivalent of the US Interstate Highway network was not conceived until the 1990s. Secondly the management of the infrastructure often causes even more difficult problems: the lack of consistency in electrification and loading gauges in the railways and the problems of diverse air traffic control authorities are good examples.

The discussion in the previous chapter has shown that our understanding of the ways in which transport infrastructure affects economic development and the process of integration is still seriously limited. The major problem we face is that there is an assumption that infrastructure must have a positive effect on growth, and hence on both competitiveness and cohesion. In this contribution we shall review the possible theoretical approaches which will enable us to be more confident in our ways of appraising new infrastructure projects.

The 21st century will see a variety of new social and technological trends which will influence the way in which transport is supplied and utilized. At present a wide range of social phenomena, including rising incomes, increased leisure time, new communication technologies, an ageing population and a declining role of the traditional family are changing the nature of the demands we place on transport. In response to new techniques of production, shipping and the growth of markets economic activities are also changing. Institutional reforms such as privatisation and deregulation have changed transport in ways that are not yet well understood. At the same time the increasing use of petroleum resources for travel and transport has raised concerns about the eventual depletion of fossil fuels as well as the contribution to global warming and decreases in urban air quality. Europe and the United States are the world’s major energy consumers and transport users. However, the long-term sustainability of current transport systems is increasingly being questioned as levels of motor vehicle fatalities and injuries as well as congestion continue to rise. These trends raise questions on whether our current transport systems will be sustainable beyond the next half century (see also Black and Nijkamp, 2001).

Disparity, in its specific meaning, can be defined as inequality, difference, or incongruity. Meanwhile, as Myrdal (1972, p. 17) pointed out, ’…experience shows that if by some chance discrimination in a particular field of social contact is increased or decreased the psychological force behind it that is prejudice tends to change so as to support actual behaviour. This too fits into the general pattern of circular causation.’ In this sense, there are certain periods when opposing forces balance one another. However, when the whole system moves after a shock by a push or a pull, then the changes in the forces work in the same direction because the variables are interlocked in circular causation.

The regional dimension of the transformation processes undertaken in Central and Eastern European countries represents a new field of research in regional science (van Geenhuizen and Nijkamp, 1995a). The problems involved in the restructuring of regional economies, the question of regional policy instruments in a context of acute shortage of financial means, the question of decentralisation, the impact of European integration etc. represent central issues in analysing the regional economies in these countries in transition.