Spatially-Blind Versus Place-Based Policies

Abstract

In this chapter we start observing that the Washington Consensus doctrine has failed to provide a general recipe for economic development. Major economic improvements took place where the requirements for fiscal austerity, privatization, and market liberalization were not met. Where this recipe was applied, very little progress was recorded, while serious imbalances occurred. The current view that a more “humble” search for paths to development is needed has replaced the claim that best practices can be applied anywhere. The failure of the Washington Consensus gave a notable boost to a spatial perspective. If there are no general recipes, then opportunities and constraints must be considered on a case by case basis. Dealing with development policies, therefore, involves dealing with regional policies. In the central part of this chapter we review an unresolved debate in this field. Is it better to invest in people regardless of where they live, or should we support the development of places to help people more effectively? Should all regions grow simultaneously or could just a few drag the others? Is the goal of developing backward regions unnecessary or unattainable? A debate is emerging between people-based (spatially blind) policies and place-based policies. The World Bank supports spatially-blind policies, while European Cohesion Programs are conceived as place-based interventions. In the last part of this chapter, we review the 2014 European Cohesion Policy reform and outline its merits and weaknesses.

Appendix: The Italian Mezzogiorno

The reduction of unemployment in Southern Italy in the 1960s and 1970s was certainly a consequence of emigration, i.e. the reduction in labor supply, as outlined by the 2009 World Bank’s Report. In 1951 the southern population was 24.9 % of the entire national population; in 1971 it decreased to 22.9 %. According to a survey conducted in 1978 by the Center for Economic and Agricultural Research for the South of Portici, between 1951 and 1971, 4,200,000 people, out of a total population of 17,500,000 emigrated from Southern Italy.

At the same time, there was a significant increase both in production and labor demand, which Indermit Gill ignored. Figure 1.2 shows the course of the South/Centre-North share of GDP per capita and of its two components, population and GDP change. The share of per capita income in the South decreased constantly from 1881 to 1951. In 1881, twenty years after the Country’s unification, there was no gap recorded between North and South because the North-East was very backward. While this gap within the North gradually closed, the North-South gap opened and continued to grow. The 1960s and 1970s were the only period when a significant reduction in the North-South division was achieved. This was the time of the “Italian economic miracle” (1959–1974), as shown in Fig. 1.3, and also the time of a particularly effective development policy implementation in favor of the South, as shown by Lepore (2012).

Fig. 1.2

Some figures about the North-South divide in Italy. Source Figure obtained by processing data from Iuzzolino et al. (2011, 64–74)

Fig. 1.3

Italian rate of employment (on the labor force). Source Figure obtained by processing data from Istat (2011, 474)

The Cassa per il Mezzogiorno’s intervention in favor of the productive sectors through grants, loans, direct investments (which could be considered in the logic of a place-based paradigm) were particularly relevant in the 1960s and 1970s. The most significant expenditure on infrastructure (sectorial top-down interventions), on the other hand, occurred in the 1970s and 1980s (Fig. 1.4).

Fig. 1.4

Cassa per il Mezzogiorno, expenses in million euro in constant prices (2008), moving three year averages. Source Adapted from Lepore (2012, 101)

The period featuring the most notable place-based action is when there was the greatest growth in the GDP share per capita in the South compared to the Centre-North due to the component of local growth and not to that of emigration. In comparison, the following years witnessed higher expenditure in infrastructures and lower economic growth. In general, although these interventions in favor of the South did not cancel the gap with the Center-North, they are correlated with the interruption of its historical upward trend. Moreover, in their period of greatest intensity, these policies produced a remarkable reduction of the gap, which later stabilized at a significantly lower level compared to the 1950s when the South-oriented policy began.

The Italian Mezzogiorno, therefore, does not demonstrate that regional development policies are inevitably destined to fail. Although the South has not reached the development levels of the Center-North, it is also true that when the policy for the South was very active, significant results were successfully achieved.