Regional governance and economic development: A European perspective

In current debate the economic impact of local development can be traced back to two strains of perspectives and outcomes which are on the whole schizophrenic. On the one hand, when questions regarding disparity and inequality, or conversely cohesion and convergence, are being considered, what emerges are above all the potentially negative consequences, risks and uncertainties associated with it. On the other, when under investigation are the prerequisites of system competitiveness and therefore issues concerning the development of infrastructures, finance and good administrative practices, capital and technology, labour and human resources, natural and environmental resources or, in other words, the innovation in broad production factors, then what emerges are above all the potentially positive consequences, opportunities and trust associated with it. The problem is that local and regional development assumes different meanings and dimensions: ranging from the urban or metropolitan level to that of the district area or province, and furthermore to the level of the great European regions. Administrative and functional territorial divisions are intertwined. The size of the local systems under consideration plays an important role in inducing its economic influence. Moreover, as we will argue in paragraphs 2 and 3, local development is an essential determinant of structural dynamics which change over time the general framework of the economy, with effects that in macroeconomic terms are not easy to be foreseen. As far as structural dynamics is concerned, local and regional development seems to support a only partially endogenous adaptation of institutions to the needs of the economic system. If this is true, structural dynamics currently in progress are far more complex than those retained in some recent studies on the evolution of the Italian economic system (Onofri, 2001). The complexity of results is due at least in part to the complexities of the processes of adaptation in progress. Following the internationalisation of national systems and the globalisation of markets, basic components and internal functions of each economic system are being redefined. Likewise, if it can be true that some adaptation toward equilibrium is brought about by structural and institutional change, also disequilibrium and discordant elements are to be accepted as its byproducts. This rises many doubts on the full capability of the market forces to lead to a sustainable configuration and on the assumed transitory nature of disequilibrium. Karl Polanyi (1957) made an in-depth analysis of the historical evolution of economic systems that were profoundly different from each other in time and space and he highlighted the importance of the reciprocity principle plays in the development of all these systems, side by side with the exchange and redistribution principles. Thus, he focussed on organisational models for economic activities as being complementary, substitutes or alternatives to the ‘pure market’ or to the ‘pure state’, taking into account in some way the potential failures in the coordinating mechanisms based on exchange and redistribution and the need for economic systems to achieve sustainability through different combinations of these three principles. This principle cannot therefore be neglected when debate is focussed on the forms and modalities of macro-economic coordination of complex systems, such as the national and local ones, operating in contexts characterised by uncertainty and instability. Furthermore, the importance that the principle of reciprocity assumes in modern economies results in those local and regional areas in which the production processes are actually carried out, playing essential roles in economy and social cohesion. Furthermore, if the competitiveness of a system is based, on the one hand, on the commensurability and standardisation of the goods and the services it produces, on the other hand draws continually upon its ability to create new varieties of goods, services and processes. Therefore, if one of the principal effects of the current technological revolution is the development of an economy based on information and knowledge, then the easier it is to gain access to codified knowledge (global) the more important the role of implicit knowledge (local) becomes in order to improve the variety and heterogeneity of a firm’s output. Three forms of dialectics are central to the dynamics of the learning process that influences competitiveness: between the uniformity and variety of goods and services; between codified knowledge and tacit knowledge; between local and global contexts. Therefore uniformity and variety, codified knowledge and tacit knowledge, local context and global context in the production systems are not antagonists or opposing pairs but rather they become two poles of a self sustaining process in which the local and global networks play a strategic role. The local systems of production and local labour markets share this ambivalence even if with differing intensities according to the types of human resources under consideration. This paper is organised as follows. In the second section, the principal stages of development for firms and local systems of production in the Italian economy are outlined. Their innovation capacity is assessed and new policy needs explored. Section three examines the main problems connected with the diversified process of regional development in the short term (with an emphasis on divergence) and in the long term (with an emphasis on convergence). With reference to the success stories in European regional development a model for benchmarking is then proposed. Although this model is not easily transferable elsewhere, it is still useful as a stimulus for improvement. In section four two positions regarding the allocation of the tools of political economy and the role of the regional governance are briefly presented. Adopting a scheme which allows me to examine the impact of regional development on the following fields of reference , attention is focussed on the role of : (i) the single market; (ii) stabilisation policies; (iii) direct redistribution policies; (iv) public goods: Two views emerge on the process of re-allocation of economic policies which is worth-wile to compare: the first is based on the s.c. ‘economic theory of federalism’ and the second on the s.c. ‘open method of co-ordination’. The conclusion is that the second method opens up the opportunity for greater institutional flexibility and efficiency in the context of increased potential growth.