Summary of the #EURegionsWeekUniversity session: A New European Industrial Strategy oriented towards citizens and the territory

The recording of this session is now available on the REPLAY section of the event web: https://euregionsweek2020-video.eu/video/euregionsweekuniversity-a-new-european-industrial-strategy-oriented-towards-citizens-and-the-territory

See the session details on the #EURegionsWeek website

Moderator:

David Bailey, Professor, Birmigham Business School, United Kingdom.

The aim of this session at the 2020 EURegionsWeek, University session held on Thu 15, October 2020 (09:30–11:00), promoted by the Association of European Schools of Planning, The European Regional Science Association, The Regional Studies Association European Foundation has been to create a communication and networking platform for regions and cities in order to facilitate cooperation and exchange of experiences and good practices, and to stimulate original research on EU cohesion policy as part of a “New European Industrial Strategy”.

The session has focused on:

• the major effects of the current Covid crisis on the local economies in Europe,
• the proposal of strategic and territorial policy programs for relaunching the European economy and improving the environment and the wellbeing of the European citizens;
• the proposals for the governance of the operative projects, the citizen’s participation and the coordination of institutions and proposed initiatives at European level for the governance of the relations between Regional governments and national Government and EU institutions

The session was coordinated by David Bailey, Professor at Birmigham Business School, United Kingdom, and included four interesting introductory speeches by Riccardo Cappellin, Professor at University of Rome “Tor Vergata”, Italy, Bernadette Andreosso, Jean Monnet Chair at University of Limerick – Ireland, Gioacchino Garofoli, Professor at University of Insubria, Varese, Italy and Phil Tomlinson, Professor at University of Bath, United Kingdom.

Industrial strategy is back on the policy agenda in Europe. The recovery from the great financial crisis has been very uneven and it is also still not accomplished in some countries. Investment have decreased in the previous decade and even more in these last few months. Industrial strategy is relevant at the national level (i.e. UK, France and also Germany) and broader than the traditional competition, sectoral and RD and technological policy measures, but also increasingly at the regional level (i.e. RIS and Smart Specialization strategy) and hopefully also at the European level in tight complementarity with macroeconomic monetary and fiscal policies, in the framework of the NGEU plan and the 2027 multiannual framework.

As indicated by the EU institutions, relaunching the economy does not mean going back to the status quo before the crisis, but bouncing forward. We must repair the short-term damage from the crisis in a way that also invests in our long-term future. All of the money raised through Next Generation EU will be channelled through EU programmes in the revamped long-term EU budget (e.g. https://ec.europa.eu/commission/presscorner/detail/en/ip_20_940; https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1590732521013&uri=COM:2020:456:FIN)

In particular, three topics seem of particular interest: a) engage stakeholders, by identifying their relevant motivations, role, responsibilities, influence, level and engaging of connectivity and promoting the sharing knowledge and structural cooperation, b) define the medium term strategy based on the analyse of the problems at stake with specific reference to the territorial dimension and define strategic recommendation and promote cross sectoral integration, in order to align recovery and sustainability objectives at the regional, national and global scale, c) propose specific planning actions, by aligning the medium term strategy with selected operative projects and defining their governance and implementation requirements, including funding and finance and monitoring of result.

The universities and also the scientific and professional associations have a key role in order to address the skills gaps and to support local and regional government in defining a medium –long term recovery strategy and to address a consistent message to Central government and European institutions. In fact, some universities have played a key role in COVID response according to future oriented civic role and playing a anchoring role in local collaboration, by providing research and advice and collaborating in the design of Regional Recovery plans. They should have an active role in creating a vision for the economic renewal of the region, building on the principles of the Local Industrial Strategy, focused upon inclusive & sustainable regional growth and “foundational sectors” (such as health/education/energy) and societal challenges/societal innovation (Morgan, 2019). The contributions presented at the session are the results of the ongoing networks of European researchers, which have organized previous workshops and publications and would like to continue their cooperation on the topic of this session in the coming months both in the framework of scientific – technical conferences and with the dialogue with the EU officials and other political decision-makers, as well as stakeholders from business, banking, civil society organisations and the media.

The recent Covid crisis has aggravated the urgency of and European policy response, which was already required in order to face to long term challenges such as climate change, economic stagnation after the previous 2008-09 financial crisis, due to the austerity policies adopted during the past decade, the emerging and aggravating political tensions within Europe and in the global economy, due to increasing immigration from no European countries and increasing national trade disputes including the danger of a fragmentation of the European Union, as indicated also by Brexit

All countries and regions have indicated a decline in investments and also in consumption and exports and especially a decline in employment. The most affected sectors have been service productions such as accommodation and food, arts, entertainment and recreation, wholesale and retail trade, transport and storage, together with construction sector, while other sectors have been affected to a lesser extent and have also recovered at faster measure in following months after the lock down, such as manufacturing, information and communication services, finance services and public administration.

The policy response has been similar in the various European countries, as indicated by increase public expenditure on health care, adoption of job retention schemes and fiscal support to unemployed or furloughed workers and support to business including self-employment support in the form of fiscal grants and liquidity loans. These initial measures have been followed by medium term measures which have varied between countries and should be coordinated at the European scale, such as general grant supports: administered through Local Enterprise Offices to help firms with strategies to access finance, commence or ramp-up online trading activity, to reconfigure business models, cut costs, innovate, diversify markets and supply chains and to improve competitiveness or measures addressed to specific sectors, such as tourism sector, farm and horticulture sector businesses, food and drink and seafood sector. Long-term policies should learn from the crisis and aim to build new modern filieres/supply chains at the EU and national level, such as for example a health care filière, which may give a substantial contribution to the growth of the manufacturing sector (pharmaceutical firms), as indicated by Bernadette Andreosso and Phil Tomlison.

A new and in depth analysis is needed of the policy fundamentals of the recovery. The concept of “A new European Industrial Strategy” is different but also complementary to the traditional fiscal policies by the Governments and monetary policy by the ECB. The productions to be considered are not only ICT and Green technologies but also new modern productions, which may respond to other needs of the citizens on the various cities and regions of the European territory. The problems and priorities of the various regions are different and the aim of the Recovery Plan should first of all to relaunch the employment and decrease disparities within the countries and between the European countries.

The changes in the structure of final consumption expenditure by households distinguished by consumption purpose indicate emerging long term trends in the pattern of demand especially in the territory and especially in urban areas and cities networks indicate the increasing importance of the following new productions and supply chains, in order to creates new employment and to stimulate greater investments and GDP: agrifood, housing, tourism-culture-entertainment, regional-urban transport, health-education, environment-energy. These new markets and supply chains may represent the priority productions and investment and innovation sectors in a New European Industrial Strategy, as indicated by Riccardo Cappellin.

That implies that macroeconomic policies in the EU should focus on the growth of domestic demand for investment and consumption, both private and public, in the territory and in the cities and not only on the growth of exports towards an increasingly fragmented and declining global market. It requires also a greater effort in innovation by private companies which must reconvert from traditional productions to new productions, where the demand increases. Innovation and especially “product innovation” will increase the financial return of the investments by the companies and stimulate investments by the companies. Productivity increases at the national aggregate level are related to a major reconversion to new productions having a higher productivity and from traditional productions being in the late phases of the production cycle. Innovation requires not only greater immaterial investment in technological and in scientific research, but also in education and training, as human resources are crucial in modern knowledge economy and society, and in strengthening secondary and tertiary education. It requires also organizational and institutional structural changes (i.e. “structural reforms”) within companies, within specific markets and also in the society and the regional, national and EU institutions. These economic and technological changes are tightly complementary and needed in order to insure a better environmental quality and quality life of citizens. Changes in the demand patterns, in national and regional sectoral production structures and in the environment and the territorial structure are closely linked between them, as indicated by a “circular” development model

A New European Industrial Strategy should focus on the large latent demand existing in Europe for those productions, which could drive a “large investment push” by private companies and could be sustained by private investments and not only by large public investments.  Therefore, the Covid-19 crisis after a decade of slow growth may represent the stimulus for a major diversification of the European production system in the various countries and regions of the European territory.

The shock of the Covid19 crisis has had a very different impact on the various local communities, on the various tertiary and industrial productions and on the various companies. The employment fall is not homogenous in the various regions, but is concentrated in cities and especially in large metropolitan areas. Therefore, the stimulus measures should be “specific” and should be taken both on the demand and on the supply of the individual productions. In this respect a regional approach is really appropriate.

A balance between the demand and supply schedules is not always achieved, but there may be either an excess of demand or an excess of supply. In the current post Covid situation, a new European industrial strategy should reorient both the supply of productions and the demand towards new goods and services. The actual EU priorities are the increase of public expenditure and investments in specific sectors (“digital and green transition”) without considering and stimulating their market demand and that may lead to an increase of the supply side in unprofitable sectors.

In Europe we need not only a rapid and strong recovery in spending but also that it be differentiated by country and region; this has significant consequences in terms of public interventions at national and regional level and complex governance of the various public institutions. Economic development it is hardly pushed from above and it can only arise from the bottom. Moreover, in all Europe local communities share very similar problems. Therefore, operational projects should be designed and implemented by local actors on the territory, where there are already many smaller projects to be easily implemented, in housing, tourism, sports, spectacle and retail. A new modern industrial strategy having a territorial dimension must take into account the interactions between four types of actors within a modern industrial system: the companies, the workers, the community of citizens, who are also consumers and savers, and the territory, the city networks and the natural environment.

The transition period towards a major structural change for a new European strategy based on industrial development policies requires a complex and multilevel European governance, based on the construction of a coherent inter-institutional governance of the public government chain. In particular, the main ideas and general objectives of the restructuring process. The vision and specific resources should be introduced and developed at the European and national level, while the decision-making process and investment projects should be promoted and designed in the territories and regions, for the purpose to guarantee the responsibility and participation of economic and social actors and territorial and community autonomy. However, local and regional government need to be reinvented, empowered and re-skilled as appropriate in the perspective of the foundational economy and learn from what has worked and what has not worked elsewhere in Europe and from experience in other sectors. A multilevel governance should comprise complementary actions at regional and higher levels (national and European): while regions can adopt industrial policies to favor particular development paths, national and supranational levels have a role especially in levelling the playing field and mitigating the tendencies for monopolization (against the market power’s abuse).

As indicated by Gioacchino Garofoli, Public and PPP (private and public partnership) investments should be greatly increased in Europe and this needs a strong cooperation within the institutional filière, because territorial and regional projects should be promoted and implemented with the involvement of the various local stakeholders, in order to promote bottom-up initiatives and the innovation and design approach by the social and economic actors in each European region. This approach is crucial to create a culture of the territorial governance and for the mobilization of local and regional resources, both public and private, including financial resources using special vehicles and financial instruments, such as “territorial bonds”. In this context, the role of planning must be understood as the capacity of the State and of the public and private actors involved in the negotiation to achieve a specific set of objectives. This means the ability to implement investment projects starting from engineering phase up to the execution and control phase. The indicative planning approach, which was used in the post-war decades and afterwards also in some experiences of negotiation planning agreements for industrial development in various European countries (such as France, Germany and Italy), is crucial to create the conditions for complementary investments between public and private actors and to stimulate PPPs for strategic initiatives.

The opportunities to initiate pilot projects on green and sustainable technologies in some regions (e.g. decarbonisation strategies in some coal regions, such as Saxony in Germany, and strategies for reducing the environmental impact of tourism in the Balearic Islands), the identification the best practices existing in some territories (e.g. the WEGo alliance and the Foundational Economy Challenge Fund in Wales, the participatory experience launched by the Economic and Social Committee in the Balearic Islands, the civic university model for the third mission in UK) seem to justify the creation of an European networks between territories and regions to promote learning from experiences and the dissemination of best practices, thus favoring experimental governance and the dissemination of the culture of development projects and the mobilization of actors.

The new European Industrial Strategy is in line with emerging positions in the social and economic debate, especially with endogenous development theory (and place-based development), sustainable development and foundational economy approach. In this regard, it is possible to introduce the concept of experimental governance, which represents a form of co-governance, in which state officials and members of civil society work together, overcoming the traditional divide and mistrust between university experts and government officials, contributing to redesigning politics and rebuilding long term vision in the public sphere. That would enhance the capability to organize the basic conditions for the creation of a bridge between policy makers, university experts and the citizens and favor their awareness and their participation to various development projects and it should also represent a great commitment for those economic and social scholars, who have been looking for a decrease of these traditional gaps.

Therefore, the national States and the EU institutions should provide the funds and coordinate the programs, but the individual projects should be embedded in the respective cities and territory and be designed and implemented at the local level by companies, banks, universities, trade unions, citizen’s associations and local governments. On the contrary, the actual European documents on the European Recovery Program do not address with any precision the spatial dimension and the mechanisms required to implement effectively the policies outlined above. Moreover, since many of the policies indicated above should be designed and implemented at the local, regional level, the national and European institutions should share in a more equitable measure the financial resources of the national public budget with the lower level of government.

The #EURegionsWeekUniversity Webinar Series was organised by the European Commission, Directorate-General for Regional and Urban Policy (DG REGIO) and the European Committee of the Regions (CoR), advised by the Regional Studies Association European Foundation (RSA Europe), and with the cooperation of the European Regional Science Association (ERSA) and the Association of European Schools of Planning (AESOP).