What is the most appropriate level of government from which to develop and apply regional polices? Consider this question from the point of view of regional policy in contemporary Europe.

Within each country there are areas that have differing levels of income per capita meaning that the inhabitants of the area may have a different standard of living. This is generally caused by the location of employment and the movement of labour force to those areas, leaving home areas with fewer resources to live with, thus cause disparities within regions (areas of statistical analysis). These regions will therefore be generally poorer resourced and will need to either help itself or be helped by richer areas in order to get to a level that is acceptable. It is generally wanted that all areas become equal and can compete with one another effectively in order to get economically efficient. In order to do these governments must develop policies, which help these regions (regional policy). These can either be developed at the level of the region’s government, in Europe this would be the member state for example the UK i.e. Westminster, or at the higher level of government i.e. the European Union (EU) commission in Brussels. It is important for each region to get the right policies for itself as differing regions will need differing forms of help therefore the level at which these policies are developed and implemented are important and must be achieved to the best level that they can be, in order for them to work.

Regional policy, principally, within the EU came into existence during the 1970’s with the European Social Fund (ESF) and European Agricultural Guidance and Guarantee Fund (EAGGF); this was used to finance the Common Agricultural Policy (CAP). This came with the formation of most states when they joined together to form the, what was then the European Committee. These two elements formed the Structural Funds, which was part of the European Regional Development Fund (ERDF) in the 1975. In the formation of the Single European Market (SEM) reforms (1989) occurred to regional policy in order to allow it to be of some use to the new member states and give it a future within the plans of the EU, the joining of member states with a Single European Currency. These reforms were reassessed and changed in 1992 with the collapse of the Exchange Rate Mechanism and the boom-bust period of the time. The financial situation of this era meant that regional policy was being used due to the deprivation of certain regions caused by high unemployment at an increased level i.e. more funds were required in order to get out of the depression of the early 1990’s. The Maastricht Treaty of 1992, meant that in the future (now in place) the states would come together as one Single European market, sharing currency and of course monetary policies. This has the impact that the disadvantaged states need to be helped in order to allow the free market to work to what it was imagined to do create competition for Europe to become an efficient market. This therefore led to the EU starting up a cohesion fund in order to help these regions out.

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Regional policy within the EU was therefore primarily developed in response to the disparities that were evident between the nation states. With the opening up trade in the EU through the removal of both financial barriers and non-tariff barriers, the regions that have poorer resources are being flooded by competition from cheaper producers. In the EU these regions tend to be the peripheral regions that are dominated by small firms unable to compete against large efficient multinational companies. These areas also have the disadvantage of not being near the centre of the EU, where they would have the ability to exploit their geographical location by being accessible by most of the markets. These central areas of the EU also have well trained labour forces and high-level amounts of infrastructure due to their richness. Thus allowing them to have an even greater starting position over the peripheral regions within the EU. It is this disparity that the EU’s regional policies are trying to remove.

There are two main levels at which the regional policies within the EU can be developed and applied, the first is at the EU level itself and the second is by the member state and then on at the member state’s own regions, though is to be considered as a sub level. These are formations of centralized and decentralized policies and applications, both the development of policies and the actual application of them can also be completed either by centralized or decentralized policies.

The power of the EU is such that it can ensure that the disparity is neutralised by ensuring that the suffering regions get the help that they require by ensuring that resources can be directed to them. It is also able to ensure that spending by the member states is distributed to the areas that require it. Richer members have the ability to attract new investment easily through the improvement of infrastructure and such like. The individual states may therefore distribute funds unfairly, meaning that the poorer states can miss out on new incoming investments. Therefore the EU should implement controls on how a member state operates its regional policies. The EU is also able through financial transfers to transfer funds from the richer members to the poorer members. Although this can be viewed as a bad policy because of its Robin Hood nature, it does, in theory, allow the members states to help each area out thus in the end providing more competition and increased efficiency.

Another advantage of EU policy is that it allows for member states to help other states with their problems. The members have an interest in other states caused by the EU wide affects that can occur when in a union. The union moreover is about trade, if there is a recession in one region then demand for another regions goods is decreased thus affecting it. Therefore by having EU regional policy, there are overspill over affects of regional policy it is often states that have low levels of unemployment and have still spare resources can take the idle resources from another state thus solving two region’s problems.

The regional policies themselves and within this, at what level they were designed and implemented are formed around a number of key principles. With this essay title perhaps the most important one would be subsidiarity. Subsidiarity is “the decentralization of power to the lowest tier of government with efficient policy delivery” This is basically the idea that local knowledge has power, where the local regions know how best to deal with their problems and how best to invest development funds. However there is a possibility of member states becoming unfair (as stated above), where they only invest into their own states as would be with this principle and therefore local regional policies would not benefit the poorer regions. There would have to be controls in place to ensure that regions’ policies were fair and efficient. This leads on to another principle.

Co-ordination, this is the EU regulating the funds for regional policies, as subsidiarity occurs that EU level must ensure that funds distributed fairly and only to the necessary areas. Thus an argument for centralized policy making is that policies must be co-ordinated with each level of government to ensure that there is co-ordination with each member state. Member states if not looked after may decide to become corrupt and spend money unwisely on areas that do not need funding. Thus allowing peripheral regions to fall by the way side, when attracting new investment, or competing against other companies.

It is thought that if member states were to be just given funding and were not co-ordinated then problems of corruption may occur, where the states will automatically look after themselves not looking for the best interests of other states, hence inefficient allocation may occur. By allowing the EU to develop and apply policies this is avoided as the EU can ensure that the spending is matched by the problems and can thus be solved.

There is no reason for the EU to take over regional policy as the local governments know how best to deal with there problems but having a partnership between both levels allows for the local regions to have knowledge and the EU have the control and power to see that policies are put in place correctly and really are used in the areas that would most benefit from it. Going on from this and also into another principal, one of additionality. This is that EU regional policy should be implemented and developed as well as an individual states own policies. The first reasoning for this is that the EU does not have the monetary funding available to it like an individual state does. Its income from taxation is only 3% of the entire revenue collected through tax. Therefore it must be up to the individual states to finance regional policy as well. By having additional policies the scope of regional policy in general is improved, as there are two levels of knowledge being inputted on a member states problems thus enabling it to overcome its regional disparities.

These principles show us that there are valid arguments for having both centralized and decentralized regional policies, thus having an integration of both levels. This takes us back to the principal of subsidiarity, as it is the best level of government that should be setting up the regional policies, but which is the best level of government to do this? If we go through the above arguments as we have done there are benefits to at both levels. Therefore it is thought that regional policies within the EU and also other areas should be developed and implemented by both levels working together and co-operating. This would ensure that both the knowledge of the individual state and that of the other states, with in Europe is used in developing these policies, as it will provide a much greater basis to work form. This diagram shows the co-ordination of regional policy in the EU. It shows the use of all levels within regional policy.

Here the EU works with the two member states, which work with each other helping each other’s policy, remember that it is in the best interest of all states to help out other states problems. The member states then go further down enforcing their regional policies, which again is linked to the second member state.

In conclusion, the most appropriate level of government to form regional policy must start with the EU first then be supplemented with the member states own policies in order to ensure that all areas are covered. Therefore from what I have read and understood it is that policies should come form all levels of government and be both centralized and de-centralized. The centralized should be those that cover the main aspects of regional policy such as infrastructure within the member states. It should then be up to the individual member states to decide how to implement the policy developed at the higher level, in this case EU. By allowing the member states to implement the policy could still allow them to become corrupt the EU can oversee its implementation and can act if needed to stop corruption from occurring. Furthermore this would continue to allow local knowledge to help with policy implementation enabling it to be more successful then it otherwise might be.

Bibliography:

Regional Economics and Policy H. Armstrong and J. Taylor