we don't live in a post industrial age

I’m reading Ha-Joon Chang’s 23 Things they don’t tell you about Capitalism at the moment – and am very impressed. An economist who writes simply and elegantly (shades of JK Galbraith) and makes you think (as distinct from fall asleep). Section nine – entitled We do not live in a post-industrial age - took me back to arguments with my father in the 1970s about the role of industry. The indifference (at least) of British social scientists – and the policy elites who took their arguments – to the decline of manfacturing industry is a phenomenon to which we have not yet done historical justice! Here’s some of what Chang has to say -

Part of the de-industrialisation myth is due to optical illusions – reflecting, for example, changes in statistical classification rather than changes in real activities. One such illusion is due to the outsourcing of some activities that used to be provided inhouse by manufacturing firms and thus captured as manufacturing output (e.g., catering, cleaning, technical supports). When they are outsourced, recorded service outputs increase without a real increase in service activities. Even though there is no reliable estimate of its magnitude, experts agree that outsourcing has been a significant source of de-industrialisation in the US and Britain, especially during the 1980s.
In addition to the outsourcing effect, the extent of manufacturing contraction is exaggerated by what is called the reclassification effect. A UK government report estimates that up to 10% of the fall in manufacturing employment between 1998 and 2006 in the UK may be accounted for by some manufacturing firms, seeing their service activities becoming predominant, applying to the government statistical agency to be re-classified as service firms, even when they are still engaged in some manufacturing activities.
A third factor in the myth is the relative price-effect. With the (inflation-adjusted) amount of money you paid to get a PC ten years ago, today you can probably buy three, if not four, computers of equal or even greater computing power (and certainly smaller sizes). As a result, you probably have two, rather than just one, computers. But, even with two computers, the portion of your income that you spend on computers has gone down quite a lot (for the sake of argument, I am assuming that your income, after adjusting for inflation, is the same). In contrast, you are probably getting the same number of haircuts as you did ten years ago (if you haven’t gone thin on the top, that is). The price of haircuts has probably gone up somewhat, so the proportion of your income that goes to your haircut is greater than it was 10 years ago.
The result is that it looks as if you are spending a greater (smaller) portion of your income on haircuts (computers) than before, but the reality is that you are actually consuming more computers than before, while your consumption of haircuts is the same.

 A very thorough review in Dissident Voice starts with an excellent summary of some of the main points Chang makes - all starting with a statement of "what they tell us", followed by  a demolition of the conventional wisdom -

* Government must never interfere with “the free market.” (Chang says WRONG: modern economies would collapse without numerous forms of government intervention. Smart capitalists know very well that “there is no such thing as a free market.”)
* Companies should always be run in the interests of their owners/shareholders (WRONG: shareholders often damage the long-term prospects of companies by over-emphasizing short-term profit.)
* Economic health requires the assumption that people think only about themselves (WRONG: the most successful firms and national economies understand how to harness peoples’ cooperative and altruistic sentiments and instincts.)
* Poor counties need to adopt “free market” (neoliberal) policies (especially “free trade”) to achieve sustained growth. (WRONG: developing countries experienced superior growth in the period of state-led Third World development [1945-1970] than in the period of neoliberal, market-oriented “reform.” This is richly consistent with how the world’s richest nations – the ones who preach neoliberalism to the rest of the world – rose to ascendancy in the past: “through a combination of protectionism, subsidies, and other [state- and not market-led) policies that today they advise developing countries not to adopt” [63].)
* The relatively free market, capitalist-friendly neoliberal United States enjoys the highest standard of living in the world. (WRONG: thanks to the nation’s remarkably high levels of inequality [itself a symptom of its extreme neoliberalism], millions of Americans do not enjoy the United States’ remarkable average living standard. That extreme inequality and the poverty it generates are the main factors behind comparatively poor health indicators and crime levels in the U.S. Higher immigration and poor working conditions explain are the main reasons that many services are purchased more cheaply in the U.S. At the same time, Americans work considerably longer hours than Europeans so that “per hours worked, their command over goods and service is smaller than that of several European countries [103].”)
* Making rich people richer makes the rest richer too since it is rich people who seek out marketing opportunities and then invest to create jobs (WRONG: pro-rich policies have failed to produce economic expansion in the last three decades. “Trickle down economics” doesn’t work. It can have no positive outcomes in the absence of polices that (contrary to neoliberal doctrine) that make the rich deliver higher investment and share the benefits with – and put spending power in the hands of – non-affluent people, who spend a higher portion of their income than do the rich).
* Government must give maximum freedom to big corporations for the good of the countries in which those companies reside (WRONG: it is often better for the national economy and even the individual company for government to impose reasonable restraints and obligations on those companies).
* Capital has no nationality in the age of multinational corporations and globalization and therefore it nationalistic government policies towards transnational capital is “at best ineffective and at worst counterproductive” (WRONG: “most transnational companies in fact remain national companies with international operations, rather than genuinely nation-less companies” and it is “very naïve to base economic policies on the myth that capital does not have any national roots anymore”)
* Governments lack the ability (including the required expertise and information) to make intelligent business choices and thereby “pick winners” through state-led industrial policy. (WRONG: governments can and do regularly choose winning firms and industries over and against “market signals” and in ways that can and do “improve national economic performance”).
* The only equality that is economically functional or advisable is equality of opportunity. Policies that seek to generate more equality of outcome are inherently inefficient and unjust (WRONG: the equality of opportunity that is required to broaden the spread of economic benefits does not really exist without at least some measures to enhance equality of outcome. Free public education is woefully insufficient to broaden opportunity when it is not accompanied by policies that put a basic decent minimum standard of material living for households on the bottom end of the scale).
* The big government welfare state damages economies by depriving the rich of the incentive to create wealth and making the poor lazy. It creates resistance to the change that modern economies require. (WRONG: by providing second and third chances and a safety net to the non-affluent, the welfare state encourages workers to be more open to change when comes to choosing their first jobs and letting go of their existing jobs).
* Efficient financial markets – capable of the rapid allocation and re-allocation of capital across time and place – are the source of economic health and expansion Recent financial disturbances aside, smart policy makers should do nothing to slow down and complicate the operation of the world’s high speed financial markets (WRONG: U.S. and western financial markets are actually too efficient. The currently over-developed financial sector is now so proficient and organized in the pursuit of short-term profits that it is a leading source of economic instability and is incapable of giving emergent enterprises and industries and complex national economies the patient nurturance they require to develop over time.)

The painting is the only abstract which graces my collection - by Stefan Pelmus, more of whose paintings can be seen here.

Classic Romanian painters

Still blocked in Bucharest with the snow and biting temperatures (minus 27 in Brasov last night) and, being the first Wednesday of the month, what better to do than take advantage of the free entry to galleries which this date always offers. So off to the great National Museum of Romanian Art – and straight up to the third floor (so as not to be tired out by the time the modern section is reached!) The large collection there starts with a generous number of the bright Theodor Aman (1831-1891) society paintings – ditto Nicolae Grigorescu (1838-1907) and Ion Andreescu (1850-1882) - and gives a new perspective on every visit.

I had previously praised a website which purports to show the Romanian cultural patrimony but now notice that none of the great paintings on display seem to be in the virtual collection.

Stefan Popescu (1872-1948), for example, is a great favourite of mine – particularly those which reflect his time in northern Africa. Sadly, however, I can find none of these on the site (which is, in any event organised in a very administrative, non-user friendly way) - or online generally. If you scroll down on this blogpost (on my links) about the Brasov Gallery you will get a certain sense of some of the classic Romanian painters.

The National Gallery always has interesting publications and, this time, I bought (for 7 euros) a very well-produced 122 page book on their modern school. At the Humanitas bookshop nearby, I bought, for 9 euros, the 150 page book on Theodor Aman – and also a great-looking source book on Balkan Cinema.

Romania's first jailing of a senior politician

One of Romania’s ex-Prime Ministers was sentenced yesterday to 2 years in jail – although, compared with the wider suspicions against him and all those who occupy such positions here, the issue on which he was sentenced smacks a bit of the Al Capone syndrome (done for taxation issues; this is Capone's mugshot) -

Romanian High Court of Justice magistrates gave former prime minister Adrian Nastase on Monday a 2-year sentence and stripped him of certain rights in a corruption case known locally as the "Quality Trophy" file. In this case, Nastase, who served as head of the Romanian government between 2000 and 2004 (see pic below), was charged of supporting his electoral campaign through funds collected in a "Quality Trophy" event organized by the a public institution. The sentence can be appealed. UPDATE Adrian Nastase said on Monday he would appeal the verdict and that he was sure "things will be corrected on appeal". He called the verdict a "political decision, a dirty decision" and referred to "rumors" that head judge Ionut Matei "had meetings with representatives of the National Anti-corruption Department", the body which launched the corruption investigation against him.

In fact, Nastase cut a fairly impressive figure when he was PM - open and intelligent - probably the least corrupt of the lot (apart from Trade Unionist lawyer and National Peasant Party Ciorba). He did attract some ridicule for his attribution some years back of his unexplained wealth to the inheritance from an old aunt. He is in fact the first high-level politician to go to jail - Severin, the MEP, still shamelessly draws his salary and expenses - despite his exposure a year ago for corrput practices and banishment from the socialist bloc.
Those who wish to know about current events in Romania are best to follow the Sarah in Romania blog which is on my links. And she had a good post recently on the protests here which continue even in the biting cold here (minus 22 last night) -

Romania's president incumbent, Traian Basescu, spoke on national television last week for the first time since protests began almost three weeks ago, in defense of his government's tough austerity measures. The measures suffered in Romania have been immensely strict. "Brutal and unthinkable in a West European country" was the verdict on the two years of austerity from Andreas Treichl, the president of Austria's Erste Group, the largest foreign investor in the Romanian banking sector.
• 2011 budget deficit 4.35% of GDP
• public sector pay cut by 25%
• VAT raised from 19% to 24% (only surpassed by Iceland, Hungary and Norway)

We have been very much aware of the harsh conditions inflicted on the Greeks due to their own government's wheelings and dealings for decades, but very little, if anything, was reported by the international press up until the protests on those suffered by the Romanian people. In his 35-minute address to the nation, Mr Basescu acknowledged "some citizens have lost faith" but said the measures had pulled the country out of a recession, the Associated Press reported. "I know what needs to be done. We are where we should be. Romania has come out of a recession," he said.
To say that 'some citizens have lost faith' is something of an understatement. If the press and the social networks are to be believed, a very large majority of the country has lost faith - and that can be seen in the thousands who have taken to the streets across the entire country over the last 13 days. Teodor Baconschi, the Foreign Minister, was fired after he called protesters "inept and violent slum dwellers," and compared them to the miners who took to the streets of Bucharest in the 1990s. Clearly, the government believed this would mollify the protesters, but they remain wholely unconvinced.
In the nationally televised speech delivered live from the presidential palace on the occasion of Cristian Diaconescu's swearing-in as the new Foreign Minister, Basescu said his government would continue to create more jobs and fight against corruption and tax evasion. If Romania is really going to fight corruption, surely those in power now will have to step down and certain members of the opposition (the majority, in fact) would be unable to take power. You know the saying - 'the fish rots from the head...' Of course, corruption is so deep-seated one is helpless in knowing where to begin, but those in power today are as guilty of it as anyone. As are some in the opposition. There is the quandry. They are both as bad as each other. Today, the US Ambassador to Romania, Mark H. Gitenstein, criticised the country's high-level corruption - not particularly helpful, since it's nothing particularly new...
Those calling for Traian Basescu's resignation continue to state that ANYONE would be better than him. Those hoping he stays say that this is truly not the case. And so far, there is nobody else.
On 24 january, about 2,000 teachers, nurses, retired army officers and trade unionist rallied outside the government's headquarters: "I want to regain my dignity, I want this dictatorship formed by president and prime minister to fall," said Otilia Dobrica, a kindergarten teacher and part-time secretary who earns around $420 a month.
"We can't take any more," nurse Adriana Vintila explained. "Four million Romanians have left to work abroad because they can no longer survive in their home country. I don't want to leave; it's the government that should go."
About 5,000 people rallied in Iasi, calling for early elections, whilst in Bucharest's Piata Victoriei, protesters shouted "Freedom, Early Elections!" during yesterday's anti-government rally. “When I was the captain of a ship I never failed to bring my ship to port and I won’t fail to bring Romania to safe harbour,” Traian Basescu said during his address. “The belief that the president no longer represents the people is false. The president’s obligation is to represent them continuously, as the president has been elected through direct vote.”
Romania has been transformed since the overthrow of the Communist dictatorship in 1989 and the sometimes violent instability that followed. The nouveau-riche jet-set of young Romanians fill trendy nightclubs and plush restaurants that have sprouted up in Bucharest, and shiny new SUVs cruise the capital’s boulevards. There are many who do not wish to lose what Romania has today - better, richer in comparison to the way things were. They say that Traian Basescu is not a dictator and that Romania is no longer a dictatorship - they lived in and survived one. They know. Today, they have an opposition in parliament and they can protest in the streets. That is proof that no dictatorship exists today.
And yet, those in favour of the opposition, or at least, those calling for the resignation of Traian Basescu, Emil Boc and the fall of the present government say the benefits of progress have been uneven: life is harsh in rural areas and in the capital. Seventy hospitals nationwide have been closed; education has taken a nose-dive; if one wants a decently-paid job then one must go abroad; pensions are insultingly low; salaries have been cut. Among the EU nations, only neighbouring Bulgaria is poorer. Laws are passed without going through parliament to suit those in power, eg. Rosia Montana. That is NOT democracy.
Traian Basescu's speech, said Crin Antonescu, leader of PNL, was a sign that he was out of touch with reality and that he should resign, whilst Victor Ponta, the leader of PSD, told Agerpres that the speech said nothing at all and had no link whatsoever to do with what was happening in Romania.
Indeed, Romania finds itself today at a deeply messy and complex impasse. To choose between rotten apples and rotten pears is impossible and, until someone better comes along, until a new party surfaces that is not filled with officers and informants of the securitate and yesterday's nomenclatura, I remain fearful for the future of the country of my heart.

And Sarah also has a very readable piece today about Romania’s great dramatist – Caragiale – who was, as I mentioned on the 30 January posting, born 160 years ago -

By the late 1870s, Caragiale began writing the plays which cemented his reputation as an important playwright in Romania. In both plays and prose, he showed an incredible sense of the Romanian language, customs, and mannerisms, especially in the common person, and successfully used them for comedy and satire. Caragiale was highly observant of the human condition, particularly our tendency towards mistakes. He used what he saw and heard in his stories which generally focused on social conflicts and political corruption. The plays, especially, were full of fast-moving action and farce, employing solid characters with witty dialogue who usually failed in their goals. In the 1980s, Caragiale's plays were banned until the dictator Nicolae Ceausescu was executed in 1989

Thank you, Sarah, for these excellent posts!

World Social Forum

Every now and then I bemoan the lack of journals giving an adequate coverage of European life and policies. Any amount of stuff on Europe as a concept or European Union policies – but virtually nothing which gives us a comparative sense of national policies (in those fields still within the control of member states). Today I came across a French website - Books and Ideas - which does at least seem to offer, in the English language, some non-Anglo-Saxon perspectives.
And one of its contributions offered an answer to something which had been puzzling me since last summer when I wrote an article for a special issue of a Romanian journal which was devoted to the world a decade after 09/11. My piece was entitled "The Dog that didn’t Bark” and focussed on the general failure of radicals to capitalise on the global crisis – and, more specifically, the apparent failure of the World Social Forum which had been so active until 2005. The Forum is apparently right now holding another of its huge meetings - in Brazil (significant that I get the detail only from a German media source) - and Geoffrey Pleyers suggests two things in his article in BooksandIdeas - first that the Forum has been a victim of its own success (with many politicians now using their rhetoric); and, second, that the movement has now fragmented around three distinct trends -

1. A Focus on the Local Level
Rather then getting involved in a global movement and international forums, a wide “cultural trend” of the alter-globalization movement considers that social change may only occur by implementing participatory, convivial and sustainable values in daily practices, personal life and local spaces. In many Italian social centres, critical consumption and local movements have often taken the space previously occupied by the alter-globalization movement. Local “collective purchase groups” have grown and multiplied in Western Europe and North America. Most of them gather a dozen activists who organize collective purchases from local and often organic food producers. Their goal is to make quality food affordable, to bring an alternative to the “anonymous supermarket” and to promote local social relations. The movement for a “convivial degrowth” belongs to a similar tendency and aims to implement a lifestyle that is less of a strain on natural resources and reduces waste.


2. Citizens’ and Experts’ Advocacy Networks
Rather than massive assemblies and demonstrations, another component of the movement believes that concrete outcomes may be achieve through efficient single-issue networks able to develop coherent arguments and efficient advocacy. Issues like food sovereignty, Third World debt and financial transactions are considered both as specific targets and as an introduction to broader questions. Through the protection of water, activists raise for instance the issue of global public goods, oppose global corporations and promote the idea of “the long-term efficiency of the public sector” (“Water network assembly”, European Social Forum 2008). After several years of intense exchanges among citizens and experts focusing on the same issue, the quality of the arguments has considerably increased. In recent years, they have become the core of social forums’ dynamic. Although they get little media attention, these networks have proved efficient in many cases. During the fall of 2008, the European Water Network contributed to the decision by the City of Paris to re-municipalize its water distribution, which had been managed previously by private corporations. Debt cancellation arguments have been adopted by Ecuadorian political commissions, and some alter-globalization experts have joined national delegations in major international meetings, including the 2008 WTO negotiations in Geneva.

3. Supporting Progressive Regimes
A third component of the movement believes that a broad social change will occur through progressive public policies implemented by state leaders and institutions. Alter-globalization activists have struggled to strengthen state agency in social, environmental and economic matters. Now that state intervention has regained legitimacy, this more “political” component of the movement believes that time has come to join progressive political leaders’ efforts. It has notably been the case around President Hugo Chavez of Venezuela as well as President Evo Morales in Bolivia. New regional projects and institutions have been launched on this basis, like the “Bank of the South” that has adopted the main tasks of the IMF in the region. For historical reasons and their political cultures, Latin American and Indian activists are used to proximity with political parties and leaders.

And a German journal gives a frightening insight into the Greek situation -

The Greek economy is not productive enough to generate growth. Aside from olive oil, textiles and a few chemicals, there are hardly any Greek products suitable for export. On the contrary, Greece is dependent on food imports to feed its population.
"Greece has been living beyond its means for years," an unpublished study by the German Institute for Economic Research (DIW) concludes. "The consumption of goods has exceeded economic output by far."
Especially devastating is the assessment that the DIW experts make about the condition of an industry that is generally seen as a potential engine for growth: tourism. According to the DIW study, the Greek tourism industry concentrates on the summer months, with almost nothing happening throughout the rest of the year. There is almost no tourism in the cities, which translates into low overall capacity utilization and high costs for hotel operators. By contrast, capacity utilization in the hotel sector is much more uniform in other Mediterranean countries.
According to the study, a key cause of the problem is the relatively poor price/performance ratio. In Mediterranean tourism, Greece has to compete with non-euro countries like Croatia, Tunisia, Morocco, Bulgaria and Turkey, which can offer their services at significantly lower prices. The per-hour wage in the hospitality industry was recently measured at €11.39 in Greece, as compared with only €8.49 in Portugal, €4 in Turkey and as little as €1.55 in Bulgaria. The study arrives at grim conclusions, noting that the drastic austerity programs will not only remain ineffective, but will also stigmatize the country as "Europe's problem child" for a long time to come.

The painting is a....Turner, of course!

Cohesion Policy - part IV

The last few posts have been about the apparent lack of public knowledge (including mine - let alone discussion) about an issue which has been absorbing the energies of thousands of specialists throughout Europe in the last 2-3 years – namely the future shape and management of the huge amounts of money which Europe disburses to Regions and which take up the energies and time of so many officials in countries such as Bulgaria and Romania – with so much acrimony (confusion, corruption and penalties) and so few apparent results.

My concerns are not populist – since I have always accepted the existence of „market failure” and the case for government intervention and spending programmes.
My recent experience in the field in Bulgaria raises the following sorts of questions -
• What was actually achieved in the period since 2007 by the 50 billion a year spent on what most of us know as EC Structural Funds (although technically it comes from 6-7 differently-named programmes)?
• Where is the country by country analysis?
• Can one programme do justice to the needs of 27 countries – even granted its management is in the hands of each country?
• Particularly a programme of which amost half is in new member states (still in transit from centralised political cultures) and which yet makes no mention of the specifics of these countries?
• Has it not been a mistake to run the programme as a regional development one when the needs are more institutional and developmental?
• In what precise ways is the new proposed policy from 2014 different from that which has ruled for the 2007-2013 period?
• And what weaknesses of the previous policy explains the changes?
• What exactly is the "place-based approach” which is trumpeted in the new policy ??
• Where are debates which deal clearly and honestly with these questions?

I am encouraged by one semi-official report (of 250 pages) which appeared in 2009 – the Barca Report - which seems very well written, draws on a wide range of discussions and openly admits (a) the conceptual and political confusion; (b) the difficulties in measuring impact; and (c), in the very first page, the lack of public debate -

What is lacking is a political debate about whether that particular way of spending public funds adds value compared to sectoral or national approaches. And when and where it is effective. The same failure is visible in the academic debate, where very often a line separates the “cohesion policy experts” and the rest of academia.

I've a long way to go in reading this report - so please be patient. And, in the meantime, I stick with my main accusation - that there don't seem to be any journalists writing about this issue!

Today Romanian media have been celebrating the birthday of their most famous dramatist - Caragiale - who was born 160 years ago. The Romanians are very fond of him and his mocking of the political process.Mitica was a character who cropped up in his plays and whom the Transylvanians particularly associated with the slippery southerners. Wikipedia have a very detailed entry on his life and works.

The painting is a Levitan

Briefings on the new Cohesion Policy

A summary of the new Cohesion Fund which the EC is proposing to replace the present Structural Funds is available here.
The University of Strathclyde’s European Policies Research Centre can generally be counted on for clear summaries of the issues involved in EC regional policies and duly produced two years ago a paper “Challenges, Consultations and Concepts – preparing for the Cohesion Policy Debate”

Last August the Centre presented an updated 150 pages briefing on the issues to the European Parliament - Comparative study on the vision and options for Coherence Policy after 2013 – although its Executive Summary does not seem quite up to its normal standards of clarity. Judge for yourself -

The Commission proposes to reinforce the urban agenda, encourage functional geographies, support areas facing specific geographical or demographic problems and enhance the strategic alignment between transnational cooperation and macro-regional strategies.
Unsurprisingly, there is resistance to some of the more prescriptive elements. Yet, the territorial dimension could benefit from a greater strategic steer at EU level, potentially drawing on the recently agreed Territorial Agenda for 2020 to clarify and reinforce future territorial priorities for Cohesion Policy. A more strategically focused approach to the territorial dimension of cooperation must also be a priority, including a greater focus on priorities and projects of real transnational and cross border relevance, seeking greater coherence with mainstream, external cross-border cooperation and macro-regional strategies and the simplification of administrative requirements.

And what, exactly, does this mean???

The 2009 Barca Report was a bit long (250 pages plus 10 annexes) but did at least give a good summary of what we know about the impact of Structural Funds -

20. The state of the empirical evidence on the performance of cohesion policy is very unsatisfactory. The review of existing research, studies, and policy documents undertaken in the process of preparing the Report suggests, first, that econometric studies based on macro-data on growth and transfers, while providing specific suggestions, do not offer any conclusive general answer on the effectiveness of policy. This is due partly to the serious problems faced by any attempt to isolate at macro-level the effects of cohesion policy from those of several confounding factors, and partly to the fact that existing studies have largely analysed the effect on convergence, which is not a good proxy of the policy objectives. The review also shows both the
lack of any systematic attempt at EU and national/regional levels to assess whether specific interventions “work” through the use of advanced methods of impact evaluation, and a very poor use of the system of outcome indictors and targets formally built by the policy.


21. Despite these severe limitations, the available quantitative evidence and a large body of qualitative evidence lead to two conclusions on the current architecture of cohesion policy. First, cohesion policy represents the appropriate basis for implementing the place-based development approach needed by the Union. Second, cohesion policy must undergo a comprehensive reform for it to meet the challenges facing the Union.

22. The strengths of cohesion policy, which indicate that it represents the appropriate basis,
include, in particular:
• the development of several features of what has come to be called the “new paradigm of regional policy”, namely the establishment of a system of multi-level governance and contractual commitments that represents a valuable asset for Europe in any policy effort requiring a distribution of responsibilities.
• A good track record of achieving targets, both when cohesion policy has been implemented as a coherent part of a national development strategy and when local-scale projects have been designed with an active role of the Commission and the input of its expertise.
• A contribution to institution-building, social capital formation and a partnership approach in many, though not all, regions, producing a lasting effect.
• The creation of an EU-wide network for disseminating experience, for cooperation and, for sharing methodological tools in respect of evaluation and capacity building.

23. The most evident weaknesses which indicate the need for reform of cohesion policy are:
• A deficit in strategic planning and in developing the policy concept through the coherent adoption of a place-based, territorial perspective.
• A lack of focus on priorities and a failure to distinguish between the pursuit of efficiency and social inclusion objectives.
• A failure of the contractual arrangements to focus on results and to provide enough leverage for the Commission and Member States to design and promote institutional changes tailored to the features and needs of places.
• Methodological and operational problems that have prevented both the appropriate use of indicators and targets – for which no comparable information is available - and a satisfactory analysis of “what works” in terms of policy impact.
• A remarkable lack of political and policy debate on results in terms of the well-being of people, at both local and EU level, most of the attention being focused on financial absorption and irregularities.

The new Cohesion Policy as a case-study in Orwellian language?

Having made a casual reference a few days ago to a rather superficial paper on EC Structural Funds (with which I have a tangential link in my current Bulgarian project), I was understandably attracted by the title of one of the LSE lecture series - Redesigning the World's Largest Development Programme: EU cohesion policy - by the Special Adviser to the current EC Regional Commissioner (Austrian Johannes Hahn) – one Phil McCann, a Professor of Economic Geography. Particularly because it also offered a 91 slide presentation.
Before I started to listen to it, I checked on Googlescholar to see whether McCann had perhaps not written an article on the subject - which I could read in a fifth of the time necessary to stick with the lecture. Unfortunately McCann’s papers are highly academic and almost impossible to read – eg here.
The guy seems very chatty in person but the more he gets into his subject, the more naïve he (and his type) seems. The academic discipline of geography has always seemed, for me, one of the best of the social sciences with its strong multidisciplinary bias. So (and from the title) I had hoped to get an insight into the intellectual and political aspects of the european-wide discussions of the past 2 years about the future shape of this central piece of the “European venture” (now almost level pegging spending with the wasteful CAP).
What I got was a frightening Orwellian presentation of the latest fashionable EC phrases. I have still to read all the relevant documentation which has poured from the EC presses in the past 2 years (and to which I do brief justice in the sections below). All I know is that the key adviser to the Regional Commissioner seems to know nothing about policy analysis; seems completely taken in by words and phrases; and seems blissfully ignorant about the various reasons for implementation failure. I do concede that he was speaking to a student and graduate academic audience - and that this may be one reason why he focussed on words rather than realities.

Discussions on the future of EU Cohesion Policy - €347 billion between 2007 and 2013 – were launched amost 3 years ago.
Two key documents which appeared almost simultaneously in April 2009 have served as a basis for discussions on regional policy reform: first a reflection paper by Danuta Hübner, who had just demitted office as commissioner in charge of regional policy (from Nov 2004) and amost immediately became chair of the European Parliament’s Committee on Regional Development (!!)
The other document was a report she had commissed - and which was drafted by Fabrizio Barca, director-general at the Italian Ministry of Economy and Finance.
Both papers categorically rejected any attempt to renationalise Cohesion Policy - which was the thrust of the Open Europe Report I had mentioned earlier in the week.

Barca’s report, in particular, pays homage to the legitimacy of a policy, which he considers essential to pursuing European goals. The policy, says the report, must serve two objectives: development of territories based on local/regional possibilities; and improvements in social welfare (combating social exclusion). Like Hübner, Barca suggests placing territories at the centre of EU strategy. Both papers considered that EU intervention must be refocused on a few key objectives.
The report's recommendations for reform seem typical in their language of such documents. They are based on ten “pillars” and I would ask the reader – as a mind-game – to try reversing the phrases to check for how much meaning they contain -

1: Concentration on core priorities (how many of us would suggest focussing on inessentials??)
Dr Barca says the EU should concentrate around 65% of its funding on three or four core priorities, with the share varying between Member States and regions according to needs and strategies. Criteria for the allocation of funding would remain much as now (i.e. based on GDP per capita). One or two core priorities should address social inclusion to allow for the development of a "territorialised social agenda".
2: A new strategic framework
The strategic dialogue between the Commission and Member States (or Regions in some cases) should be enhanced and based on a European Strategic Development Framework, setting out clear-cut principles, indicators and targets for assessing performance.
3: A new contractual relationship, implementation and reporting
The Commission and Member States should develop a new type of contractual agreement (a National Strategic Development Contract), focused on performance and verifiable commitments.
4: Strengthened governance for core priorities
The Commission should establish a set of “conditionalities” for national institutions as a requirement for allocating funding to specific priorities and should assess progress in meeting targets.
5: Promoting additional, innovative and flexible spending (how many of us would suggest inflexible spending????)
The Commission should strengthen the principle of "additionality", which ensures that Member States do not substitute national with EU expenditure, by establishing a direct link with the Stability and Growth Pact. A contractual commitment is needed to ensure that measures are innovative and add value.
6: Promoting experimentation and mobilising local actors (ditto)
The Commission and Member States should encourage experimentation, and a better balance between creating an incentive for local involvement in policies and preventing the policy from being “hijacked” by interest groups.
7: Promoting the learning process: a move towards prospective impact evaluation
Better design and implementation of methods for estimating what outcomes would have been had intervention not taken place would improve understanding of what works where, and exert a disciplinary effect when actions are designed.
8: Strengthening the role of the Commission as a centre of competence (as distinct from a centre of incompetence?)
Develop more specialised expertise in the Commission with greater coordination between Directorate-Generals to match the enhanced role and discretion of the Commission in the policy. This would imply significant investment in human resources and organisational changes.
9: Addressing financial management and control (as distinct from ignoring them???)
Achieve greater efficiency in administering the Structural Funds by pursuing the ongoing simplification agenda and considering other means of reducing costs and the burden imposed on the Commission, the Member States and beneficiaries.
10: Reinforcing the high-level political system of checks and balances
A stronger system of checks and balances between the Commission, the European Parliament and the Council, through the creation of a formal Council for Cohesion Policy. Encourage an ongoing debate on the content, results and impact of the Cohesion Policy.

Such an approach argues for a Cohesion Policy which continues to address all EU regions, both Barca and Hübner say. Pawel Samecki, who succeeded Hübner as commissioner (but for one year only until replaced by an Austrian who is contesting accusations of plagiarism in his doctorate)), follows the same logic. Since both (or all three) defend the need to concentrate the greatest share of funds on less developed regions, where GDP per inhabitant would remain the reference indicator for prioritising funding, we are no longer talking about a ‘Sapir-style’ scenario. This was named after the Belgian economist André Sapir who, in 2003, drew up a highly controversial report for the Commission, which recommended a Cohesion Policy almost exclusively for regions in the new member states. For the Commission, a regional policy addressed to all is especially necessary since challenges, such as globalisation and climate change, affect the whole of the European Union – the EU15 as much as more recent members – at a time when national exchequers are stretched. There is no doubt, however, that some member states will call on the Sapir scenario in discussions on the new Cohesion Policy
During her mandate, Hübner frequently insisted on the need to strengthen the Commission’s strategic role in defining the policy to be implemented. The same idea is taken up in the Barca report. This envisages a seamless process starting with a real political debate and leading to adoption of a European framework and signature of “strategic development contracts” between the Commission, member states and, possibly, regions. In the Barca scenario, regional and local authorities would be more widely involved than today, which the Commission is also said to support. These contracts would formally commit signatories to a strategy, results and follow-up reports.
A genuine assessment for monitoring the performance of programmes and results would also need to be established – something Barca considers is lacking today. In her reflection paper, Hübner talks of setting up a “culture of monitoring and evaluation”. Commissioner Samecki also highlighted the need to concentrate further on results and performance. In this, they are slavishly following the fashion of today - and that part of McCann's presentation which dealt with this issue was positively embarrassing in its naivety and failure to relate to the wider and highly critical literature about performance management.

One of the problems about EC policy-making is that, despite (perhaps because of??) the emphasis on transparency and consultation, the processes are conducted by insiders - many of them paid by the EC itself (academics and not a few journalists). Outsiders like myself are discouraged by the language, complexity and sheer volume of paper. It would be interesting to spend some time reading the relevant stuff on Structural Funds (regional policy, social funds, coherence et al) and explore some basic questions about Value Added!!!

EC Structural Funds - Cui Bono?

I'm cocooned at the moment in a cosy flat in a wind-swept and snow-bound concrete block in down-town Bucharest.

The ever-watchful Open Europe operation has targeted two big elements of EC spending in reports just out – on Structural Funds and its Development (or “external” assistance). Its report on the latter subject has been drafted for the UK House of Commons Select Committee on International Development which has started an investigation of the EC’s Development Assistance budget. In combination with Member States’ own aid budgets the EU as a whole provides 60% of global Official Development Assistance (ODA) making it the largest donor. "Despite some improvements", the Committee says, "concerns have been expressed about the effectiveness of EC development assistance, the slow disbursal of aid, the geographical distribution of EC aid and poor coordination between Member States".
This blog (and papers on my website) have also made a more detailed critique in relation to its state-building programmes in transition countries. The committee points out  that

Total EC external assistance in 2010 was €11.1 billion. The UK share of this was approximately €1.66. A new Commission policy paper, “An Agenda for Change” was published in October 2011 for approval by the Council in May 2012. At the same time, negotiations are proceeding for the Multi-Annual Financial Framework, and the replenishment of the European Development Fund. Together these will set the parameters for EC development aid from 2014-2020. The Committee invites evidence on:
• The comparative advantage of the EU as a channel for UK development and humanitarian assistance and the UK’s ability to influence EU development policy;
• The proposals set out in the “Agenda for Change”;
• The proposals for future funding of EC development cooperation;
• Progress towards policy coherence for development in climate change, global food security, migration, intellectual property rights and security.

The Open Europe paper is a fairly political briefing on the issues of geographical distribution, administration (costs and waste), EC “value-added” and policy issues (eg questionable reliance on budgetary support) – but seems to have been written by epople with little familiarity with the field of development work.

Its other paper – on EC Structural Funds - is a rather better one which actually looks at what the research has actually tells us about the success over the years of this funding in dealing with its basic objective – namely reducing regional differentials within countries. The answer is "difficult to prove”. Of course, the 60 billion euros a year programme is now more about building up the missing technical and social infrastructures of new member States and the paper argues that this should be properly recognised by the richer member states being taken aut of the programme’s benefits. The paper reminds that

the previous UK Labour Government proposed limiting the funds to EU member states with income levels below 90% of the EU average and suggests that this could create a win-win situation. Such a move would instantly make the funds easier to manage and tailor around the needs of the poorest regions in the EU. The paper estimates that 22 or 23 out of 27 member states would also either pay less or get more out of the EU budget, as the funds are no longer transferred between richer member states.

Structural Funds are, however, an important political tool for those committed to "the European project” in developing and sustaining clienteles. This should never be forgotten!

I have never been a fan of the EC Structural Funds which I have seen expand from almost nothing in the 1970s to 350 billion euros in the 2007-2113 period (60 billion a year – eg 5 billion annual contribution for UK). As a senior politician with Strathclyde Region which was the first British local authority to forge strong relations with the European Commission in the 1980s (when we had no friends at Margaret Thatcher’s court), you might imagine that I was positive about the European funding which we then received. In fact, I was highly critical – mainly for the dishonesty of the claims made about its net benefits. The British Treasury simply deducted whatever we gained from our European funding from our UK funding.

The programme really expanded in the Delors era on the watch of Scottish politician Bruce Millan as Regional Commissioner (1989-1994). In those days, we believed in regional development. In my own case, it was my whole intellectual raison d’ etre! The subject was coming into its own academically – and it was indeed the subject I first focussed on in my own academic career (before I moved into public management). It spawned thousands of university departments and degrees many of which seem still – despite public spending cuts - frozen in institutional landscapes. And I have never seen an intellectual questioning of what it has brought us – although I did recently come across this short critical article on the related field of urban development.

This Open Letter by some prominent Hungarians has just been published about the situation in that country - and is a useful briefing on the issues - as is this EuroTribune one. When I worked in that country, I vividly remember one of my older Hungarian colleagues telling me that she hoped that, this time, the country might actually succeed in something - since the history of her country to that point seemed to have consisted of a series of failures.She must be crying herself to sleep these nights!

The cartoon is one of Honore Daumier's - "The Gargantuan". At times like these, we are in desperate need of the caustic insights of the likes of Daumier, Goya, Kollwitz et al - and those influenced by them such as the Bulgarian caricaturists of the early and mid- part of the last century.