The regional economic effects of European integration

Geoforum, Vol. 18. No 2, pp. 213-227. 1987 Printed in Great Britam

The Regional Economic Effects of European Integration

CHRISTOPHER

JENSEN-BUTLER,*

Aarhus,

Denmark

Abstract:

This paper presents evidence concerning changes ‘in regional economic disparities in the EEC. This is related to regional economic theory. Finally the role of technological change and innovation is discussed in the light of empirical evidence and theoretical arguments.

Introduction

consider the definition of a region. Eurostat defines three levels of region in the EEC:

The question of whether European economic integration has caused and will cause increases or decreases in regional economic disparities has been discussed extensively. In this paper some of the main theoretical arguments concerning the question are examined. This is followed by examination of empirical evidence concerning changes in key regional economic variables within the EEC. Finally the discussion will return to theoretical questions, particularly the role of technological, social and economic change in relation to regional economic change. This paper is written with some reference to the case of Portugal, one of the two newest members of the community. Regions

Before addressing the question of whether European economic integration has served to increase or decrease regional disparities, it is first necessary to

*Geographical Institute, Aarhus C, Denmark.

University

of Aarhus,

(1) Nations. (2) Level 1 regional units: in the Community of 10 there were 54 level 1 regions. (3) Level 2 regions: in the community of 10 there were 118 level 2 regions. The total numbers of regions of the two levels in the community of 10 was as follows: F.R.G. (1): 11 (Linder), (2): 30 (regeirungsbezirke) France (1): 8 (ZEAT), (2): 22 (regions) Italy (1): 11 (RCE), (2): 20 (regioni) Netherlands (1): 4 (zones), (2): 11 (provincies) Belgium (1): 3 (regions), (2): 9 (provinces) U.K. (1): 11 (standard regions), (2): 0 Greece (1): 3 (RCE), (2) 9 (RSDR) Denmark (1): 1, (2): 3 (no name) Ireland (1): 1 Luxembourg (1): 1

These regional units are used in most EEC regional statistics and can be seen in Figure 1. The question of 8CKKJ regional unit is important for a number of reasons. The patterns which emerge from any analysis are in 213

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part determined by the regional classification chosen. In addition, it would seem increasingly that intraregional economic and social differences are more important than in®ional differences. A regional classification can conceal this fact. European

Integration

In terms of the level of integration, the EEC has developed considerably since 1956, and will continue to do so. There are, in broad terms, five levels of international economic integration, ranked as follows in order of degree of integration and therefore loss of national sovereignty:

(1) Free-trade

area where there are no trade barriers between member states and no common external trade policy. (2) Customs union, which is a free-trade area with a common external tariff. (3) Common market with free movement of factors of production. (4) h4onetar-y union where a common currency is established.

Figure 1. EEC

(5) Economic union where macro-economic made by a central authority.

policy is

The regional economic effects for any one member state or any region will be different, depending upon which type of integration we are dealing with. The EEC is at present between stages (3) and (4), but clearly intends to continue, if possible, to stage (5). Regional

Economic Theory and the EEC

Both within positive economic theory and Marxist economic theory there are, broadly speaking, two views concerning the regional economic effects of European integration. One view is that regional economic differences in the long term will be reduced as a consequence of the process of integration. In the short and medium term, regional economic differences may persist, and in specific areas even increase, but this is viewed as a temporary phenomenon. The regional policy of the EEC is designed to solve such basically transient problems. _

regions (level 2): 10 countries.

Geoforum/Volume 18 Number 211987 The second view is that regional economic imbalance

is endemic to free-market economies and that increased economic integration will in the long term reinforce the processes leading to increases in regional economic disparities. Within liberal economic theory, neoclassical trade theory and growth theory are the main theoretical foundations for the first point of view. According to the trade theory formulation, regions will specialise in types of production for which they have a comparative advantage. There are two main versions of the thesis, the Ricardian explanation of comparative advantage (where Portugal and England are used as the classical example) and the factor proportions theory of Heckscher-Ohlin, which explains how factor prices will equalize between regions via trade, in a situation with zero factor mobility. The theory is thus well suited to analysis of free-trade areas and customs unions, with low factor mobility. The theory predicts that factor prices (and therefore in the final instance GDP/capita) will be equalized in a regional system with trade. Furthermore growth of GDP will be maximised if regional specialisation based upon factor endowments develops, which will create maximum benefits for the whole system [see, for example, ARMSTRONG and TAYLOR (1985)J. Despite the fact that some celebrated studies (MORONEY and WALKER, 1966) appear to disprove the basic theory, and, despite the apparent verification of the Leontief paradox, it is extremely persistent. In the Marxist literature, EMMANUEL (1972) is well known for his critique of Ricardian and neo-Ricardian conclusions. The theory of customs unions [see for example BALASSA (1%7), and EL-AGRAA and JONES (1980)] is frequently used to analyze the regional consequences of integration. Whilst most authors accept that trade creation and trade diversion will cause new patterns of regional growth and income, the general conclusion is that trade will benefit members of the customs union. Thus the conclusion emerges that a strong general economic case for integration exists, though market imperfections and externalities may limit the benefits. What is more important for the present analysis is the other main problem, the ~~~~~~tio~ of benefits.

There is, within this theoretical approach, as noted above, general agreement that mechanisms of trade creation and trade diversion can create regional

215 economic problems in a customs union, as new patterns of trade develop with changing tariff patterns. However, it is usually argued that these problems will disappear in the long term, partly because regional economies will adjust to the new trade patterns, and partly because regional economic specialisation will bring higher levels of economic growth, and in fast-growth situations it is easier to remedy regional economic imbalance. When discussing monetary integration and a full economic union, other problems arise. In this situation two new factors emerge: (1) Exchange rates can no longer protect the production of regions which have a lower productivity. (2) In principle there is full factor mobility. In the first case, prices of exported goods will increase and sales will decline. In the second case, factors of production will migrate to regions where factor rewards are higher. In regional terms, it is argued that there are long-term advantages with a full union. High-cost inefficient production is removed, giving rise to net gains for the union as a whole. Factor mobility will ensure that regional differences in factor patents disappear and that total product is maximised. Thus regional GDP/capita will tend to converge in the system as a whole and at a higher level than would be the case without the union. This means that regional specialisation is no longer determined by comparative advantage, but by absolute advantage, as within a national system with a unitary currency and no trade barriers. This more efficient resource allocation will, according to the argument, which is essentially neoclassical [see, for example, JONES (1973, and BORTS and STEIN (1962)], induce more rapid growth in the union economy, benefitting all regions, and at the same time reducing regional inequality in factor payments. Thus regional economic convergence is predicted. The other main approach to the problem of economic integration usually takes as its point of departure a model of the M~da~Hi~c~an type (MYRDAL, 1957; STREETEN, 1964). This type of model basically indicates that regional economic imbalance is fundamental to free-market systems and regional economic disparities will grow rather than decrease. Such explanations contain a number of key elements.

Geoforum/Volume 18 Number 2/1987

216 First, it is assumed that some regions offer greater agglommeration economies (such as a skilled labour reserve, developed infrastructure etc.). These agglomeration economies enable more efficient production to take place in these regions, which in turn will attract more production to the region. At the same time rapid regional production increases imply rapid regional productivity increases, because of the operation of the Verdoom law (VERDOORN, 1949), which states that:

All of these elements combine to produce rapid growth in regional exports, which in turn produces rapid growth in the exporting regions, adding to a new round of the development process. The result is permanent immizerisation and out-migration of factors of production in slow-growth regions and increasing concentration of both capital, labour and wealth in fast-growing regions, creating a centreperiphery pattern. Marxist economic theory abounds with similar conclusions; FERRAO and JENSENBUTLER (1984) have presented a critique of the theoretical and empirical basis of these models.

where @ = growth in productivity, b = growth in output, (Y= autonomous productivity growth, and A = Verdoorn coefficient.

A rigorous attempt to model these types of growth mechanism has been made by DIXON and THIRLWALL (1973, building on work of Kaldor. Their model can be seen in outline in Figure 2.

Incidentally, this relationship, which has in a number of studies been verified empirically, negates, in part at least, the thesis that in general unemployment is induced by technological change. The effect further cements the advantages of such regions, and would also appear to be cumulative. It is also important to note that externalities such as agglomeration economies do not usually enter into neoclassical growth model formulations. These effects cause net in-migration of both labour and capital to fast-growing regions (a different prediction from the neoclassical approach). This gives rise to a second set of effects: the regional market increases, as does the regional tax base, in turn allowing more infrastructure provision. More important, inter-industry linkages within the region are strengthened, which means that the gap between regional multipliers in fast- and slow-growing regions widens. Thus the multiplicative effect of a demand increase is greater in fast-growing regions than in slow-growing ones. Furthermore, the feedback effects from slow-growth regions to fast-growth regions may even be greater than the multiplier effects in the slow-growth region. A third factor is related to this line of argument. It is generally assumed [there being a reasonable level of empirical evidence to support the argument; see, for example, OAKEY et al. (1982)] that research and innovation is concentrated in fast-growing regions, which in turn enhances growth rates in such regions and creates patterns of technological dominance over other regions. Empirically, it does seem clear that innovation is concentrated in so-called centre regions, but it is no longer the case that these regions are alwavs the fastest growing regions.

It follows from this theoretical approach that regional policy is a necessary feature of economic systems which aim to create greater regional equality. Furthermore, it is argued that in larger and more differentiated economic systems the growth process described above will have greater effects than in smaller systems. Hence the relevance of this approach for consideration of regional economic changes in the EEC. In the long term the system faces the major constraint that importing regions cannot live with a permanent balance-of-payments deficit. In this case, exporting

1induced

Figure 2. An illustration

Dixon-Thirlwall

by

I

of the principles of the Kaldormodel of exert-led cumulative growth.

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will have increasing difficulty in finding markets. One compensating mechanism is, however, governmental transfers, which in a number of west including the Portuguese European economies, (LEWIS and WILLIAMS 1982), appear to benefit peripheral regions. regions

Portugal, one of the new members of the EEC, apparently provides a good example of the process of regional economic polarization. Regional economic disparities in Portugal are very marked (LOPES, 1982; LEWIS and WILLIAMS, 1981). Until 1970 they appeared to be increasing. In addition Portugal has the lowest GDP/capita of all EEC member states. It is perhaps not surprising that there is much support in Portugal for this second approach to the explanation of patterns of regional development. Furthermore, it is generally argued that membership of the EEC will increase rather than decrease regional economic differences within Portugal, unless strong regional policy measures are adopted [see, for example, LOPES (1980) and SILVA (1986)]. It is also clear that the processes which are assumed to operate in this type of model will be most strongly developed in the case of the monetary or economic union. Trade barriers and exchange rates tend to protect poorer regions. A point of major disagreement concerns the consequences for the overall growth rate. Some economists argue that polarised growth of this nature will induce overall higher growth rates than growth regimes where govemments attempt to intervene and rectify regional imbalance. It is argued that the benefits to poorer regions of higher overall growth rates are, even with polarised growth, much greater than the effects which can be produced by any realistic redistribution policy. Others [for example THOSS (1977)] take the view that regional polarization is inefficient, and therefore costly and policies should be directed against regional concentrations of income and factors of production. A Long-term

View

WILLIAMSON (1965) has investigated regional economic disparities in a large number of countries as a function of level of economic development. He argues that in global terms regional economic disparities within a country develop as shown in Figure 3. This implies that changes in regional economic disparities are a function of time. Williamson’s analysis has been subject to considerable criticism and it clearly contains serious data

Degree of

regionei

disparit*

Level

of development

Figure 3. Relationship between level of regional disparity and level of economic development as postulated by WILLI~SON (1965).

problems. However, if one wishes to examine the thesis in theoretical terms, it is tempting to divide the x-axis into three types of regime, as shown in Figure 3. In stage 1, at low levels of development, it can be argued that the mechanisms postulated by trade theory are operating, and that no systematic bias in regional development patterns results. Of course regional differences in GDP/capita occur, but these are related to changing trade patterns, rather than internal factors. In the second stage, the mechanisms of cumulative and polarized growth operate, as industrialisation takes off and develops. Here major regional growth differences appear. Finally, in stage three, neoclassical growth processes gain the upper hand and regional disparities decrease. As can be seen, it is relatively easy to relate economic theory to this development pattern. In a later section it will be argued that such a general theoretical model is illusory, without necessarily denying the empirical reality of the pattern in Figure 3. Regional Growth

Patterns in the EEC

In this section a brief analysis is made of patterns of regional growth in the EEC in the 197Os,the results of which can be related to the theoretical questions discussed above. GDPlcapita The first problem which arises is which variables to include in an analysis of regional disparity? The obvious choice is GDP/capita. This variable is not, however, without problems, as is well known. It measures production and not income; income transfers between regions do not appear in the relevant statistics. Apart from the geographical distribution of

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DO

(Purchaslnq

Figure4. GDP/capita

1979: EEC = 100,10countries.

Source: EUROSTAT(1983b).

income it contains no information about the social distribution of income. InequaIities in income dist~bution can be considerable. Furthermore, such statistics take no account of the role of the underground economy, which in a country such as Portugal is very important (FIGUEIRIDO etal., 1985).

Figure 5 shows the pattern of development of GDP growth rates over the period 1975-1979 (EUROSTAT, 1983b). It would appear that some of the more peripheral regions have experienced aboveaverage growth rates in this period.

Figure 4 shows the distribution of GDP/capita by EEC region in 1979. With a number of exceptions, the regions with highest GDP/capita are in the traditional core regions of France, Holland and the F.R.G. There are great disparities within the EEC, ranging from 27% of the EEC average in 1980 in Thrace, to 225% in Griiningen, Holland (EUROSTAT, 1983a). The accession of Portugal and Spain has increased rather than decreased these extreme values. Five of the six Portuguese planning regions occupy the lowest ranks in the new community of 12.

Anafysis has been made of development in regional disparities during the 1970s. The variable selected is the spread of values of GDP/capita in EEC regions. The method used was as follows. Data for GDP/capita exist for level 1 and level 2 regions for most of the years of the 1970s. 1970 and 1978 were selected, as the data coverage is most uniform (EUROSTAT, 1983b). Satisfactory data do not exist for Greece for the 197Os, which is why this country was not included in the analysis. The data

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_ Figure 5. Annual average growthrate of GDP (volume), 1975-1979. EEC average = 3.5%. Source: EUROSTAT (1983b).

available are in European currency units (ECU). Data exist for conversion to purchasing power standard (PPS) which takes account of price level differences in the different countries. Thus two data sets are available. Fifty-four level 1 regions were used in the analysis, and two basic types of analysis were made: (1) Analysis of changes in spread of national averages. (2) Changes in spread of averages of regional values within each country. The measure used was the coefficient of variation for each of the 2 years in question. The results can be seen in Tables 1 and 2. At the level of nations as regions, it can be seen that the coefficient of variation decreased between 1970

Table 1. Coefficientof variationfor measure of GDP/capita in 1970 and 1978: nine EEC regions (nations)

1970 1978

Currency (ECU)

PPS

0.2443 0.1064

0.2041 0.1601

Based on data from EUROSTAT (1983b).

and 1978, both measured in ECU and PPS units. Table 2 shows that for the seven countries (excepting Ireland and Luxembourg) with level 1 regions, in all cases except the Netherlands and Belgium, the coefficient of variation decreased. The implication is that international disparities have decreased and at the same time inter-regional disparities within most EEC countries have also decreased. In this latter case

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it makes, of course, no difference used for the calculations.

which units are

Table 2. Coefficient of variation for measure of GDP/capita

in 1970 and 1978 for regions inside each of seven EEC countries

F.R.G. France Italy Netherlands Belgium Luxembourg U.K. Ireland Denmark Based on data from EUROSTAT /-

1970

1978

0.2210 0.2216 0.2703 0.1040 0.2645 0 0.1125 0 0.1619

0.2057 0.2115 0.2659 0.1334 0.2845 0 o.oQ73 0 0.0924

(1983b).

It is also coefficients: coefficients of regional surprisingly

interesting

6. Growth

in total employment EUROSTAT

the

size of the

Italy and Belgium have the largest of variation, implying the largest spread values for GDP/capita. The U.K. has low figures.

Caution must however be exercised in interpreting these results. The coefficient of variation is being used with ratio values, which raises the question of weighting. Clearly it makes little sense to weight GDP/capita by regional ~pulation. However, in this analysis small regions do have the same weight as large ones. In general, it can be expected that regional disparities are smaller when using the PPS measure, which seems to be the case. The analysis has been repeated for the whole set of regions treated as a single group. Surprisingly, these

_

Figure

to examine

18 Number Z/1987

by region, (1983a).

3-53:

1973-1980 (%).

Source:

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Geoforum/Volume 18 Number 2/1987 results are not completely consistent with the previous ones. Measured in PPS units, there is virtually no change in dispersion for the 54 regions between 1970 and 1978. Measured in ECU, regional disparities seem to increase a little. Such is the importance of regional divisions and weighting. In any circumstances one is forced to the conclusion that changes in the spread of regional disparities in the EEC during the 1970s have not been great, and that in general such changes have tended to reduce regional economic differences, measured by GDP/ capita.

that low GDP/capita is associated with rapid employment growth in the period 1973-1980. This fact supports indirectly the above evidence that regional disparities are probably decreasing in the EEC. Unemployment by region can be used as an indicator of regional economic change. However, this measure involves many problems, as definitions of unemployment and registration principles still vary widely from country to country. Unemployment rates by region can be see in Figure 7, though they must be treated with some caution, as explained above.

This finding agrees with the conclusions of a number of other authors. MOLLE (1980) found evidence for decreases in regional economic disparities in the EEC in the period 1950-1979, a point of view which VAN HOVE and KLAASEN (1980) also support. BIEHL et al. (1972) have analysed GDP/capita for the original six countries and found a clear tendency to equalisation during the 196Os, mainly due to increasing equality between the individual countries. Curiously, KILJUNEN (1980) argues that, although interregional economic disparities are decreasing, this is due to strong regional convergence in a situation where the national averages diverge. She does, however, agree that the situation appears to be very stable.

Agricultural

A number of other authors reach the opposite conclusion, that regional disparity is increasing in the EEC. For example, KEEBLE et al. (1981) argue that a centre-periphery disparity in GDP terms is clearly widening. NIELSEN (1981) also argues that regional economic disparities, measured using GDP/capita, are increasing, though he is aware that this conclusion is sensitive to the technique and data used. The

Index of support for product groups covered by CAP

European Parliament has also expressed the view that regional disparities may well be increasing in the EEC.

Table 3.

(cereals = 100) Cereals 100.0 Sugar beet 87.5 Dairy products 75.0 Oilseed, tobacco etc. 62.5 Beef and veal 50.0 Pig, meat, poultry, eggs 37.5 Table wine 25 .O Fruit and vegetables 12.5 Index of agricultural income per labour unit (EEC = 100)

Other variables Further changes

income is of considerable importance in the economy of a number of EEC countries, including Portugal. Here the regional economic influence of the EEC is much clearer. Table 3 shows in index form support for product groups covered by the common agricultural policy (CAP). The main beneficiaries of support are the richer agricultural regions, producing typically north European products. Table 3 also shows indices of agricultural income per labour unit, illustrating the effects of EEC policies. Even the finances available under the agricultural guidance policy seem to have gone disproportionately to the richer regions. The COMMISSION OF THE

variables can be included in an analysis in regional disparity in the EEC.

of

Examination of growth in total employment by region reveals a related and interesting pattern, as can be seen in Figure 6. The regions which have experienced most rapid employment growth between 1973 and 1980 are often so-called peripheral regions. The correlation coefficient between regional GDP/capita in 1973 and employment growth 1973-1980, r = -0.656 (p < O.Ol), confirms the visual imnression 1

F.R.G. 145 France 105 Italy 65 Netherlands 210 Belgium 178 Luxembourg 100 U.K. 99 Ireland 56 Denmark 148 EEC 100 Source: CUDDY (1981).

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Figure 7. Unemployment

rate in 1979 by region. EEC average = 4.2%. Source: EUROSTAT (198313).

EUROPEAN CO~~ITIES (3981) conclude that agricultural incomes are related directly to regional GDP and that richer regions are most favoured by the EEC’s agricultural policy. It is difficult to disagree with CUDDY’s (1981, p. 207) conclusion that: . . . the only substantial policy operated by the EEC which takes over 75% of its budget-has towards the richer regions.

18 Number 2/1987

an inbuih bias

This fact is important when considering future regional development patterns in all countries, but is particularly important for countries such as Italy, France, Portugal, Spain and Greece, where the agricultural sector is, in relative terms, large. Thus whilst the CAP will probably bring net benefits to Portuguese agriculture (LEWIS and WILLIAMS,

1982), the benefits brought to richer countries are even greater. On the other hand, the CAP may serve to reduce interregional economic disparities within Portugal.

Space does not allow consideration of further variables. The general conclusion of the empirical analysis is that there does not seem to be evidence for an increase in regional economic disparities within the EEC during the 1970s. On the contrary, the limited and rather unclear evidence available seems to suggest that regional economic differences may be decreasing. A reform of the CAP taking into account a specific regional dimension would certainly further this process.

223

Geoforum/Volume 18 Number 211987 It is, however, not possible on the basis of available data to conclude that European economic integration is the cause of changes in regional economic disparities. Changes would have occurred with or without European economic integration.

Theory: a Second Look

It is tempting to conclude that neoclassical growth processes are at work in the EEC, and that the regional problem will move towards solution, with some help from EEC regional policy. However, perhaps this is not quite the case. Recent theoretical and empirical research on regional development indicates that qualitative changes in regional development processes may be occurring in advanced economies, changes which raise questions concerning the more traditional theoretical explanations of regional development patterns and which necessitate reevaluation of what is meant by regional economic disparity. Elements of observable regional development tren& in Europe A number of studies have revealed new patterns of industrial location, location of service employment, population growth and regional development in western Europe. These patterns have a number of elements. Movement to rural areas. In a number of countries new patterns of industrial and service sector location seem to be developing, often orientated towards rural semi-rural locations [see, for example, &I-IERGILL and GUDGIN (1982) m . England, JENSEN-BUTLER (1982) and MASKELL (1984) in Denmark, and DUNFORD (1979) in France]. FERRAO (1986) has demonstrated the beginnings of such a process in Portugal. Movement to peripheral areas. A trend towards location in so-called peripheral regions in Europe is clearly observable in a number of western European countries, including Britain, France, Denmark, the F.R.G. and Ireland (PERRONS, 1981).

reserves, is becoming an increasingly important locational factor in a number of western European countries. DUNFORD (1979) and LIPIETZ (1980) have discussed relations between the industrial sector and the small-farmer economy in France. MASSEY (1983) has developed this discussion, with particular reference to female labour reserves in traditional and declining industrial areas in Britain. In Portugal this type of interaction is of considerable importance in the process of diffuse urbanisation and industrialisation that occurs in the north and centre of the country, particularly in the littoral (FERRAO and JENSEN-BUTLER, 1986). In Britain, an example of this type of labour reserve is the immigrant population. These new spatial patterns will clearly have consequences for change in key regional economic variables. It can also be seen that such changes can result in reduction of regional economic disparities. The important question which must be posed is: Are new types of regional disparity being created? New types of explanation? One of the main weaknesses of the neoclassical approach to the explanation of regional growth patterns is its treatment of technology and technological change, which often appears as a residual unexplained factor, though one of considerable importance. This is the Achilles’ heel of the traditional approaches to the explanation of regional development patterns. Technological change will figure large in future explanations of regional development patterns, as it provides some of the keys to understanding the new patterns of development described above. Some of the foundations of this type of approach have already been laid and a number of theoretical elements can already be discerned, these being discussed below. (1) Development of explanations of change in patterns of location, not only as a consequence of changes in the geographical environment but also as a consequence of changes in the process of production itself. This idea has been developed in detail by MASSEY (1979). (2) Treatment

Interaction between the industrial sector and nonindustrial populations. Interaction between the industrial sector and non-industrial labour forces, such as surplus labour in agriculture or female labour

of technological change as both an economic and a social relation. In addition to examining the economic consequences of particular forms of technological change, the interactions of new technology with the labour

224

force are also to be studied, including the labour qualifications required, the consequences for income structure for social class and organisation, for organisation of the labour market and the ideological consequences. Technological change interacts with social and economic change in regions. Technological change is simultaneously the cause and consequence of economic and social change in regions. Technological change is thus one (major) cause of regional social and economic change, and regional social and economic change provides a ‘push’ for technological change. (3) Studies of changes in the organisation of production and the ways in which differences are, and can be, utilized in the process of production to increase productivity and profitability will give some indication of the consequences of these changes for regional development. (4) A reassessment of region-external relations is necessary. The EEC will ultimately reduce individual nations to regions in an economic union, which emphasises the question of how export-led growth should be viewed. Export-base theory is still an important element in regional development theory, but interaction with the domestic market and with other domestic industries is often neglected. Work in Denmark suggests that in some peripheral regions experiencing rapid industrial growth, the growth is heavily based upon export o~entation, without creation of linkages to other regional or national industries. For example, the paradox occurs that whilst Danish textile exports are at present growing rapidly textile imports are growing even faster. The Danish textile industry is increasingly becoming an export enclave, sporing raw materials and exporting finished products with few linkages to other regional or national sectors (CHRISTENSEN, 1984). Futures

If we are to try to explain and predict the nature and direction of future regional change, it is necessary to consider which elements of the technology-societyeconomy interface will become important in the future. In turn these elements can be used to predict future pattern of regional development in the EEC. It must be remembered that the EEC places great emphasis on establishment of a European science and technology policy. In the following a number of ideas

Geoforum/Volume 18 Number 2/1987 and concepts concerning elements which will enter into this type of explanation are presented. (1) The breakdown of Fordist techniques and increasing orientation towards a production-unit philosophy. This typically involves creation of smaller and more flexible production units where capital investment is less heavily committed than is the case in large-scale produ~tionLarge-scale production-line line factories. factories are also more vulnerable with respect to technical stoppages of production or industrial action, even by small groups of workers. This opens considerable possibilities for hype~obility in industrial location. At the same time it involves new forms of social control, based upon self-discipline or team discipline and orientated towards more urban middle-class life-styles and values. This furthers the development of individualised social relations and structures, a consumer rather than producer society orientation, and a strengthening of the nuclear family. (2) Growing awareness of diseconomies of scale. Large org~isations are often less efficient than it is commonly supposed. Planning, administration and control can be difficult to practice in a very large organisation. Technological change is reducing the importance of scale economies, which in turn highli~ts the existence of scale diseconomies. (3) Application of new information technology (NIT) in production. NIT will affect the organisation of production in many important ways. It will permit a considerable spatial division of different parts of the production process within larger firms or groups of firms, in a number of industries, including location abroad with direct telecommunication and information linkages. Control, monitoring and information access will occur over considerable distances. Perhaps more important are the changing requirements with respect to labour. Much of the expertise of the skilled worker can be built into information and control systems. Thus unskilled labour having a reasonable general education level will be able to play an increasing role in production. NIT is also important for the development of small-scale highly-organised production, such as the Japanese ‘just-m-time’ principle. In this type

Geoforum/Volume 18 Number 2/1987

of industrial organisation production is less prone to industrial dispute and stoppages. stocks and other types of Furthermore, investment can be kept to a minimum. Such control and require advanced systems information technology. (4) Movements away from large-series massproduced consumer goods towards smaller and more individualized series. The new production forms will be much more flexible with respect to the market, permitting greater variation and adaptation to specific types of demand. These market changes are, however, not only demandbased. Supply-side reorientation contributes to the apparent changes in demand. The consumer society, with related individualistic forms of organisation, social interaction patterns and values, will be strengthened, in turn affecting demands for housing, low-density living and private rather than collective service and infrastructure provision. (5) Increasing emphasis on use values. The past 1520 years have witnessed many process innovations but fewer product innovations. Whilst the distinction between product and process innovation can sometimes be difficult to maintain, generation of new consumer demands and production of new products will probably be an important element in the future development of society. Regions with a strong orientation towards this new consumer goods production will have a clear advantage. (6) Declining linkage costs. Telecommunications improvements are radicalising the communications and transport sectors. Major improvements in transport technology are also occurring. The combined effects on the location of productive and service activity of these developments will be considerable. The distance constraint will be reduced radically in importance, permitting as yet unseen forms of organisation of production and social life. Great flexibility with respect to location of production and service will be possible, as access and control will be possible over both long and short distances. A return to work at home may be possible in some branches, with important consequences for urban structure and joumeyto-work patterns.

225 (7) Research and development. Research and development will increase in importance in industrial production and services production. Here lies a source of potential conflict between a public sector committed to long-term research programs in basic research, and the demands of industry for more immediate returns. Increasing privatisation of research and improved telecommunications can, however, reduce the spatial monopolies which certain regions have on this type of activity. (8) Increasing centralisation of economic control with physical simultaneously occurring decentralisation of production. There are clear economic reasons for assuming a continuing tendency towards centralisation of economic power. There is, however, no longer any reason for this concentration to have a spatial expression. On the contrary, we will probably witness a decentralisation of much physical infrastructure and production plant. (9) The division between work and free time. A part of the burgeoning consumer society and ideology will be increasing emphasis on the concept of free time and private consumption, as being the ultimate aim of life and work. This creates a clear division between the work situation and the rest of life, which can also develop a spatial expression. Free time will increasingly be treated as a commodity and a range of technological innovations will be used to enhance the ‘product’. (10) Changes in social structure. Thirty years ago the most important group in the labour force, in social and economic terms, were the skilled workers. In the future the importance of this group will decline, both numerically and in terms of political power and sociostructural position. Two other groups will at the same time increase in importance, the unskilled workers and the technical personnel. Both groups will have important roles to play in operating production processes with new technologies. The unskilled worker will undertake supervisory and control functions, whilst the technical personnel will be responsible for maintenance of a relatively advanced technical apparatus, emphasis being placed upon prevention of breakdown and flow of production rather than reuair. Changes in relative strength of these

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226 social groups will revolutionise the labour market and the cities where we live. There will thus be an important geographical aspect, as skilled workers typically are ‘core’ urban dwellers. (11) The local and regional labour market structure will play an even greater role in determining location of production and employment, as most other locational constraints will be of more limited importance. Trade union and labour market organisation can thus become a key factor in determining future patterns of regional development. Future Patterns of Regional Development The changes

discussed above will have profound influences on the geography of regional and urban development. They are already at work in all EEC countries and thus affect the way in which the European regions develop.

The importance of large-scale production units will decline, as will the importance of agglomerations. Access to research and technical innovation will increase in importance, but this does not necessarily imply geographical proximity. Spread of productive and service activity to peripheral regions and rural locations can thus be understood in this type of explanatory framework. Access to advanced telecommunications services and large-scale databases will be of importance, but again geographical proximity is not necessary. Increasing polarisation of the workforce into qualified and non-qualified labour will change the geography of labour and related income patterns. Individualised consumer-orientated social relations will find new forms of expression in our cities, probably resulting in falling population densities and diffuse settlement. Production, service and regional development will be integrated in many new and more subtle ways than has been the case until now.

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than interregional differences. There are in fact no poor regions, only poor people. If the poor are no longer concentrated in specific regions, we can no longer talk of a poor region as such. Second, some of the more conventional measures of regional economic prosperity will become redundant, at the same time as the regional divisions we use become redundant. The type of development described above will probably continue to lead to convergence of regional incomes, observable today. Even regional unemployment patterns will probably become more even. This explains why, in the EEC today, convergence of regional values on a number of key economic variables can be observed. Third, regional inequality will assume new forms and new dimensions, for example: (1) Differences in class structure, with related inequalities in employment and consumption opportunities and content of free time. (2) Differential access to service, both public and private. (3) Different levels of access to education, related to (I). (4) Different levels of security in employment and housing. (5) Different levels of external economic domination and control. (6) Different levels of environmental pollution. (7) Different levels of job opportunity, related in turn to the new geographic structure of production. (8) Different levels of internal linkage between firms and sectors within the region, with resulting consequences for regional multipliers. European integration will hasten the speed with which these developments occur and the speed with which they diffuse throughout western Europe. In this sense the European economic integration will affect profoundly patterns of regional development.

If the factors discussed in the previous section are in fact becoming increasingly important in determining the future patterns of social and economic development, what are the consequences for regional development? First, the concept of regions as we know them must change. Already today intraregional differences in economic development are often more important

Thanks are due to Jorge Gaspar, Ackowledgementf Joao Ferrao and Diogo de Abreu of the University of Lisbon, for helping to clarify a number of ideas in this paper. The usual disclaimer applies.

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