REVIEW #15: Regional Economic Policy and Self-Sufficient Economies in Shadow of Climate Change

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Olga Łabendowicz & Lotokot Studio

One of the defining processes in the world market economy transformed by globalization is the appreciation of localization. The intensification of regionalization processes also means that communities seek solutions to economic challenges locally by trying to create self-sufficient economies by relying on locally available resources. The European Union (EU) is placing an increasing emphasis on regional development and economic policy.

In addition to the Member States, the EU also provides significant support for regions and cities in order to promote local cooperation and local self-sufficiency, such as in Brandenburg. There are many positive developments in Brandenburg, but there are still only partial results in creating a self-sufficient region and in bringing East German regions economically closer to the developed West German regions. It can also anticipate a trend that will lead to the creation of a Europe of the Regions, replacing the Europe of the Member States

There are several reasons why the EU supports the regions. One of the main reasons is to catch up with less developed regions. The second main reason is security policy, and the third main reason is climate change. Although self-sufficiency as a cause is rarely used as an argument, it can be concluded from the efforts that the EU, due to the vulnerability of certain territories, with its support, seeks to improve the self-sufficiency of the regions. These territories for support are either underdeveloped, on the fringes of the EU, or threatened by climate change.


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PÉTER KEREKES / REGIONAL ECONOMIC POLICY AND SELF-SUFFICIENT ECONOMIES IN THE SHADOW OF CLIMATE CHANGE


First, we may think that the concept of globalization-localization is one based on an opposition, or two kinds of the same economic process. However, the reality is that localization is part of globalization. This phenomenon, or economic process, can be observed primarily in knowledge-based advanced economies-such as the United Kingdom, the United States of America, or the European Union.

The main motivation for the resurgence of regional economic policy is to gain a competitive advantage in the global market, in local activities where companies can gain a market advantage. These market advantages are concentrated in a specific geographical territory (for example, Blue Banana Zone in the European Union, Silicon Valley). These market benefits are often linked to a locality or a city.

It has been accepted that globalization results in a reorganizing of a regional division of labor as companies relocate certain activities to less developed regions. These activities usually entail a lower competitive advantage in the production chain (for example, an activity that can be performed without knowledge). Trends that emphasize the crucial importance of geographical concentration/deconcentration soon became popular in economics, but this concentration is not observed for all activities, only for companies engaged in traded activities that want to benefit from local advantages.

Although the trend is good, and fundamentally globalizing market economy processes also contribute to the development of regional economic policies, we cannot ignore the following two important findings on this topic:

  1. Regions compete with each other (for example, for workers, for knowledge, with better quality cheaper locally produced products in order to protect markets from non-locally produced products) and only those regions or self-sufficient communities that operate according to or develop an appropriate strategy will be successful in the long run. Territorial units are competitive if their economy is open and their per capita income is consistently high and growing. As well as a high and non-declining employment rate, i.e. broad sections of the population are expected to benefit from this income. In the case of self-sufficient communities, self-sufficiency can only be achieved if these communities remain competitive with the external market. In the event that the self-sufficient community is unable to compete with the non-community market, their self-sufficiency cannot be achieved in part or in full because the external market controls the self-sufficiency market because it can provide a service to local communities at a lower price and better quality. If the local community pursues an overly protectionist economic policy, it can lead to a kind of isolation that can negatively affect the local community. A good example of this is the Brexit referendum. Britain has also left the common market with its exit from the EU, partly to protect its internal market. The exit had unexpected negative effects on the country’s population. The prices of certain products have risen or there has been a shortage of goods, there has been a shortage of labor in some sectors, and trade with the European Union has become more difficult and costly.
  2. Although the regions are competing with each other, among others, because of climate change, they will sooner or later have to coordinate and work together along certain points. Regardless of motivations and whether external or internal influences trigger regional development, the impact is either caused by multinational corporations or local communities. By companies – in order to gain market advantage in return. By local communities – to improve the living standards of the local population, creating jobs, halting negative migration/depopulation trends, or achieve independence from the global market economy. Global climate change is affecting areas and the people who live there, which everyone needs to take into account. An important aspect for companies is design capability. When planning, they must take into account local specific economic, legal and political cultural aspects, and the degree of market advantage, as well as the negative effects of climate change. This is no longer a negligible aspect, especially when it comes to a large investment that pays off in the long run and is difficult to move (such as setting up a factory). For local communities, this is important, especially if they are self-sufficient, because climate change is affecting, among other things, residential areas (the Netherlands is a good example, due to rising sea levels, without major investment, the territory becomes uninhabitable), and economy, such as local agriculture.

To sum up the findings, although regions and local communities compete with each other (either for external capital, or to protect the internal market from the external market), because of global climate change, they need to work together to rival with each other.

In order to work together, actors need to agree on points that may limit themselves or reduce their market advantage due to environmental change. Cooperation can also be mutually positive in some cases, for example when self-sufficient communities trade with each other to deal with the climate crisis, one providing knowledge and the other the raw material of the product.

So, these measures should focus on combating climate change. The measures do not necessarily only harm local communities or companies. For communities, fighting climate change can also lead to the creation of new jobs, new businesses for companies, such as the recycling business, and technological advances can also mean spending cuts.


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