Europe Needs to Pull Back Depressed Areas from Decades of Neglect

Workers left behind, families experiencing economic hardship in big cities as well as in the suburbs, young people with fewer job opportunities because they were born in depressed areas and forgotten by central administrations. There are millions of abandoned people in the world and they live closer to you than you think, according to Paul Collier. In his book account of the neglected masses of the west, Poveri e abbandonati (Poor and Abandoned. A new economics for the left behind, Università Bocconi Ediotre, 2024, in Italian), Collier, Professor of Economics and Public Policy at the Blavatnik School of Government at the University of Oxford, explains how many of the inequalities we observe today arise from mistaken beliefs and wrongheaded ideas in economic policymaking. One above all: the belief that every poor area can find its path to progress thanks to market forces.

“In this sense I think the United Kingdom – says the professor – is an extreme case, and the book is partly a criticism of the nation, not only because I happen to be British but because it is the most extreme example of inequality in the entire western world. A condition that contributed to Brexit and that offers us many lessons to be learned.” The first, according to Collier, is that when we talk about poor areas we need to overcome the developed/developing world dichotomy, given that on the “podium” of inequality there are corners of the planet very close to us Europeans.

Collier highlights how Western and centralized economies have been among the most ineffective in mitigating poverty, transforming themselves into countries where social mobility is at a standstill, there is no redistribution of wealth and inequalities are growing. A phenomenon that is evident when analyzing the labor market. Collier says: “Everything starts with jobs and professions. Great Britain has been incredibly negligent in investing in professional skills. I am thinking of technical and specialized labor: from construction to health care, which is the industry of the future and is in crisis. Great Britain has 18 of the 100 best universities in the world but does not exploit this lever sufficiently. For example, we only train 40% of the doctors we need yearly for the National Health Service and universities, and this is extremely serious, they have now lost their relationship with the territory."

An own goal also for the manufacturing system because "that ecosystem that helps small businesses grow and have access to technology and new solutions is missing". In short, there is a lack of redistribution of the skills needed to develop solid local economies. "We lost – Collier underlines – this tradition already in the 1960s, when the sources of funding for universities moved from local industrialists to Whitehall in London." Collier gives a concrete example: South Yorkshire, once a hub of the steel industry, today the poorest county in the United Kingdom. "When the University of Sheffield was founded there was a partnership between the steel workers and the local steel baron. It was a wonderful example of a community that came together around building the future, represented by the creation of a university. Today all this has been lost, with the exception of Cambridge and Oxford which are closer to London’s financial industry, leading to a centralization of financial power that has weakened many local territories," he adds.

But how can the trend be reversed once a locality is hit by a depressive shock? For Collier, given that private finance tends to flee places hit by crises, to reverse the trend public finance must enter the playing field and be the first to take on risk. The European financial institutions can do a lot in this sense. And the reference goes to entities such as the European Investment Bank and the EBRD, the European Bank for Reconstruction and Development, which according to Collier are accelerating many industrial regeneration projects. These are possible only if they also involve the territorial stakeholders, from universities understood as research and development centers, to local communities. The example par excellence is Stuttgart which, unlike other cities centered around the automotive industry such as Detroit in the United States, has avoided the crisis by transforming its industrial plants into centers and laboratories of innovation. It is no coincidence that a recurring word in Collier's book is agency, namely the capacity to collectively act of those who live in the places left behind, guaranteeing their capacity for self-determination. This is possible if the conditions for bottom-up territorial policies are created. A model that presupposes the existence of a forward-looking political class, capable of supporting change.

Having made these premises, Collier explains that the model is replicable in the many depressed areas of the world today: from the United States to Japan, from Zambia to Colombia to realities closer to us. Speaking of Italy, the reference is to the potential of the economically depressed areas of the Mezzogiorno. "To regenerate these territories – he says – it is necessary to evaluate the strengths of local economies. In Puglia, for example, despite there being critical issues, from demographics to poor investment, there are enormous opportunities coming from tourism but also agriculture, facilitated by the favorable climate. What is still missing is the right ecosystem for relaunching growth." There also needs to be forms of external financing capable of supporting entrepreneurial risk. "Without risk finance, rapid growth is impossible. I am convinced, however, that there is hope in this sense in Europe. There is a new sense of realism, I believe, throughout Europe, and Italy can be a reference in this sense. The German government recently collapsed and so did the French one: the old Franco-German partnership has become outdated and Italy is in a favorable position today." The EU can have the strength to grow if it acts united, says the professor. "I believe that the Draghi Report the right wake-up call for Europe. I think there is a real possibility that the European Commission shifts its attention from regulations that are making everybody’s lives impossible to measures that really encourage governments to invest in the future." And Europe’s future passes through the regeneration of those territories and the retraining those workers what have been and felt abandoned for a long time.