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The geography of EU
discontent and the revenge
of places that don’t matter
Andrés Rodríguez-Pose
Professor of Economic Geo...
2
Places that matter/
Places that don’t
The dominant narrative
3
Tim Leunig
16 October 2008, Liverpool Cathedral
o “Liverpool's time is past”
o “Regeneration spen...
Places that matter/don’t matter
London
Sheffield
Middlesbrough
Cambridge
Birmingham
Cities: the bigger the better
5
Agglomeration and density
o Glaeser (2012) Triumph of the City
o Subtitle: “How our greate...
6
The consequences
Growing territorial inequality:
Europe
7
Many regions
underperform
in the national
context
Emergence of
a middle
income tr...
8
The reaction
Poland, 24 May 2015
Brexit, 23 June 2016
USA Trump swing , 8 November 2016
The precursors
9
France, presidential first
round, 23 April 2017
Italy, 4 March 2018
Netherlands, 15 March 2017
Austria, 15 October 2017
Ge...
France, presidential first
round, 23 April 2017
Italy, 4 March 2018
Netherlands, 15 March 2017
Austria, 15 October 2017
Ge...
12
Strong anti-
Europeanism
or
Euroscepticis
m
12
Anti-
Europeanism
or
Euroscepticis
m
13 13
14
What determines the rise of
anti-system voting?
Goodwin & Heath (2016); Hobolt (2016); Ford & Goodwin
(2017); Essletzbichler et al. (2018); Gordon (2018)
Hobolt (2016); T...
Becker et al. (2017); Los et al. (2017); Rodrik (2018)
Rodrik (2018)
Goodwin & Heath (2016); Hobolt (2016); Antonucci et a...
Lee et al. (2018); Gordon (2018)
The left behind (III)
17
Rodden (2016); Cramer (2017); Bonikowski (2017);
Essletzbichler et al. (2018); Martin et al. (2018); Gordon
(2018)
Refers ...
Lee et al. (2018)
Johnson (2015); Goodwin & Heath (2016); Shafique, 2016;
Tyson & Maniam (2016); Becker et al. (2017);
Ess...
Geography of discontent mostly linked to the crisis,
often overlooking long-term processes of decline
Theory of the reveng...
21
What has driven this
‘revenge’?
DEP. V.: Shareof vote for
parties opposed to European
integration
Strongly opposed (1)
OLS
Strongly opposed and
opposed (1...
GDP per capita
change
OLS
Industrial
change
OLS
Employment
change
OLS
Demographic
change
OLS
Economic change -2.10537***
(...
Education an important factor for support (or lack of it) for
European integration
The left behind
Local wealth an importa...
The left behind (II)
Low levels of employment a moderately important factor in
the geography of EU discontent
Presence of ...
Left behind vs revenge of places
that don’t matter
The places that don’t matter
Migration, a marginal player, if at all. P...
The places that don’t matter (II)
Distance to the capital not always significant. If anything,
areas farther away from nat...
The places that don’t matter (III)
Long-term economic and industrial decline
as the main drivers of anti-EU vote
Populatio...
29
Are we surprised?
Economists got it wrong
30
Challenge has come from an unexpected source
Told to expect negative externalities
o Land rents...
31
Territorial policy more
needed than ever
But, what type of policy?
Has nothing been done?
32
No, quite a lot has been done for these areas
o National level
o Welfare transfers
o Public empl...
Fiscal transfers
33
USA
Spain
UK
Public employment
0.00
10.00
20.00
30.00
40.00
50.00
60.00
0 10000 20000 30000 40000 50000 60000
Publicsectoremployment
20...
Expo Station,
Seville
‘Radial’ motorways,
Madrid
Castellón Airport
AVE Toledo-Albacete
July 17, 2015 5:38 pm
Spanish ghost...
36
Towards a different policy
Towards a different policy
37
The problem is territorial/ Places matter
We need better, not more, not less policy
But a di...
Tapping potential
38
Under 0.5M
19%
0.5M - 2M
17%
2M - 5M
10%
5M - 10M
24%
10M +
30%
Big firms
Fortune Global 500 headquar...
But are we tapping that potential?
39
Potential not used as many of these cities and regions are stuck in a middle income ...
How to go about doing it?
40
41
Conclusions
Why do we need to act now?
42
Why Germany has no gilet jaunes protesters (The Economist,
February 2019)
o Because it has t...
Fixing the places that don’t matter
43
The most negative externality so far has come through the ballot
box
The places tha...
The geography of EU
discontent and the revenge
of places that don’t matter
Andrés Rodríguez-Pose
More papers at:
http://pe...
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The geography of EU discontent and the revenge of places that don't matter - Andrés Rodríguez-Pose

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Andrés Rodríguez-Pose, Professor of Economic Geography, London School of Economics, UK at the OECD Conference on SMEs and the Urban Fabric, 15-16 April 2019, OECD Trento Centre, Italy.

Full event info: https://oe.cd/SMEs-Cities

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The geography of EU discontent and the revenge of places that don't matter - Andrés Rodríguez-Pose

  1. 1. The geography of EU discontent and the revenge of places that don’t matter Andrés Rodríguez-Pose Professor of Economic Geography, London School of Economics OECD Conference on SMEs and the Urban fabric 16 April 2019 // Trento, Italy
  2. 2. 2 Places that matter/ Places that don’t
  3. 3. The dominant narrative 3 Tim Leunig 16 October 2008, Liverpool Cathedral o “Liverpool's time is past” o “Regeneration spending towns" have slipped back relative to Britain's most successful towns. o If we really want to give people in Liverpool, Sunderland, opportunities, we need to let many of them move to the south-east. o We should convert half of the industrial land in the South East into housing: gain 200,000 houses, o We also need to expand London – making it a mile bigger would create 400,000 new houses. o And add a million houses in Oxford and Cambridge, along the model of America's Silicon Valley.
  4. 4. Places that matter/don’t matter London Sheffield Middlesbrough Cambridge Birmingham
  5. 5. Cities: the bigger the better 5 Agglomeration and density o Glaeser (2012) Triumph of the City o Subtitle: “How our greatest invention makes us richer, smarter, greener, healthier, and happier” o “Urban density provides the clearest path from poverty to prosperity” (page 1) o Combes, P.-P., Duranton, G., Gobillon, L., Puga, D. and Roux, S. (2012) The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection. Econometrica, 80: 2543–2594. RTD basic for long term growth o “There are substantial productivity benefits for all firms in denser areas that are even stronger for more productive firms” (page 2570) o “Firms in denser areas are, on average, about 9.7 percent more productive than in less dense areas” (page 2584) And transport costs o Decline in transport costs which fuels agglomeration and density
  6. 6. 6 The consequences
  7. 7. Growing territorial inequality: Europe 7 Many regions underperform in the national context Emergence of a middle income trap
  8. 8. 8 The reaction
  9. 9. Poland, 24 May 2015 Brexit, 23 June 2016 USA Trump swing , 8 November 2016 The precursors 9
  10. 10. France, presidential first round, 23 April 2017 Italy, 4 March 2018 Netherlands, 15 March 2017 Austria, 15 October 2017 Germany, 24 September 2017 Hungary, 8 April 2018 The flood 10
  11. 11. France, presidential first round, 23 April 2017 Italy, 4 March 2018 Netherlands, 15 March 2017 Austria, 15 October 2017 Germany, 24 September 2017 Hungary, 8 April 2018 The results of the flood 11
  12. 12. 12 Strong anti- Europeanism or Euroscepticis m 12
  13. 13. Anti- Europeanism or Euroscepticis m 13 13
  14. 14. 14 What determines the rise of anti-system voting?
  15. 15. Goodwin & Heath (2016); Hobolt (2016); Ford & Goodwin (2017); Essletzbichler et al. (2018); Gordon (2018) Hobolt (2016); Tyson & Maniam (2016); Antonucci et al. (2017); Becker et al. (2017); Bonikowski, 2017; Essletzbichler et al. (2018); Gordon (2018); Lee et al. (2018); Rodrik (2018) A series of individual characteristics: “Older, working-class, white voters, citizens with few qualifications, who live on low incomes and lack the skills that are required to adapt and prosper amid the modern, post- industrial economy” (Goodwin & Heath, 2016: 325) The left behind 15
  16. 16. Becker et al. (2017); Los et al. (2017); Rodrik (2018) Rodrik (2018) Goodwin & Heath (2016); Hobolt (2016); Antonucci et al. (2017); Becker et al. (2017); Ford & Goodwin (2017); Rodrik (2018) The left behind (II) 16
  17. 17. Lee et al. (2018); Gordon (2018) The left behind (III) 17
  18. 18. Rodden (2016); Cramer (2017); Bonikowski (2017); Essletzbichler et al. (2018); Martin et al. (2018); Gordon (2018) Refers to a series of geographical characteristics: “Local economic conditions were the single most important factor driving the pattern of voting” (Los et al., 2017: 788) (see also Garretsen et al., 2018) Linked to the so-called “great inversion”: Once prosperous rural areas and small and medium-sized cities have suffered relative economic decline and job loss (Moretti, 2012; Storper, 2013; Martin et al., 2018) A geography of discontent 18
  19. 19. Lee et al. (2018) Johnson (2015); Goodwin & Heath (2016); Shafique, 2016; Tyson & Maniam (2016); Becker et al. (2017); Essletzbichler et al. (2018); Martin et al. (2018); Rodrik (2018) A geography of discontent (III) 19 Goodwin and Heath (2016); Hobolt (2016); Becker et al. (2017); Ford and Goodwin (2017); Goodwin and Milazzo (2017); Lee et al. (2018); Rodrik (2018)
  20. 20. Geography of discontent mostly linked to the crisis, often overlooking long-term processes of decline Theory of the revenge of the places that don’t matter (Rodríguez-Pose, 2018): Anti-system vote linked to long- term decline by neglected places (or places that feel neglected). Different types of long-term decline The places that don’t matter 20
  21. 21. 21 What has driven this ‘revenge’?
  22. 22. DEP. V.: Shareof vote for parties opposed to European integration Strongly opposed (1) OLS Strongly opposed and opposed (1&2) OLS Strongly tomoderately opposed (1, 2 &3) OLS Economic change -0.69266*** -2.10537*** -0.55057*** (0.041) (0.067) (0.066) Population density -0.00024*** -0.00043*** 0.00010*** (0.000) (0.000) (0.000) Distance to the capital -0.00265*** -0.00103*** -0.00219*** (0.000) (0.000) (0.000) GDP per capita 0.04176*** 0.11045*** 0.07000*** (0.002) (0.004) (0.004) Employment -0.16178*** -0.14491*** -0.26329*** (0.007) (0.010) (0.012) Population 65 andover -0.26127*** 0.05510*** -0.02545** (0.008) (0.012) (0.012) Education -0.18333*** -0.16978*** -0.08907*** (0.007) (0.009) (0.011) Migration -0.26622*** 0.04181*** -0.01563 (0.008) (0.010) (0.011) Share of noCHES vote -0.09780*** -0.22435*** -0.28251*** (0.004) (0.005) (0.006) Observations 63,307 63,307 63,307 R-squared 0.67014 0.61962 0.74615 CountryFE YES YES YES AdjustedR-squared 0.670 0.619 0.746 F test 5167 9757 20420 Migration not an issue - Connected to a lower share of anti-European vote - People who interact with migrants less likely to vote anti- European Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1 Ageing not an issue - Regions with older population tend to vote less for extreme anti- European parties - As is the case with moderate anti-European parties Main results stand Density and rurality only apply for extreme anti-European options Once moderate anti-European parties are included, urban dwellers are more likely to vote for parties against European integration Four factors consistent and significant across different degrees of anti- Europeanism: Economic change, GDP per capita, Education Employment Economic decline a driver of anti- Europeanism 22
  23. 23. GDP per capita change OLS Industrial change OLS Employment change OLS Demographic change OLS Economic change -2.10537*** (0.067) Change in industrial employment -0.31374*** (0.012) Change in employment 0.50161*** (0.088) Population change 0.65785*** (0.021) Controls YES YES YES YES Country FE YES YES YES YES Observations 63,307 63,307 63,307 63,307 R-squared 0.61962 0.61709 0.61387 0.61880 Adjusted R-squared YES YES YES YES F test 0.619 0.617 0.614 0.619 Economic and industrial decline as the drivers of anti- European integration vote Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1 Employment and population growth, by contrast, linked to higher votes for anti-system options Does all decline lead to populism? 23
  24. 24. Education an important factor for support (or lack of it) for European integration The left behind Local wealth an important factor for anti-Europeanism. But, in contrast to expectations, once other factors are controlled for, richer places are more anti-European Left behind vs places that don’t matter 24
  25. 25. The left behind (II) Low levels of employment a moderately important factor in the geography of EU discontent Presence of an elderly population does not result in greater anti-EU vote. Once the economic trajectory, levels of education and the wealth of the place are controlled for, areas with large shares of elderly population tend to vote less for both radical and moderate anti-EU parties Left behind vs places that don’t matter 25
  26. 26. Left behind vs revenge of places that don’t matter The places that don’t matter Migration, a marginal player, if at all. Places with higher share of migrants tend to vote less for parties strongly opposed to European integration Density and rurality has less of a role than predicted by US political scientists. Once moderate anti-European parties are considered, more dense places resort to anti-EU vote Left behind vs places that don’t matter 26
  27. 27. The places that don’t matter (II) Distance to the capital not always significant. If anything, areas farther away from national capitals tend to be more pro-European integration Left behind vs places that don’t matter 27
  28. 28. The places that don’t matter (III) Long-term economic and industrial decline as the main drivers of anti-EU vote Population decline and low employment levels do not have the same effect in generating a geography of discontent. The creation of sheltered economies may be a factor behind this difference Left behind vs places that don’t matter 28
  29. 29. 29 Are we surprised?
  30. 30. Economists got it wrong 30 Challenge has come from an unexpected source Told to expect negative externalities o Land rents o Congestion o Pollution Told to expect Inequality: Interpersonal o But the poorest of the poor have not rebelled: Trump and Brexit votes But a fundamental negative externality overlooked o Territorial decline o Territories left behind o Long-periods of low-, no- or negative-growth o Industrial and agricultural decline o Brain drain o No hope Geographies of discontent
  31. 31. 31 Territorial policy more needed than ever But, what type of policy?
  32. 32. Has nothing been done? 32 No, quite a lot has been done for these areas o National level o Welfare transfers o Public employment o Regional level o Big investments in infrastructure o White elephants: Big motorways, empty airports, under-used high speed trains The real economic potential of these areas has not been mobilised o Policies have often promoted collusion, corruption and poor government o Perpetuating the impression that there is no future o Or that the future inevitably passes through big cities o This is massively resented
  33. 33. Fiscal transfers 33 USA Spain UK
  34. 34. Public employment 0.00 10.00 20.00 30.00 40.00 50.00 60.00 0 10000 20000 30000 40000 50000 60000 Publicsectoremployment 2016% GDP per capita 2015 % France 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 0 10000 20000 30000 40000 50000 60000 70000 Publicsectoremployment 2016% GDP per capita 2015 % Germany 0.00 10.00 20.00 30.00 40.00 50.00 60.00 0 5000 10000 15000 20000 25000 30000 35000 40000 Publicsectoremployment 2016% GDP per capita 2015 % Spain 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 0 50000 100000 150000 200000 Publicsectoremployment 2016% GDP per capita 2015 % United Kingdom 34
  35. 35. Expo Station, Seville ‘Radial’ motorways, Madrid Castellón Airport AVE Toledo-Albacete July 17, 2015 5:38 pm Spanish ghost airport costing €1bn attracts offer of just €10,000 Tobias Buck in Madrid Ciudad Real Airport 35
  36. 36. 36 Towards a different policy
  37. 37. Towards a different policy 37 The problem is territorial/ Places matter We need better, not more, not less policy But a different policy o Away from simply providing welfare o Away from sheltering less developed regions o Away from big, visible white elephants Place-sensitive policy o Place-sensitive distributed development policies (PSDDP) o Strongly based on theory and evidence o But sensitive to the different conditions of clubs of regions o Aimed at tapping local potential o And enhancing the opportunities of every territory (entrepreneurship, skills, absorption of innovation) o Offering portable skills o Tackling institutional inefficiencies and bottlenecks head on
  38. 38. Tapping potential 38 Under 0.5M 19% 0.5M - 2M 17% 2M - 5M 10% 5M - 10M 24% 10M + 30% Big firms Fortune Global 500 headquarters by city size, 2018 Entrepreneurship
  39. 39. But are we tapping that potential? 39 Potential not used as many of these cities and regions are stuck in a middle income trap
  40. 40. How to go about doing it? 40
  41. 41. 41 Conclusions
  42. 42. Why do we need to act now? 42 Why Germany has no gilet jaunes protesters (The Economist, February 2019) o Because it has tapped into its local potential o And has not let long term decline fester
  43. 43. Fixing the places that don’t matter 43 The most negative externality so far has come through the ballot box The places that don’t matter have revolted Responding to this geography of EU discontent, requires addressing the places that feel left behind o Focusing not only the least developed areas o Or in the areas showing the greatest potential o But considering long-term economic decline o Long-periods of low-, no- or negative-growth o Industrial decline o Low employment rates o Brain drain o But this requires a different type of policy o Place-sensitive distributed development policies
  44. 44. The geography of EU discontent and the revenge of places that don’t matter Andrés Rodríguez-Pose More papers at: http://personal.lse.ac.uk/rodrigu1/ @rodriguez_pose

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