Should more money be taken from the rich to give to the poor? However we dress it up, this is arguably the most fundamental issue in any democratic system. It’s even more relevant today as global inequality continues to rise. Yet, as the collapse of the Venezuelan economy illustrates, it’s not exactly straightforward.
Things become even more complex when transfers of wealth are taking place across borders, where a sense of national solidarity is not at play. Public hostility to foreign aid budgets is one manifestation of this. Another is frustration in wealthier countries at sending money to the EU so that some of it can be invested in infrastructure and other projects in poorer EU regions.
EU cohesion policy is not just about rich countries paying for poor countries. Within wealthy EU countries, there are also poorer regions (just as within poorer countries there are wealthier regions). Via its cohesion policy, the EU invests in poorer regions to reduce differences in wealth not just between EU Member States, but also between regions within EU Member States. It is the EU’s largest instrument of investment, with 351.8 billion euros set aside for cohesion in 2014-2020 (one-third of the EU budget). The biggest recipients tend to be regions in Southern or Eastern Europe, including regions in Poland, Italy, and Spain.
What do our readers think? Well, we had a comment from Goran, who is frustrated that richer EU countries keep trying to cut cohesion funding to poor EU Member States. But is it fair that richer EU countries (and regions) have to pay for the development of poorer European countries (and regions) via cohesion funds?
To get a response, we spoke to Kevin Morgan, Professor of Governance and Development at the University of Cardiff. What would he say?
I would say the answer, in short, is yes. Strong countries and regions should contribute to the improvement of weaker ones, and there are two reasons for that: The first is what I would call ‘enlightened self-interest’, and the second is the ethical duties we have for social justice.
In terms of enlightened self-interest: Germany, for example, gets an incredibly good deal out of the Eurozone in terms of its currency, and in terms of creating markets for its high-value goods in Southern and Eastern Europe. Germany’s contributions to cohesion policy are the very least it can give in return. So, strong countries and regions get a lot out of it. It’s enlightened self-interest for them to help weaker countries.
The second reason is social justice. We have an ethical duty for wealthier people and places to help those who are less fortunate than themselves. So, there are two answers to Goran’s question: Enlightened self-interest says ‘Yes’, social justice says ‘Yes’.
To get another perspective, we also took Goran’s comment to Andrzej Porawski, Executive Director of the Association of Polish Cities, an organisation representing local governments in Poland. What would he say?
I would try to explain to him that it is fair for the following reasons. That money, which is paid by richer EU countries for the development of poorer EU countries and regions, does not only work in the interests of those poorer countries. It also works in the interests of those countries that pay… That money results in economic development in poorer countries, enhancing economic contacts with richer countries, enhancing cooperation between companies in poorer and richer countries. So, the ultimate effect of this investment benefits not only the country which is being supported, but the entire European economy as a whole.
Next up, we had a comment from Sabo who reminds us that the purpose of EU cohesion policy is to help make weaker EU Member States more competitive and bring up their level of wealth, alleviating economic differences across the European Union. Has it actually been successful in pursuing that objective?
I would say that, on the whole, the evidence suggests that cohesion policy has made a positive contribution to help us manage the positive contribution between the enormous divides between West and East, North and South. I wish the evidence was much clearer and sharper, but I believe that cohesion policy is the right way to go, and we can build on it.
For a cohesion policy really to be effective and sustainable, it needs to based on two principles, and I’d like to see these both strengthened. Number one is solidarity, where stronger countries and regions help weaker ones… The second principle is subsidiarity, whereby we devolve power to the lower levels so that policies can be based on the local knowledge of localities and regions, but those localities and regions need to be accountable for those resources, and answerable for their performance. So, the short answer is yes, cohesion policy has made a positive difference, but it needs to do so much more post-2020, and it needs to strengthen these two principles of solidarity plus subsidiarity.
What would Andrzej Porawski say? Certainly, some countries have grown their economies at an impressive rate since joining the European Union (such as Poland). Others, however, have grown more slowly. There are still big differences between the wealthiest and poorest EU Member States. So how effective has the EU cohesion policy been in practice?
Well, the effectiveness of EU cohesion policy depends also on individual decisions made by those who receive resources for development… The European Union sets out the criteria for using cohesion funding, but the implementation decisions are made by the people of the beneficiary countries. So, different countries take different approaches, and some are more effective than others. Also, there are different circumstances, social and economic, and decisions which were effective on one country might be less effective in another country… But, overall, I would say that EU cohesion policy has been effective in helping to develop the poorest regions and countries in Europe.
Finally, we had a comment from Graziano, who thought that EU cohesion funds should be withdrawn if a country is clearly in breach of European rules or values. Is it right to make such funding conditional on following debt and deficit rules, or on adhering to European values on democracy and civil rights?
I think when we make rules, we should by-and-large try to respect them. If we think of the history of EU rules, some of the first breakers of those rules have been the powerful countries of Germany, France, and Italy, for example, even though poor old Greece is often held as the only culprit. So, we need to respect rules, but we also need to understand circumstances where they may need to be relaxed in certain cases. Like austerity, for example, we may need to relax the rules on Southern Europe, and Greece in particular…
I’ve always argued that it’s a shared responsibility between the region, the Member State, and the European Union. They all need to play role, because no poor region can possibly solve its own problems unilaterally at the regional level. But if they get money – let’s say the regions of Italy in the Mezzogiorno, for example. Where they get money from Rome and Brussels, those regional elites must be made accountable for the performance of that aid. And, in the past, they’ve been allowed to get away with poor performance and therefore their governance needs to be strengthened to ensure transparency and efficient use of public money.
Is it fair that rich countries pay for the development of poorer countries? And has EU cohesion policy been effective? Should cohesion funds be cut if a country breaks EU rules or values? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!