Competitive Regions in a Globalised Economy Grzegorz Gorzelak EUROREG, University of Warsaw

1. Competitive Regions in a Globalised EconomyGrzegorz GorzelakEUROREG, University of Warsaw IV ANNUAL FORUM: REGIONAL COMPETITIVENESS RAISING STRATEGIES IN THE AGE OF GLOBALIZATION: UKRAINIAN AND INTERNATIONAL EXPERIENCE Kiev, 12 November 2008

2. From quantity to quality • Shift from resource-based to innovation-driven economy: raw material do not matter any more. Now – knowledge, and especially new knowledge (innovations). • Creative class – the most important factor of development (e.g. Richard Florida): • technology: places with intensive R&D potential grow faster; • talent: economic activity follows (creative) people – and not the vice versa, as it had been the case in the old paradigm; • tolerance: permissive social and cultural climate supports creativity. • From quantitative to qualitative location criteria.

3. Segmentation of the global economy „Low” and „high” segments of global economy

4. Comparative and competitive advantage • Only innovative may attain long-term competitive advantage and become rich. • Those who compete by price (i.e. low production costs, therefore low wages) have to remain poor (M.Porter). • „Innovate or die” (R.Reich).

5. From places to flows • Shift from „economy of places” to „economy of flows” (M.Castells).Interconnectivity on the global scale. • Metropolises – the most important nodes of the global network - metropolisation of development.

6. Territorial polarisaiton • Metropolises weaken their ties with their hinterlands – need high quality inputs. • Backwash effects prevail over trickle-down effects: the metropolis „sucks up” best human resources from its hinterland, not giving much back. • Polarization of regional development – almost whole-European experience.

7. Weighted coefficients of variation, GDP/inhabitant in EU Member States a: 1998 for Romania b: 1998 for Romania and 2000 for Malta Source: G.Petrakos, 2008

8. Sector versus region • In resource-based development paradigm the „place” with raw materials and/or favourable conditions for mass transportation was attracting capital. Industrial territorial complexes emerged. • In a knowledge-based economy the industry is becoming more „footloose”. • Growing role of the Transnational Companies – bring capital, jobs, technology, incomes. • The „territory” is becoming weaker than the „sector” – the public authorities compete against each other to attract capital.

9. Geography of the biggest TNCs http://www.forbes.com/free_forbes/2005/0418/200.html

10. Growing role of endogenous factors • Exogenous factors are beneficial for a region only when endogenous climate is promoting growth and efficiency. • There are many examples from all over the world of regions that received huge external transfers – and remained underdeveloped (Central Appalachia, Southern Italy, Eastern Germany). • What was lacking? Mostly entrepreneurial spirit, qualifications and proper institutional infrastructure. • Culture matters! (Harrison, Huntington)

11. How do the Polish regions cope with these challenges? • In very different ways: • metropolitan cores: the winners, grow faster than the rest of the country; • some successful regions grow fast (modern industry, tourist); • old industrial regions – either in decline, or depending on the world prices of raw materials (currently: copper down). Delaying restructuring is harmful! • peripheral rural regions decline relatively (in extreme cases also in absolute terms. • Poland: typical for other new member states.

12. Central & Eastern Europe „Winners”: capital citiesand selected other large cities „Rising”: outer metropolitan areas andselected industrial regions „Disappointing” – undiversified economic base(depended on economic situation in selected industry branches ) „Losers”: usually rural and peripheral, but also selected industrial regions „Losers” „Rising” „Winners” „Disappointing” Source: Eurostat data

13. Changes in Polish coalmining after 1989 Production: 50% Employment: 25% Productivity: 200%

14. Metropolisation: Warsaw – a new city

15. Metropolisation – from industry to bussienes and commerce:Warsaw, Służewiec Przemysłowy

16. However, relicts of the old times still visible…

17. … and the new has not yet replaced the old

18. Katowice: 19th and 21 centuries

19. Rybnik: mines – and university complex

20. Automobile industry Fiat Isuzu Opel Delphi

21. Mistakes with industrial restructuring • Too late, too long, too costly. • Buying social peace at the expense of economic rationality (subsidising exports of coal!). • Some measures – incorrect (incentives for leaving the mine). • Still very heavy pollution and accumulation of waste. • Overall – finally, in good direction.

22. What can the regional policy do? • It cannot divert „natural” processes – but can shape them. • In particular – regional policy cannot aim at equalizing the levels of regional development. It would be a waste of money and effort. • However, it can increase attractiveness of already relatively attractive regions through creating favourable conditions for businesses. • It can also accelerate and rationalize restructuring in old industrial regions (delaying restructuring is a mistake!). • In lagging regions it can help increase the endogenous potential of the most active and promising localities. • It should allow for coordinating sectoral policies („implicit regional policy”) which usually have much more funds than the „explicit” regional policy.

23. Suggestions for Ukraine - if I may…. • Support the most promising cities and regions through: • increasing their innovation and technological potential; • educating possibly largest numbers of people, also abroad, developing international contacts in science and higher education; • improving their connectivity with the outside world. • Speed-up restructuring of old industrial regions. • Enhance endogenous potential of most promising local units through helping them in developing infrastructure and qualifications. • Develop business supporting institutions and organisations on national, regional and local levels. • Do not concentrate on assisting the „depressive” territories. • And – stabilize national politics.