Globalisation, economic policy and rural development in Europe.

• Author: Bueno, Raul de Arriba
• Position: Report

1. Introduction

   Rural Europe has been experiencing far-reaching transformations in the context of contemporary economic globalization. Most rural areas have traditionally depended on agrarian activity. Nevertheless, the general decline in the importance of agriculture and the subsequent reduction in its employment absorption capacity have been bringing about significant mutations in the rural sphere. In many rural areas deep demographic changes are taking place, such as population aging and depopulation, while processes of counter-urbanization in some areas close to large city centres are also being observed. In this context, the viability of many rural zones has been dependent on economic diversification and the impulse of non-farming activities.

   Economic policy has faced up the opportunities of managing the challenges that these transformations present while preventing the impoverishment of the rural environment. Therefore the role that the State should play in rural development is a question of central interest. After the crisis of the 70s, the subsequent boom in neoliberalism since the 80s and the fall of the Berlin Wall in 1989 the role of the State in the economy has been thoroughly questioned. Nevertheless, despite the tide being against it, State intervention through economic policy continues to be very important. In fact, the weight of the State in the economies of the European Union (EU) has barely diminished; changes have been produced more in the ways of intervention rather than in the intensity itself.

2. What is the specificity of the rural sphere?

   There is a commonly held image of what the rural world is. Nevertheless, it is difficult to establish a precise operating definition from an economic policy and research point of view. This difficulty is rooted in the diversity of territories that could be identifying as rural. A variety of more or less spontaneous concepts and perceptions associates rural spaces with barely populated remote territories surrounded by natural countryside, agriculturally dependent, culturally traditional, etc. But, it would be necessary to specify what is understood by barely populated and even by what constitutes a territory (a municipality, a province, a region). Also, not only remote zones, but also those close to city centres may be considered rural. Furthermore, a post-industrial space (with a minimum of natural zones) belonging to a region in decline that has suffered a process of intense depopulation could also be considered rural. The most utilized definition is provided by OECD (1994). It distinguishes two hierarchical levels of geographic detail, local community level and regional level. Local communities are classified as rural or urban, according to their population density (rural if there are less than 150 inhabitants per square kilometre). Regions are then classified according to the proportion of population living in rural or urban communes as "predominately urbanised" (less than 15%), "significantly rural" (15-49%) and "predominately rural" (more than 50%) (1).

   Working with this definition, it is interesting to outline some very broad characteristics of the rural world in EU to be able understand its importance and, therefore, the importance of rural development economic policy. The overall picture hides not only an enormous diversity of situations among different EU countries but also within each country. The rural sphere is important in terms of territory, population and employment. Rural areas (predominantly rural and intermediate regions) represented 90% of the territory and 54% of the population in 2005. They generate 42% of the gross value added and provide 53% of employment. Income per capita is 28% to 32% lower in rural areas. The primary sector represents 18% of employment and 5% of value added. In general, most economic activity depends more and more on the service sector. Between 2000 and 2005, the relative importance of the primary sector in the economy of the rural areas in EU-27 decreased by 6.3 percentage points in terms of employment and by 1.2 percentage points in terms of value added (European Commission, 2008a). In any case, the importance of the rural zones goes beyond territorial, demographic or economic dimensions. The rural sphere carries out some essential functions in our societies, from food and other necessary commodities production (including water) to ecology, cohesion, recreation, residential services and culture and education (Rodriguez et al, 2004).

   The rural sphere is not a static reality. In Europe there are phenomena that are transforming the rural zones. Globalization also influences the rural sphere. The exposure of these rural zones to competition from emerging economies affects the viability of agriculture and certain traditional manufacturing industries. The liberalization of direct foreign investment has an impact on rural economies through the phenomena of delocalisation of intensive labour and natural resource activities and, more and more, of the sectors with greater technological content. But these effects produced by the commercial and capital liberalisation also have an impact on the dynamics of urban growth and from there spread again back to the rural sphere through the connections between the rural economy and the urban productive system.

   The development of infrastructure and the changes in the global transport industry, including low-cost phenomenon, are facilitating a giddy increase in the number of national and international displacements and tourist activities. Potential tourist demand has been increasing significantly and the phenomenon of second residences is already linked not only to national citizens but also to foreigners that can now reach their second residence in a few hours at a much reduced price. These processes are producing an urbanizing pressure in the rural zones and significant landscape transformation, especially in some southern countries of Europe.

   The development of communication infrastructures and relatively easy access to the private car enable greater mobility and the phenomenon of commuting, where residence is established in a village with daily travel to work in the city centre. This establishment in decongested areas out of built-up urban conglomerations is relevant not only to people but also to the businesses that de-locate in search of cheaper land and space (Leon, 2005). Technological advances in telecommunication and information systems also facilitate these phenomena and open up new possibilities of development in rural areas.

   Recently, concern has been growing regarding the environmental consequences of the development model, especially with the effects of climatic change. The commitment to reduce gas emissions is bringing about a change in modes of production and consumption and in economic policy priorities. In this sense, agrarian and rural development policies have been increasingly incorporating environmental questions into their strategies, as in the case of the Rural Development Policy of the European Union (European Commission, 2008b), underlining the multifunctional dimension of rural spaces. Moreover, and more concretely, some processes are producing deep structural transformations in agriculture, the sector that has traditionally shaped the dynamics of rural zones. The following phenomena could be pointed out:

   * The gradual process of liberalization of the agrarian commerce prompted by the World Trade Organization since the Uruguay Round of the GATT with the inclusion in the agenda of negotiations on the agrarian products.

   * The reduction in the public support to the agrarian sector and the change of the intervention mechanisms produced in the Common Agriculture Policy of the EU (decoupling of farm payments).

   * The acceleration of the processes of technological innovation applied to agriculture and the replacement of labour by capital, more characteristic phenomena of the large-scale faming.

   * The progressive introduction of environmental requirements to agrarian practices in order to prevent negative externalities and to promote the positive ones.

   * The changes in consumer preferences as to the type of products and the form of consumption with the expansion of the purchases through the large supermarket chains.

   All these phenomena are producing changes in agrarian structures characterized by the concentration of large-scale farming that seeks to...