PLANNING FOR A SUSTAINABLE EUROPE? - TU Berlin

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importance of economies of scale, imperfect competition and the localized nature of
spillover effects. Yet ironically, this new economic geography ends up challenging the
validity of regional transfers in a much more troubling manner, because it implies that
spatial redistribution will diminish competitiveness. The question then becomes whether
cohesion, i.e. a more equalized distribution of economic activity across European space,
is still a desirable goal if it might jeopardize European competitiveness in the long run.
This forces decision-makers to clarify their objectives. Philippe Martin’s (1999):12)
recent EIB prize winning essay poignantly summarizes the key dilemma for economists:
If economies of scale and localized spillovers explain phenomena of increased
regional inequalities, this necessarily implies that efficiency gains … accrue from the
existence of economic agglomeration. The existence of these beneficial effects of
agglomeration suggest rather that, in certain respects, Europe’s economic geography is
insufficiently agglomerated and specialized (for example in comparison with
American geography). It is therefore illogical to claim that the diminution of regional
inequalities supposedly facilitated by regional policies will generate efficiency gains at
pan-European level. To oppose concentration and geographical specialization is also
to renounce their beneficial effects.
According to this rationale, pursuing cohesion ultimately means foregoing the
very benefits that urban and regional agglomerations provide. In other words, although
hugely problematic from an equity perspective, the argument is that Europe as a whole
may be better off (macro-)economically if it keeps concentrating infrastructure
investments in the Blue Banana core of Europe, with certain peripheral exceptions.
Martin is thus making an interesting efficiency argument that the EU, for political
reasons, could never officially heed. 15
15 It should be noted, however, that current rethinking of regional policy as a whole does not necessarily
challenge the sense of using road and rail investments as tools for economic development, since neither
market-led economic integration nor diversification can be achieved without first physically linking the
infrastructures of countries or regions. What it does, challenge, however, is previous simplistic assertions