Wednesday

3rd Jun 2020

Centralised states bad for economy, study shows

  • Centralised states are set to have bigger troubles with the economic crisis (Photo: Duchamp)

European countries where regions have more powers and responsibilities in terms of taxation, legislation and education policies tend to do better economically than centralised ones, a Swiss study shows.

"Centralism hammers development of countries at the cost of its citizens," Klaus Klipp, secretary general of the Assembly of European Regions, an umbrella network of regions from 33 European countries, said on Monday at the launch of the study, which was commissioned by his organisation.

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The study, developed by the Swiss-based BAK research centre, measures the impact of decentralisation on the economy, as well as the quality of education and innovation in 26 European countries, including non-EU members Switzerland, Norway and Croatia and excluding Luxembourg, Slovenia, Cyprus and Malta – because of their small size.

The country ranking as most centralised was EU newcomer Bulgaria, followed by the Baltic states, Greece, Croatia, Norway, Ireland, Denmark and France.

At the other end of the scale, Switzerland – famous for deciding almost everything by referendum - ranked first, followed by Germany, Belgium, Spain, Austria and Italy.

The index was drawn up after a series of different factors were taken into account, for instance if public servants are employed on a national or regional level, if university or kindergarten policies are decided in the capital or the regions, if taxation is fixed only at a national level or also at local and regional levels.

The findings show that decentralisation has a positive impact both on GDP per capita and economic growth, although many of the new EU member states are still relatively centralised and have experienced high growth in the past 10 years.

But the authors of the study underline that these countries started off from a very low level and could have progressed even further if their regions and local authorities had more powers.

University performance, especially when it comes to patents and applied sciences, also flourishes when regions have the power to decide on educational policies - for instance in the German region of Baden Wurttemberg, where technical schools are strongly connected to the local high-tech industry.

Regional politicians, in Mr Klipp's view, tend to be more involved in hands-on solutions for their constituencies, to whom they tend to have a closer connection than national decision-makers. He gave the example of a high-speed train between Paris and Strasbourg which was inaugurated after years of intensive lobbying by the regional authorities in Alsace.

A mayor in Transsylvania also managed to push for his town, Sibiu, to get an international airport, although initially the national government excluded it from the list. Sibiu was EU capital of culture in 2007 and has developed into a major hub for German small and medium enterprises.

Yet national competences should not be excluded or minimalised, especially during the economic crisis, Tomas Ekberg, representing the southwestern Swedish region of Vasetra Gotaland said. His region is home to carmaker Saab which is about to lay off some 4,000 people plus an estimated 6,000 people working in the car-supplying and service sector.

"We're not here to say we don't need nations – the labour market remains a competence of the national government. But it's a question of responsibility and efficient spending of the taxpayer's money," Mr Ekberg said.

Although the findings do not come as a big surprise, with federalists and economist for a long time arguing that delegating powers from the centre to the regional and local governments improves economic performance, the Swiss academics say they are the first to have scientifically proven this theory.

"It is not just anecdotal, it is now a scientifically proven fact and we hope that it will give regional politicians more leverage when dealing with national decision-makers," Urs Muller, the main author of the study, told this website.

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