Missions and Cohesion Policy: Living separate or dancing together?

Cappellano, Francesco; Molica, Francesco; Makkonen, Teemu Working Paper Missions and Cohesion Policy: Living separate or dancing together? JRC Working Papers on Territorial Modelling and Analysis, No. 02/2023 Provided in Cooperation with: Joint Research Centre (JRC), European Commission Suggested Citation: Cappellano, Francesco; Molica, Francesco; Makkonen, Teemu (2023) : Missions and Cohesion Policy: Living separate or dancing together?, JRC Working Papers on Territorial Modelling and Analysis, No. 02/2023, European Commission, Joint Research Centre (JRC), Seville This Version is available at: https://hdl.handle.net/10419/283087 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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Makkonen, T. 1 Missions and Cohesion Policy: Living separate or dancing together? Francesco Cappellano (corresponding author) 1 WSB University, Poland [email protected] Francesco Molica Joint Research Centre, European Commission, Belgium [email protected] Teemu Makkonen University of Eastern Finland, Finland [email protected] Abstract This paper explores avenues for cross-fertilisation between the mission-oriented approach and Cohesion Policy. It argues in favour of mutual policy learning between the two to address some of their respective shortcomings: Cohesion Policy is facing a gradual erosion of its identity, whereas the mission-oriented approach needs a stronger territorial perspective. The mission-oriented approach could offer a theoretical blueprint for re-organizing Cohesion Policy priorities around few missions, linking more explicitly its objectives to major societal challenges so as to reinforce its rationale and revive its political ownership. Moreover, Cohesion Policy can draw inspiration from the concept of directionality to strengthen its result-orientation dimension. It should be also assessed whether the missions’ blending of top-down and bottom-up approaches can inspire ideas to streamline the complex governance of Cohesion Policy. The mission-oriented approach can benefit from adopting Cohesion Policy peculiar architecture enabling joint broad priorities to be adapted to territorial contexts and into regional strategies. The mission-oriented approach could also learn from Cohesion Policy goal of maximising equity and efficiency, its focus on empowering regions, and its redistributive approach to foster the full potential of all EU regions to tackle societal challenges. Keywords: Cohesion policy; European Union; Mission-oriented approach; Policy learning; Regions Disclaimer: The views expressed are purely those of the author(s) and may not in any circumstances be regarded as stating an official position of the European Commission. 1 The first author was supported by the Polish National Agency for Academic Exchange under the ULAM programme BPN/ULM/2022/1/00075 2 INDEX 1. Introduction ............................................................................................................................................................... 3 2. Policy backgrounds ................................................................................................................................................... 4 2.1 Cohesion Policy and its quest for a (new) identity ....................................................................................... 4 2.2 Challenges faced by the mission-oriented approach .................................................................................... 6 3. Policy learning............................................................................................................................................................ 9 2.1. A mission-oriented Cohesion Policy? ............................................................................................................ 9 4.2. What the mission-oriented approach can learn from Cohesion Policy ................................................. 11 4. Conclusion and policy challenges ......................................................................................................................... 13 References .................................................................................................................................................................... 15 3 1. Introduction We set out here to examine two areas of the European Union (EU) policy landscape and their possible crossovers. The first one refers to the Five EU missions 2 launched in 2021, as part of the Horizon Europe program, building on the mission-oriented approach, to direct innovation towards problems with high societal values: the so-called Grand Societal Challenges. The latter one is the EU Cohesion Policy, a dominant policy instrument aimed at promoting social, economic, and territorial cohesion in the EU. In principle, the two policies are ambitious and should contribute to the quality of life of all EU citizens. They mobilize EU investments in a few common areas although Cohesion Policy covers a broader list of intervention fields and priorities. To date, their implementation is completely separated and there is no link between the two (even if aspects of the missions’ logic can be already identified in Smart Specialization Strategies). Although at very different maturity stages, the two policy instruments can offer potential “spillovers” one another. The missionoriented approach has gained prominence in the policy debate as a framework to orient innovation toward the societal challenges that threaten our society and the humankind. The need to pursue a directionality to innovation policy is well rooted in the academic literature: notably in the economic geography scholarship (e.g., Weber & Rohracher, 2012; Edler & Fagerberg, 2017; Fagerberg, 2018). While gearing innovation policy toward the creation of public good prompted a normative turn in the policymaking (Uyarra et al., 2019), several gaps in knowledge and practice hamper the implementation of the mission-oriented approach. Yet, its high strategic directionality can offer room for policy learning for Cohesion Policy. On the other hand, Cohesion Policy – which accounts for about a third of the EU budget – is tasked with addressing a growing number of priorities and polarization trends across and within EU regions (see European Commission, 2022). This raises questions about the rationale and purpose of the policy. However, its objective to promote territorial convergence can inspire the mission-oriented approach and its implementation in the EU policymaking. While discussing how strategic directionality and a territorial convergence can inform mutually the two policy instruments, we also draw on what academics from different scholarships claim to be their shortcomings or weaknesses in order to play a matchmaking exercise to evaluate the potential for a synergetic approach. Our aim is, thus, to provide room for learning in both policy areas. Scholars and policy practitioners challenge the mission-oriented approach, since it adopts a normative standpoint when defining societal challenges (Flanagan et al., 2022) as well as taking for granted a narrow technological scope of innovation envisioned in the mission-oriented approach (Tödtling et al., 2022). This undermines the possibility to turn challenges into business opportunities at local level (Wanzenböck & Frenken, 2020) hampering a sort of local “sense-making” process of the societal challenges. Scholars contend that the role of subnational governments needs to be better defined in the mission-oriented approach, both at the design and the implementation stages (Cappellano & Kurowska-Pysz, 2020; Wanzenböck & Frenken, 2020). While considering the mission-oriented 2 The missions are: 1) Adaptation to climate change; 2) Beating cancer; 3) Restoring our ocean and waters; 4) 100 climateneutral and smart cities; 5) A soil deal for Europe. 4 approach as a default policy choice (Janssen et al., 2021) such top-down approach can ignore the local policy dynamics and areas of expertise (Bours et al., 2021; Bugge et al., 2022). All these claims explicate further why scholars are concerned about the risk of missions being tuned into place-blind policies (Coenen et al., 2015) that might even strengthen territorial imbalances across and within the EU Regions (see Rodriguez-Pose, 2018). Simultaneously, the economic and political developments of the past three years have significantly intensified questions about Cohesion Policy principles and purpose (Bachtler, 2022). Since the early 2000s, scholars had already warned about a gradual erosion of the theoretical underpinnings of Cohesion Policy due to budgetary pressures, widening priorities, the mixed results of the policy, national interests, etc. (Hooghe, 1998; Hooghe & Marks, 2001; Allen, 2010; Begg, 2010). The conceptual foundations of Cohesion Policy have been further challenged by its deployment against short-term shocks, increasing extension and heterogeneity of its investment priorities, overlap and competition with new funding streams and declining additionality (Molica & Lleal Fontàs, 2020; Böhme et al., 2022). Historically, the case for Cohesion Policy has also suffered from unstable evidence of its economic impact (Bachtrögler et al, 2020). In addition, awareness of its benefits, as well as ownership, are still modest in many countries (Molica & Salvai, 2019). This study explores whether the mission-oriented approach, or selected elements thereof, can exert a positive influence in (re)building a robust identity and purpose for Cohesion Policy and identifying avenues for future reform. Conversely, Cohesion Policy could contribute to addressing questions as to whether a place-based application of the mission-oriented approach is viable and can be further pursued. The literature has demonstrated the positive impact of Cohesion Policy in accelerating the devolution process in many countries, improving the multi-level governance (Bache et al., 2011), enhancing the capacity building potential of local authorities (Polverari et al., 2022) and facilitating the adoption of reforms and policies (Berkowitz, 2017). Considering this, could it play a role in enabling place-based missions? In the following sections, we will first introduce the two policy concepts (Cohesion Policy and the mission oriented approach) and their main shortcomings and then discuss the potential for mutual policy learning. 2. Policy backgrounds 2.1 Cohesion Policy and its quest for a (new) identity Cohesion Policy is one the most consequential policies of the EU given its political salience, thematic breadth, and geographical scope. Its relevance is also epitomised by the sheer financial size, accounting for a third of the EU budget. Since its inception, the overall mission of the policy has not changed in essence. It lies in tackling disparities by fostering the development of EU regions, with a particular focus – though less pronounced than in the past – on lagging ones. However, the shape and objectives of the policy have been steadily evolving as a result of internal dynamics and external factors ranging from globalisation to enlargement, to shifting priorities at the EU level (Piattoni & Polverari, 2019; McCann & Ortega-Argilés, 2021). The geographical coverage of the policy has been enlarged so as to encompass all EU regions, which has in turn affected both the allocations break-down and 5 objectives. Thus, the focus of the policy has shifted from a purely integrated regional development to a broader competitiveness perspective (Mendez, 2011; Sielker et al., 2021). That is, from providing assistance to less developed regions to fostering endogenous growth in all territories. Accordingly, the emphasis on supporting physical infrastructures and manufacturing clusters has increasingly given way to promoting knowledge-based growth and decarbonisation. Lastly, the structure of the policy has been a given more strategic focus, with a reinforcement of the long-term planning and result-orientation dimension. These changes occurred against a background of intense discussions among scholars, analysts, practitioners, as well as governments. The most prolific debate pertains to the economic effects of the policy. The economic literature has been traditionally inconclusive in this respect. A number of works have questioned the impact of Cohesion Policy (Boldrin & Canova, 2001; Dall’erba & Le Gallo, 2008), in particular its permanent or transformative effects on local economies (Aiello & Pupo, 2012; Barone et al., 2016). More recently, consensus has emerged around the existence of positive though very diverse impacts across regions (Di Caro & Fratesi, 2022). This heterogeneity can be explained with two main circumstances: the first stems from the diversity of interventions or objectives delivered under the different Cohesion Policy programmes; the second relates to the context of implementation (Bachtrögler et al., 2020). In relation to the latter, empirical studies have found that the effects of the policy may be influenced by as many variables as the economic structure of regions (Percoco, 2017), the quality of government (Rodríguez-Pose & Garcilazo, 2015; Mendez & Bachtler, 2022), human capital (Becker et al., 2013), regional innovative capacity and infrastructural endowment (Crescenzi & Giua, 2016). The lack of unequivocal and, thus, compelling evidence about the impact has not been the only debated aspect of the policy. Its complex organisation and wide thematic focus have also attracted criticism (Manzella & Mendez, 2009). Moreover, the political discourse at both EU and domestic level has revolved essentially around financial absorption and irregularities, often fuelling negative narratives (Molica, 2022). Lastly, the political ownership of the policy remains limited, and awareness of its benefits varies a great deal across member states (Molica & Salvai, 2019). All the aforementioned factors have led to growing scrutiny – and ultimately questioning – of Cohesion Policy’s rationale and organisation, despite a fresh rise in regional disparities since the crisis of 2008 (Monfort, 2020). While the convergence process has slightly resumed in the past few years driven by Eastern European regions, a significant number of regions are locked in what has been termed as “development traps” (Diemer et al., 2022): many less developed, middle-income or rural regions have kept declining or stagnating (European Commission, 2022). Regional differences in relation to labour market indicators have not gone back to the pre-crisis levels whereas regions have performed very differently in relation to other key indicators (e.g., innovation). The “soul searching” process – that Cohesion Policy is going through – has further deepened in the wake of the multiple crises that have struck the continent in the past three years. Three circumstances have come into play. First of all, since the pandemic a non-negligible share of Cohesion Policy funds has been re-directed to crisis mitigation measures. This has resulted in shifting funds away from high value-added investments, notably from R&I (Böhme et al., 2022), as well as eroding the place-based dimension of the policy (Molica & Lleal Fontas, 2020). 6 The use of cohesion funds for addressing the short-term effects of negative shocks, which to a lesser extent took also place during the Great Recession, marks a departure from the structural and strategic goals of the policy. Thus, it has triggered questions on both its purpose and principles (Bachtler, 2022). Second, the establishment of the EU Recovery Instrument (NextGenerationEU or NGEU) in response to the pandemic has come to challenge the preeminent role and specificity of Cohesion Policy under the EU budget. The Recovery and Resilience Facility, the main pillar of NGEU, represents a parallel funding stream that delivers investment in areas partially overlapping with Cohesion Policy thematic priorities. Yet, the Recovery and Resilience Facility also enjoys features that differ considerably from Cohesion Policy, as it is based upon a centralised governance, a largely spatially blind approach and disbursements based on performance (Conte & Molica, 2022). While the Recovery and Resilience Facility has been conceived as a one-off instrument, analysists and policymakers are already debating as to whether it should be made permanent (Rubio, 2022) or which of its aspects could be mainstreamed to Cohesion Policy. Either scenarios could result in a reassessment of Cohesion Policy core mission and features. Third, pressure has been building on Cohesion Policy to address an ever-larger number of objectives (e.g., integration of migrants, energy independence, etc.), which heightens the risk of turning it into a “catch-all” policy at the expense of its core goals. Enlarging the number of Cohesion Policy objectives might be harmful in a number of ways: I) it reduces the shares of resources per each single objective, hampering a critical funding concentration on few priorities; II) it might lead to a loss in efficiency impinging on the results of the policy; III) it can further fuel rent-seeking and clientelism in some areas. To sum up, the main consequence of these shortcomings is that the identity of Cohesion Policy is increasingly becoming blurred. Specific work to focus its objectives and conceptualise its foundations is very much needed (Barca, 2009) in view of designing the post-27 Cohesion Policy. 2.2 Challenges faced by the mission-oriented approach Arguments in favour of the mission-oriented approach were firstly discussed by Ergas (1987), who put forward the notion of “big science for big problems”. Until then, missions were mainly connected with the defence sector R&D venture. In the last decade, missions and the underlying mission-oriented concept were linked to social objectives, with scholars signalling that our societies were investing disproportionally in economic targets rather than solving societal issues (see Nelson, 2011). The mission-oriented approach is by its nature linked to societal objectives with the aim of generating a transformative change (Mazzucato, 2018a). At EU level, an early plea to incorporate the mission-oriented approach within the EU policy agenda can be dated back to the “Lamy report” (European Commission, 2017). The document recommended that “post-2020 EU R&I programme should thus translate global societal challenges (social, economic, environmental) into a limited number of large-scale research and innovation ‘missions’.” Building on this, the report of the ESIR high level group discussed how to frame the missions in alignment with the EU agenda and what would be the best tools to mobilize. Two concepts emerging 13 should also consider investing in knowledge generation (Tödtling et al., 2022). This should include technological endowments as well as investment in education and training of researchers aligning their curricula to the societal challenges needs. In this regard, the mission-oriented approach could learn from Cohesion Policy, which has invested greatly – notably via the European Social Fund (ESF) – to increase the educational attainment within and across member states. Fourth, more research is needed on the geographical distribution of funds to sustain societal challenges projects. However, as discussed above, there is a risk that the majority of the funds are allocated to the existing innovation hubs of Europe. The fact that Cohesion Policy is designed to distribute its funds depending on the wealth of the territories should, therefore, also inform the mission-oriented approach. Indeed, lagging regions (those EU regions whose GDP fall below the EU 75% average) receive more money than more developed regions within the European Structural and Investment Funds (ESIF) distribution logic (Solís-Baltodano et al., 2021). Every territory should be in the position to generate its contribution to the societal challenges regardless of its income, and first analyses of the readiness of regions to tackle societal challenges demonstrate that this can be the case (Cappellano et al., 2022). For example, rural regions are anything but void of innovative activities (Makkonen et al., 2020). In fact, rural regions have been shown to host precisely those types of actors (notably social enterprises) that can help to tackle the societal challenges (Richter, 2019; Olmedo et al., 2021). Further, they are noted to be key locations for important parts of the economy, such as the circular bioeconomy (Brandão & Santos, 2022), contributing to solving the EU missions. Therefore, a redistributive approach should also be considered in the case of the missionoriented approach to facilitate fostering the full potential of the EU area to tackle the societal challenges. 4. Conclusion and policy challenges We set out to discuss the possibility of mutual policy learning between two separated high priority EU policy areas: Cohesion Policy, a dominant policy instrument aimed at promoting social, economic, and territorial cohesion in the EU and the EU Missions building on the mission-oriented approach, to direct innovation towards solving societal challenges. The goals of these two policy areas are ambitious as they should contribute to the quality of life of all EU citizens. The contemporary academic debate has, however, raised concerns about their capacity to meet their ambitions. Cohesion Policy has been questioned for: 1) covering too many priorities (a “catch-all” policy), 2) lacking a strong sense of purpose, 3) the mixed evidence of its achievements and 4) its multi-level governance structure consisting of complex vertical and horizontal relationships. Similarly, the mission-oriented approach has been criticised for: 1) disregarding the place-based nature of societal challenges, 2) favouring existing clusters of innovation over less innovation-prone regions, 3) focusing on existing knowledge bases, while neglecting investments on education and 4) ignoring the empowerment of all EU regions, while selecting which one can contribute to missions. Considering these shortcomings in Cohesion Policy and the mission-oriented approach, we explored the possibility of policy learning between the two policy areas. Our aim was to disentangle whether the mission-oriented approach 14 can exert a positive influence in (re-)building a robust rationale for Cohesion Policy and help identify avenues for future reforms and whether Cohesion Policy can contribute to addressing questions concerning the placed based application of the mission-oriented approach. We identified four key areas of potential policy learning for both approaches. We argue that Cohesion Policy could learn from the mission-oriented approach: 1) a blueprint to re-arrange its multiple priorities under fewer cross-sectoral goals so as to achieve more efficiency and consistency; 2) the establishment of targets (missions) that resonate with policy-makers and the general public alike, and thus trigger higher support and engagement; 3) political and normative goals that clarify the expectations of the policy to consolidate its design towards concrete measurable targets; 4) blending of top-down and bottom-up approaches to streamline the vertical and horizontal governance relations. In terms of mission-oriented approach, we argue that it could benefit from adopting Cohesion Policy: 1) thematic focus on objectives that can be adapted to territorial contexts and into regional policy strategies; 2) goal of maximising equity and solidarity; 3) priority assigned to increasing the educational attainment (and overall empowerment) within the EU regions; 4) redistributive approach to foster the full potential of all EU regions to tackle the societal challenges. Our aim here was to initiate and stir up further discussion on the possibility of mutual policy learning between Cohesion Policy and the mission-oriented approach. This is particularly relevant in the context of the embryonic debate on the future design of EU funding instruments for the post-27 programming period. Major changes in the global environment, ranging from geo-political shifts to trade fragmentation, are triggering a rethink of the EU agenda with profound implications for its investment policies such as Cohesion Policy (Hunter, 2023) or Horizon Europe. The current situation begs for a major reform of the EU Multiannual Financial Framework after 2027 to bring it more in line with these emerging challenges. Understanding whether the conceptual frameworks underpinning the mission-oriented approach and Cohesion Policy can be mutually reinforcing is essential to inform this political discussion and suggest a viable direction. Both Cohesion Policy and Missions can be cornerstones of the EU investment agenda for the end of the decade provided that they are capable of opening up to innovative approaches drawing on other policy frameworks and experiences such as the Partnerships for Regional Innovation (PRI). 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