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Economic competitiveness

[ Summary ]


Chapter 1:


For many years, the economic balance of most rural areas was chiefly dependent on agriculture. In some countries, since the beginning of the last century, and in others much more recently, the importance of agriculture has diminished very considerably, especially in terms of the numbers employed in farming, and, in many cases, this has led to massive depopulation.

Such changes have resulted in diverse economic situations in rural areas. Consequently, in rural Europe today it is possible to distinguish a multitude of different situations for which any number of typologies can be developed to illustrate this diversity.

Our own basis for interpretation includes nine common types of situation that can be found either in isolation or in combination, which, at least to some degree, reflect the diversity of rural areas. These are areas:

  • where agriculture employs a sizeable proportion of the working population and still forms the basis of the economy (Type 1)
  • with rich, not highly labour-intensive agriculture (Type 2)
  • where traditional large-scale landholdings continue to predominate (“latifundias”) (Type 3)
  • where natural or protected land plays a key role (Type 4)
  • geared towards tourism, with small-scale facilities (Type 5)
  • with a large proportion of second homes and/or residential homes (for the elderly, the disabled, etc.) (Type 6)
  • with a large number of small businesses (Type 7)
  • in a peri-urban location (Type 8)
  • with a predominantly elderly population and/or where a high proportion of people are on welfare assistance (Type 9)

Owing to their definition and geographical coverage (Objective 1, 5b and 6 areas), LEADER programmes I and II were designed to create new economic opportunities in most of the areas concerned, with the exception of those with an “outward-looking” economy, chiefly rich agricultural areas and areas situated in the immediate vicinity of towns. LEADER has guided the search for new forms of territorial competitiveness, based on a form of public intervention designed to exploit local resources in a more participatory and systematic way.

By borrowing some of Garofoli’s variables [1] to develop a typology of “local development models”, the nine types of rural area can be described as follows:


Type 1 - Areas where a sizeable population is still employed in agriculture

    Such areas are characterised by:

    • a high percentage of the population employed in agriculture or livestock production;

    • a large amount of unpaid labour, multiple job holding and part-time working;

    • some processing of agricultural products organised on the farm itself;

    • systems of processing and marketing based on organising a multitude of different operators (processing cooperatives, marketing consortia, group purchasing of services, etc.);

    • the ability to innovate in terms of quality, labelling, controlling markets and distribution systems, etc.;

    • the ability for collective organisation within the sector and to link together the various producers/organisations, including diversification into tourism: wine routes, cheese routes, etc.;

    • housing settlements linked with the distribution of farms.

    Examples in Europe: areas specialising in early fruit and vegetables, areas of intensive or extensive livestock production. This category is extremely diverse and includes: mountain areas in Greece, where more than 40% of the working population is still employed in traditional systems of mixed farming and livestock production; Greek and Spanish coastal areas practising highly intensive agriculture, often under glass; areas where farming is very modern but heavily indebted and extremely polluting, as in Brittany (France), Flanders (Belgium) and the Netherlands; and areas with extensive livestock production, such as the Auvergne and Limousin (France).


Type 2 - Areas with rich, not highly labour-intensive agriculture

    These are areas characterised by:

    • a low percentage of people in work, especially in the agricultural sector;

    • a structural surplus of labour, especially female labour;

    • large-scale farms (with a strong tendency towards concentration) generally geared towards single-crop farming;

    • heavily mechanised production and very high surface area/manpower and capital/manpower ratios;

    • farming predominates in generating revenues and in organising the area and its landscape;

    • a weak relationship between enterprises, with production and marketing decisions relying essentially on price regulation and subsidies;

    • the search for new functions for farmers in order to prevent long-term demographic decline;

    • little demand for local development policies and strong support for farmers’ unions;

    • a public sector role determined largely by the administration of Common Agricultural Policy (CAP) subsidies.

    Examples in Europe: the cereal-growing plains of the Parisian Basin in France, the rice-growing plains of northern Italy, the numerous maize- and sunflower-growing areas, and the areas of extensive livestock production in the United Kingdom.


Type 3 - Areas of traditional large-scale landholdings (“latifundias”)

    In general such areas are characterised by:

    • the presence of large numbers of farm workers and frequent absence of landowners;

    • poor development of the area and serious impediments to players, other than traditional landowners, gaining access to land;

    • a search for legal solutions to overcome such obstacles (agrarian reform in Scotland, “privatisation” and breaking up large estates in the new German Länder);

    • a poor rate of business creation;

    • limited know-how about product processing;

    • housing settlements concentrated in the villages.

    Examples in Europe: certain areas of Scotland; the southern Iberian Peninsula (Andalusia in Spain, Alentejo in Portugal); Sicily; and the new German Länder.


Type 4 - Areas dominated by natural or protected habitat

    Such areas are characterised by:

    • a high proportion of the population working in forestry, fishing or extensive livestock production;

    • diversification towards quality organic and/or natural products;

    • the tourism sector is structured to promote nature and conservation;

    • frequent conflict over the use of resources, sometimes with very strong opposition between the various interest groups;

    • consultation between public and private organisations, formalised by regulations or contractual agreements;

    • networking and inter-territorial cooperation (e.g. federations of nature reserves);

    • scattered housing settlements.

    Examples in Europe: areas in northern Scandinavia; areas where there are nature reserves of long standing (mostly national parks) and others where nature reserves were formed more recently (often regional parks).


Type 5 - Areas geared towards tourist accommodation, based on small- scale facilities

    Such areas are characterised by:

    • small, family-run facilities;

    • a highly consolidated identity and social structure;

    • a large proportion of the working population is involved in tourism, some on a part-time basis;

    • close ties between the various local business sectors;

    • a cottage industry and small- and medium-sized enterprises that have developed to supply local markets (including the tourist market);

    • restrictions on building and demands for infrastructure, considerable community control over the environment and the use of resources and, in some cases, a deliberate policy to limit tourist numbers;

    • intensive use of housing.

    Examples in Europe: alpine areas of Austria and Italy, especially those populated by minorities or communities with a strong identity.


Type 6 - Areas dominated by second homes or residential homes

    Such areas are characterised by:

    • a large proportion of housing devoted to second homes;
    • heavy demand for housing from city-dwellers, retired people and, in some cases foreigners (areas in southern Europe);
    • very little out-of-season tourism development;
    • temporary service activities and/or constant demand for only certain types of service;
    • real estate expansion not always followed by infrastructure development.

    Examples in Europe: certain rural areas in Wales and Scotland; certain areas of southern France; Spain’s Mediterranean coast; and Tuscany in Italy.


Type 7 - Areas whose economy is dominated by small local businesses

    This category covers three different types of situation: areas in which the sectors are not well structured (small businesses with no links between them); areas where, by contrast, the sectors are highly structured (small businesses that are specialised but complement one another); and areas specialised in a single sector.

    The first case includes areas where:

    • a large number of small heterogeneous businesses exist in the area, some for many years;

    • a lack of specialisation which hampers relations between enterprises and prevents them from identifying their needs for services and support policies;

    • mostly local or regional markets.

    Examples in Europe: certain areas of southern Scotland, southern Italy and, more generally, all areas where no business collaboration/competition rationale has been developed.

    By contrast, areas where specialisation facilitates links between enterprises and encourages initiatives involving technology dissemination and business services, there are:

    • large numbers of specialised but complementary small businesses, often existing alongside medium-sized and large enterprises (what is termed “diffuse specialisation” in the case of Italy’s industrial clusters);

    • local training to provide skills and technical specialisations associated with the development of the sector;

    • significant social and territorial cohesion;

    • access to world markets, by competing internationally;

    • a high level of technological innovation permeating the entire sector;

    • however, in some cases also a low standard of management training, due to immediate job opportunities.

    This type of structure is not so common in European rural areas. It is especially characteristic of northern Italy (industrial clusters of Venetia, Lombardy and Frioul) and certain rural areas of France (Tarn, Jura).

    The third type of area is characterised by:

    • small businesses which all specialise in a single product and therefore compete with one another;

    • local vocational training provision but a poor diversity of expertise;

    • access to national and European markets, but the competition to gain access is fierce.

    This category corresponds to areas of small-scale agri-foodstuff production, such as cheese-producing areas (see the example of Bregenzerwald in Austria below) and the vineyards of Italy, Portugal, etc.


Type 8 - Peri-urban areas

    Such areas are faced with:

    • large numbers of commuters;
    • shops and services have to fight competition from metropolitan areas or nearby towns;
    • an inadequate rate of business creation;
    • problems in providing sufficient services to the population;
    • residential housing predominates;
    • the area’s identity is being undermined.

    Examples in Europe: most rural areas situated close to cities.


Type 9 - Areas with elderly populations and/or a high dependency rate

    Such areas are characterised by:

    • economic and social decline reflecting low per capita income and a poor employment rate;

    • significant demographic decline combined with an ageing of the population;

    • problems in the succession/take-over of businesses and farms;

    • poor development of the area, accompanied by a gradual neglect of the architectural and historic heritage and infrastructure;

    • lack of attractiveness and insufficient services to keep young people in the area;

    • a highly dispersed production structure that makes it difficult to bring about the potential multiplier effects generated by public measures;

    • a serious need for public measures to preserve existing businesses and jobs, which are supported chiefly by multiple job holding;

    • difficulties in organising local players.

    Examples in Europe: many mountain areas (except where they have a strong tourism or industrial base); certain areas in inland Spain, Greece and Portugal; Italy’s Mezzogiorno region; certain areas of France, like the Limousin plateaux, Aude, etc.


[1] Garofoli Gioacchino, in Modelli locali
di sviluppo, Franco Angeli Editori, 1991, p65-66.
His variables were: production structure and
corporate structure; origin of entrepreneurs and
capital; markets; business creation dynamic;
employment, social and territorial structure;
local institutions and economic policies.

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