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Key Factors of Structural Change in North Rhine-Westphalia

Introduction and objectives

Recent years have seen the re-emergence of industrial policies and policies for the promotion of economic activity in both industrialised and developing countries, flanked by regional and national strategies for enhanced integration into increasingly globalised international markets, improved competitiveness and sustainably dynamic economic growth. The growing popularity of these policies is also a reflection of recent currents in international economic debate, notably the argument that the recipes for stability staunchly championed by neo-liberals, which gave rise to the Washington Consensus in the early eighties, need to be complemented by more committed policies designed to strengthen international competitiveness.

A number of international bodies, such as the OECD, the ILO, the UN institutions, the WTO and the World Bank itself, are currently pushing more emphatically for frameworks of exchange and promoting comparisons of experience and best practice in matters such as attracting investment and business, promoting R&D and technological transfer, stimulating clusters and business networks, incentives for start-ups and entrepreneurship. There is a recognition that the success of particular policies will inevitably depend on the economic, political and social context in which they are applied, and also on the structural challenges which the national or regional economy concerned should be or has been confronting.

The German Federal State of North Rhine-Westphalia (henceforth NRW) is a particularly interesting case for at least three reasons. First, huge areas within this territory — such as the Ruhr and Aachen — have undergone radical industrial conversion over the last decades, thereby responding to a need for new competitive products and services to counter the definitive decline of the formerly hegemonic cluster consisting of coal, steel and mechanical engineering which had powered the economy in these areas from the mid—19th century until the early 1960s.

The second reason is that over the last thirty years the State government, drawing on resources of its own boosted by local, Federal and European funds, has actively promoted the restructuring of the regional economy by means of a sweeping communication strategy, a broad range of instruments and initiatives to promote industry, subsidies, and political and financial support for the creation of public—private institutions which have enriched the region's "meso—economic" framework, generating exchanges with the public apparatus at state, regional and local levels but also with employers' associations and trade unions, and furthermore providing a new spectrum of support services adapted to the needs of business.

A third factor which makes NRW especially interesting as a case study is the degree and nature of decentralisation which has been achieved by these economic development policies. Due to the socio—cultural make—up of this territory, the process of conversion and economic stimulation has entailed vigorous dialogue between geographically dispersed players. Decentralisation from state to regional and local level is most obvious in relation to operational decision—making and the capacity to provide it, but these local structures have clearly acquired a status which goes well beyond the implementation of policies adopted and passed down by the state government. In addition, they have been endowed with various technical mechanisms of their own, such as forums where views are exchanged and projects prioritised, combined with a close—knit network of autonomous institutions able to provide the financial management and engineering to advance projects by drawing on funding from every administrative tier.

This does not mean that structural transformation within NRW is now complete and its success firmly established. There are still high rates of unemployment, notably in the Ruhr Area, home to a third of NRW's population. Indeed, most economic growth indicators are still below the national average. Coal mining still receives considerable subsidies enabling it to survive, even though it has lost its competitive edge and has been cut back dramatically. Likewise, some of the policies and initiatives pursued in recent years are debatable, both conceptually and empirically, in terms of their efficiency and effectiveness.

This article will not attempt to describe in detail the industrial promotion policies pursued by the State within the framework of its strategy for structural change. Rather, it will present the author's impressions from the perspective of a visitor with a certain expertise in the field of industrial policy, but nevertheless a total stranger to the territorial, economic and socio—cultural context of structural transformation in NRW. I shall try to systematise these impressions, to identify the fundamental features, and to formulate some questions and reflections which may help us to understand more precisely how this strategy has progressed, what results it has achieved to date, how it is likely to continue and what challenges remain unsolved.

To these purposes I have divided the paper into four sections. To begin, I shall briefly explain the causes and principal economic effects of the decline in the traditional industries and describe the strategies adopted by the leading companies in this coal/steel/metalworking cluster, hoping thereby to convey the magnitude of the structural crisis which arose in the regional economy and the categorical need for conversion.

In the second section I shall summarise the main thrust of the ensuing strategy for structural change, highlighting three factors which, in my view, can be regarded as the constituent elements of this strategy: the sheer magnitude of the challenge, the active leadership role assumed by the State government and how this has evolved over the years, and the impact which globalisation and Europeanisation have had or are likely to have in future on the internal and external conditions of transformation.

The third section raises some lines of argument with regard to as yet unresolved aspects of the strategy for structural change in NRW. These relate first and foremost to the activation of a meso—economic network within a highly decentralised environment with open institutional redundancies which affect the dynamics and intensity of the whole process and, secondly, to the need to allocate new roles and initiate mechanisms and communication channels aimed at monitoring and evaluating the impact of the structural policies adopted, with a view to ensuring their relevance and optimising the volume of resources mobilised towards this goal, given the complex weave of institutions involved in implementation.

Finally, in the fourth section I will outline the principal lessons which I believe can be drawn from the NRW experience, both in consolidating the future strategy and in designing and implementing economic development policies in countries facing the challenge of industrial modernisation and competitive credentials, with particular reference to Chile.

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