What diagnosis for Europe's ailing regions?

It is not so long ago that policy makers thought that excessive regional disparities would disappear automatically in the long run. Arbitrage possibilities arising from competition and factor mobility were expected to induce a more than average growth performance in lagging regions. Having the economic engine in a higher gear would eventually make these regions reach the standard of living realised elsewhere. Where convergence was not swift enough, most likely this could be accelerated by increasing public infrastructure. Governments responded by pouring huge quantities of concrete in lagging regions. These views have recently changed. Indeed, fifty years of costly regional policies in the post-war period have led to not much more that the status quo (see Quah, 1996 and 1997). Over the most recent decades, for instance, income inequality among European regions has remained rather constant from an aggregate point of view. This is discussed further in EIB Papers, Volume 5, Number 2 ('Regional convergence in Europe: Theory and empirical evidence'). Some economists are now taking this as the natural, or at least as the global-capitalist order of things: the rich get richer and so do the poor, but without ever catching up.