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‘Make it Matter’: Funds and Folly in the European Recovery by Carlos Perona Calvete

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‘Make it Matter’: Funds and Folly in the European Recovery

Every so often, my YouTube feed recycles an advertisement by the European Commission for its economic recovery package, ‘Next Generation EU’ (NextGen). Riding the wave of ’80s nostalgia, it uses the block-pixel aesthetic of vintage video-games and an 8-bit soundtrack to deliver its point.

In the full version of the ad, the message “Make it Safe, Strong, Green, Blue, Yellow,” flashes across the screen. From imagery related to the climate and clean oceans, we shift to a rainbow flag, accompanied by the message “Make it for Everyone,” before the optimistic “Make it Fast” and “Make it Real” appear. We see vaccine syringes and a nurse and young adults in the throes of gap-year, backpacking enthusiasm—but the words employment, jobs, family, house, as well as other bedrocks of most people’s long-term plans are conspicuously absent.

The European Commission’s promotional material makes ‘Next Generation EU’ comes across as oddly remote from the task of actually facilitating Europe’s next generation. Nor is it meant for a specialized audience, as it lacks any reference to how one might actually procure the product being advertised—namely, funding. I don’t know how popular this campaign is, because YouTube doesn’t display the dislike bar anymore and comments on the video are disabled, but I can only assume they are disabled for a reason.

Unfortunately, the above may belie a genuine lack of focus for these EU funds, while the Commission’s marketing ‘style’ is consistent with the prominent role consultancy is already playing at the European level. To fill in the blanks: in the coming years, the global economy will receive an injection of a couple trillion new euros following the Commission’s current Multiannual Financial Framework (MFF) and the NextGen recovery package.

To this end, the EU is set to become the world’s top emitter of debt, issuing ‘eurobonds’ to the global financial markets in order to borrow the required sum. Recovery from the economic slowdown caused by quarantines will be framed in terms of Europe’s ‘green’ and ‘digital’ transitions, for no crisis should go to waste. For instance, at least 37% of the Recovery and Resilience Facility will be allocated to climate investment and reform, with another 20% earmarked for digital transformation.

Of course, new realities require new know-how. Any recovery that proceeds on the basis of new technologies (5G, IoT, Cybersecurity, Cloud Computing, Open Data, and so on) and new requirements (including the ‘do no significant harm’ rule, wherein every project must be justified in terms of its environmental impact, such as its projected carbon footprint) is by definition non-inclusive, and cannot help but marshal up a class of expert-intermediaries.

Even apart from a lack of in-house knowledge of the new technologies and calculations involved, would-be recipients, especially smaller municipalities, will find it difficult to keep up with available opportunities and navigate the application process, which can be cumbersome and will require dedicated staff. Indeed, it is also the case that numerous open calls for projects on the Commission’s website have not been translated to the EU’s official languages (in the case of the MFF). Some of this money will, therefore, unavoidably be siphoned off to consultants, mainly by way of the “Technical Assistance” component of each fund, and there is pressure on both private-sector consultants and public sector entities to come to grips with European as well as national guidelines and priorities as soon as possible, for all NextGen funds are to have been made available to the recipient by 2023.

Not only do local governments need advising, but national authorities as well. In this context, we may focus on the countries set to receive the largest amounts from NextGen: Spain and Italy.

Spain’s national ‘Recovery, Transformation and Resilience Plan’ integrated recommendations from KPMG and Price Waterhouse Coopers (PwC), while also basing its Royal Decree-law (36/2020) concerning the reform of public procurement upon recommendations co-authored by PwC. In addition, Deloitte has been hired to advise the Spanish Ministry for Ecological Transition and Demographic Challenge.

In the Italian case, the former head of the European Central Bank and current Prime Minister, Mario Draghi, hired McKinsey & Company to help write his country’s ‘Recovery and Resilience Plan,’ defining how it will spend the 209 billion euro assigned to it. It is one thing for local, or at least EU-based, consultants to advise the public sector, but the involvement of large, foreign consultancies naturally raises doubts, even if these entities often hire locally.

Apart from benefitting consultants, the EU’s funds will also find their way into the coffers of foreign companies entrusted with developing vital infrastructure. This is unavoidable and not itself a problem, but the degree to which these investments can be absorbed and retained depends on how developed an economy is in a given sector. The fact remains that much of the work will be contracted out, although it does seem Huawei, at least, will be largely excluded from the EU’s 5G rollout, despite having participated in city-level pilots. This is no traditional Keynesian jobs program, nor is it a protectionist attempt at shielding native industry. In this sense, we are witnessing a recovery package for the world, not just the EU, and one that will likely be particularly generous to the bigger players.

Leaving consulting fees aside, investments in new green and digital infrastructure may well register as an economic boon, but the political assumption that it will be cost-neutral for citizens is unrealistic. The question is whether associated longer-term costs incurred by the citizenry will be offset by economic dynamism and the creation of (properly remunerated) employment, especially given the difficult position in which many have been left as a result of the quarantines. Indeed, it is far from clear that the ‘green recovery,’ for example, will be a job-creating one. 

We may argue that other investments will produce the economic rising tide on which green initiatives can sail but, even here, the emphasis is often naively on creating employment via the proliferation of small and medium-sized enterprises (SMEs) that can latch on to new technological infrastructure. This idea, partially evocative of the myth of Silicon Valley, ignores that those SMEs that finally attain a position of relative dominance to become bigger employers usually do so with public sector help, especially if they go on to compete internationally.

The issue of employment is further aggravated by the fact that NextGen allows its recipients a period in which to react, again, given that all funds must have been made available by 2023, that it severely arrests the ordinary funds of the MFF, as most administrations simply do not have the time or staff to address both. Yet it is precisely the MFF that includes a sizeable investment for jobs and growth through its European social and regional development funds: the European Social Fund (ESF) and the European Regional Development Fund (ERDF).

As for the more intangible or long-term objectives of NextGen, it is worth remembering that EU funding priorities follow the UN’s Sustainable Development Goals (SDGs), but we do not yet know (or have not yet decided) what SDG achievement looks like, much less which specific actions correlate with it. We are still at the experimental phase with regard to, for example, measuring the environmental impact of specific projects. Measuring the advantages of greening is an ambiguous business, although there are, of course, certain actionable priorities, such as renovating buildings and thereby increasing energy efficiency, that present tangible benefits. These do allow us to measure a financial return on investment.

The problem with the current approach to green infrastructure, however, is not just that it is not really concerned with economic value of the sort that would clearly benefit citizens—which would actually be fair enough if the situation was dire and ecological collapse really was looming—but also that it is not principally concerned with the environment either. It wants to dig itself out of a hole; that is, invest more, build more, do more, in order to impact the environment less. Why? Because its aim is economic, albeit to the benefit of the global market forming around a high-tech, green-branded sector. 

In fact, we risk updating aged infrastructure in ways that are at odds with our stated aims, not only with regards to the environment and social wellbeing, but also economic efficiency. One useful end towards which that one-third of the NextGen’s two trillion euro earmarked for the EU’s ‘Green Deal’ could be allocated is compensating companies that have absurdly invested in massive office spaces. These businesses could instead be incentivized to allow their employees to continue working from home. Ridding Europe of the electricity consumption of these buildings and the pollution that results from commuting would surely provide a greater benefit than renovating these buildings to be more energy efficient or burdening the public with congestion charges. We might even convert these buildings into parks and houses.

Meanwhile, remote working might improve our family life, reduce stress, and ultimately remove strain from the healthcare system. It may also render us more productive, and even allow people to come up with new ideas that add value to the economy, as creative thought is often hindered by excessively narrow performance parameters. Working from home could be combined with incentives to move to the countryside, given that investments are already being made to increase internet connectivity in those regions. Such an arrangement is ripe for the taking, as most companies have familiarized themselves with remote working during the previous quarantines. This is something of a cliché by now—it is constantly discussed, even if it remains offensive to much of the managerial class. 

It is precisely such an arrangement that might function to redeem the limitations of the EU’s current funding period. It would likely facilitate job creation, as it allows for greater flexibility in matching employer and employee without regard to geography. Further, that vast swath of master’s degree-wielding young professionals who compete for positions in the expensive urban centers of Europe, all the while nursing ‘back to the land’ fantasies, would find a lower cost of living and healthier environment in which to start a family. This is one proposal among a potential myriad of ideas, but just as there is much that could go wrong with the present direction of things, there is also much that could be redirected, if there is enough will to do so.

Carlos Perona Calvete has a background in International Relations and Organizational Behavior, and has worked mainly in the field of European project management and policy research.

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