Global Imbalances and EU Core Periphery Division: Institutional Framework and Theoretical Interpretations
1. IntroductionThis article places the core periphery division in the European Union (EU) within the framework of global imbalances and the dramatic geopolitical changes which have affected them in the past decades. These changes, which have been shaping the new world order, amount to (Dunford and Yeung 2011; Wolf 2011; Labrianidis, Kalantaridis, and Dunford 2011; Smith 2013; Laurent 2013) the restructuring of developed economies with the engulfing of manufacturing by the financial sector; the shift in the geography of industrial activity resulting from the increased outsourcing and offshoring of production and increasing services a substantial part of the operations of multinational corporations; the transfer of competitiveness, as a result of this delocalization, from the West to the East, to dynamic Asian economies, notably China; the emergence of chronic trade and financial imbalances in the global system, leading to the "debt fuelled growth" of many advanced economies. The above developments, facilitated by market liberalization reforms and enhanced by the financial crisis of 2008, threaten economic and political dominance of the West, particularly the US, and therefore the existing core periphery pattern. The new world division had a profound impact on EU economies, where a similar pattern of developments has been taking place, putting the old division between core and peripheral countries within Europe itself into question (Pickles and Smith 2011; Smith 2013) Within the above framework, a hot debate on an academic and political level has developed, and a number of theoretical approaches challenging the conventional, neoclassical, economic approach have emerged.The article is structured as follows: In the second section, changes in global production and trade flows, leading to the convergence process described above and gradually setting the scene for a new geopolitical order, are briefly presented. Particular emphasis is given to the phenomenon of delocalization of economic activities of Western economies, which underlines most of the ongoing developments. Section 3, using mostly data from official Community sources, provides evidence on (1) regional imbalances reflecting the existing core periphery pattern in the EU and the degree of convergence achieved at a member state and regional level before and during the current economic crisis; (2) the "catching up" of Central and Eastern European Countries (CEECs) and the factors underlying it which shows this group's dynamism and resilience during the crisis. A brief discussion on the differences and similarities between eastern and western periphery of the EU follows in section 4, combined with reference to the prevailing views on the roots of the European crisis and its impacts on the two peripheries. The overall role of the EU Cohesion Policy (CP) in this context is also discussed briefly. While the absence of the regulatory role of the state in the neoliberal era is generally thought to be the major factor of inequalities in space, the fifth section of this article emphasizes the stronger state intervention which takes place both in the domestic sphere and through the increased power and significance of international institutions and supranational arrangements in managing conflicts among hegemonic states and maintaining or shifting core periphery patterns. Searching the appropriate theoretical framework to interpret ongoing changes at global and EU levels, the sixth section briefly presents some characteristic theories of the "disequilibrium" stance (as opposed to the "equilibrium" in space assumed by neoclassical economists) referring to older and newer unequal development and location theories. It focuses on the most recent of these, Krugman's New Economic Geography (NEG) theoretical framework, stressing its relationship and similarities with the "cumulative causation school," Wallerstein's analysis of the capitalist world system and Harvey's approach on unequal geographical development and the "spatial fix.