The cost of non-rurality – preparing for a better urban-rural balance in EU funding

A balanced urban-rural policy is central to successful regional development efforts. There have been several definitions of what could constitute an urban-rural balance (or imbalance), yet measures of actual ‘costs of non-rurality’ remain elusive.

Since the Industrial Revolution, debates on this ‘balance’ centred on the shift from agricultural labour to industrial and service centres. This shift yielded economic growth but also production efficiencies in agriculture.

However, the shift to industry and services meant an accelerated agglomeration process of city populations, attracting a workforce from all sectors of the rural economy and leading to the loss of population and a process of ageing in a large percentage of rural areas. In turn, this led to a fall in public services, such as schools, medical facilities and public transport, due to the high costs in proportion to the population served.

Over time, many settlements lose viability and eventually the depopulation of rural areas reaches a point where the socio-economic net benefits of the shift are no longer assumed to be positive. There are increasing concerns emerging on the wider costs caused by the social, environmental and cultural decline in these areas on the one hand, and the mounting pressures from urban sprawl on the other.

The EU Treaties make it clear that strengthening economic, social and territorial cohesion is a key EU objective. Consequently, the Union devotes a considerable share of its budget to achieving this goal. Cohesion policy is the main vehicle to support lagging regions, while rural development per se seems firmly lodged in the realm of the Common Agricultural Policy (CAP).

Rural areas represent some 80 % of the EU’s territory and 30 % of its population. They perform critical societal functions and provide a range of public goods. Rural renewable energy production, tourism, recreational activities and food production benefits urban areas as well. They are therefore instrumental for achieving some of the EU’s headline ambitions – for instance the digital and green transitions. However, investments in rural areas are still perceived as less profitable, simply because the costs of providing these investments are larger per capita compared to densely populated areas, and because the benefits of reducing their further decline are not accounted for, namely the associated social costs.

This report aims to contribute to the debate on EU rural development policy by presenting a methodology to understand the net costs and benefits of investing in rural areas to society as a whole. By doing so, it asks whether rural depopulation is just a rural problem or whether the consequences have a bearing on all of us, and in particular on urban areas.

This paper thus seeks to look at the trends and impacts of changes in rural areas on society, the economy in general and on urban centres. It explores two fundamental questions:

• How do we estimate the overall value of the costs and benefits of these developments?

• How do we improve policies that specifically concern rural areas?

Over the course of the 21st century, new technologies have the potential to change the urban-rural balance, in essence benefitting both. However, this is only possible if the dynamics and the key factors driving or reversing depopulation are well understood.

The report first analyses key trends and reviews studies on territorial development, identifying the drivers. It also develops a concept of rural balance and the costs of imbalances to then identify a methodology to calculate the costs associated with rural decline. Finally, it analyses the policy implications to draw conclusions.