What can Wales learn from the Basque Country?

The Basques arguably enjoy greater policy autonomy than any other sub-national region in Europe. Apart from defence, foreign policy, customs, economic regulation, social security and some large infrastructure projects, which are centralised in Madrid, the Basque Autonomous Community exercises control over all areas. Yet as in most places the story is not a simple one, and the reality is that Basque policy-making takes place in an extremely complex multi-level scenario. Three sub-regional provinces have tax-raising powers, alongside considerable policy competences of their own, and the funding for regional government activities is transferred from the provincial governments. A transfer also goes to the Spanish government to support the areas where they retain policy competences, and local municipal authorities play a key role too in many areas, in particular around the development of the three main Basque cities, Bilbao, Vitoria-Gasteiz and Donostia – San Sebastian.

This complexity of policy-making levels requires considerable coordination and has necessitated innovative governance solutions that are not without their problems. Yet that the Basque Country is seen as a long-term success case in economic development within this context suggests that there are interesting lessons to be learned. In particular, policy has been instrumental in driving a transformation of the economy: from the industrial decline and high unemployment of the late-1970s and early-1980s to industrial renaissance in the 1990s and from there to the consolidation of a diversity of industries that form the base for today’s innovation-oriented policies. It is in this context that the Basque economy has proved far more resilient to the present economic downturn than other Spanish regions.

While a whole range of policy tools across health, education, culture, employment, environment and other domains have combined to foster a strong Basque economy and society, it is the policies supporting the transformation of Basque industry that have drawn most attention internationally. A cornerstone was the early commitment of the newly autonomous government to support an ‘industrial reconversion’, at a time in the 1980s when it was unfashionable to talk about industrial policy. While much of the finance for the reconversion came from central government, it was regional government leaders who worked closely with Basque business leaders to ensure a real commitment to change that would lead to other cornerstones being laid that together would support the progressive upgrading of the competitiveness of Basque industry. For example, as pioneers of cluster policy in the 1990s, a culture of strong public-private partnership was fostered to address specific areas of weakness and to build on strengths. This was coupled with a targeted and evolving science, technology and innovation policy, built initially around technology centres and later around a wider range of institutions that today form the Basque science, technology and innovation network. Throughout, there has also been strong concern with internationalisation, and in particular with supporting the export activity of Basque firms and encouraging in-flows of talent.

So, what are the key lessons that can be drawn from these experiences, and from which Wales might learn? For me, three stand out.

Firstly, the boundaries between which policies work best at different levels are by no means clear-cut. Finding the right mix is a practical question that is highly context specific, but one that also can not easily be separated from the emotional attachment to territory that lies behind a desire for greater autonomy. Science and technology policy provides a good illustration. Regional autonomy has contributed to dynamism and agility in the development of innovative policies that have supported clear regional priorities, in part because different agents have pulled together behind the ‘project’ of the territory. Yet there are scale issues too that make certain regional priorities difficult to sustain in times of crisis and imply that certain infrastructure-intensive projects are more suited to national or European support. The exploitation of synergies across places is also a key consideration, especially if ‘lock-in’ is to be avoided. This means that it is not just a case of having policy autonomy at regional level, but also of how this policy is coordinated with that of other regions; an area where there is considerable room for improvement.

Secondly, the desirable level of policy autonomy cannot be divorced from the level of policy capability (including quality of institutions and stability), or from the desire to exercise that autonomy (which is strongly related to socio-cultural identity). In this respect, the Basque Country has counted on political stability, on strong leaders, and on capable people in government, which has enabled a long term strategy to be followed, guided by certain visionary policies (cluster policy, for example) and supported by strong institutions. Private-public partnership, and in particular the presence of government leaders capable of engaging business and building networks, has been critical. Moreover this has clearly been helped by the economic development of the Basque Country being seen as part of a wider cultural project of identity, with much of the multi-agent commitment being built around Basqueness.

Finally, perhaps what the Basque experience demonstrates above all is that effective economic competitiveness policy goes hand-in-hand with a coherent strategy. Policy supporting the competitiveness upgrading of the Basque economy has been developed in the framework of a long-term and flexible strategy, which has evolved over time and continues to do so. Moreover, the role of leadership in such strategy, emerging in parallel from different sectors of society – government, business, education and so on – illustrates again the importance of the often-forgotten human element in our understanding of what makes for successful economic development.