Development strategies and economic growth in a changing world

1. Development strategies and economic growth in a changing world Andrés Rodríguez-Pose Department of Geography and Environment London School of Economics Newcastle University 17 June 2009

2. Three challenges • Forces of change • Globalization • Urbanization • Decentralization • Leading to greater territorial inequality • To the formation of new development strategies

3. Globalization: rise in trade 250 200 150 Agriculture Index 1990 = 100 Manufacturing 100 50 0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 year Trade in both agricultural and manufacturing goods has been increasing in the last decades Source: Own elaboration from World Trade Organization Module 1: The relevance of LED today

4. Sectoral shift 2 1 . 8 1 . 6 1 . 4 1 . 2 Brazil 1 Ratio China 0 . 8 India Mexico 0 . 6 USA 0 . 4 0 . 2 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Year Agricultural to industry export ratios in selected countries show that: The importance of agricultural exports has been declining compared to industrial goods • Source: Own elaboration from Comtrade, United Nations Statistics Division data Module 1: The relevance of LED today

5. Urbanization 90 80 70 60 50 40 30 World East Asia and Pacific 20 Middle East & North Africa South Asia 10 Sub - Saharan Africa Europe & Central Asia Latin America & Caribbean 0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Urban population as a percentage of total population has been increasing in all areas of the world, though not at the same pace Source: from World Development Indicators (World Bank 2005) Module 1: The relevance of LED today

6. Urbanization and wealth There is a positive association between the degree of urbanization and a country’s wealth Source: Own elaboration World Bank data Module 1: The relevance of LED today

7. Decentralization: the world ca. 1970 Red: High level of decentralization Orange: Moderate decentralization Yellow: Low or partial decentralization Blue: Decentralization on paper

8. The world in 2009 Red: High level of decentralization Orange: Moderate decentralization Yellow: Low or partial decentralization Blue: Decentralization on paper

9. The consequence: rising disparities Moderate rise in disparities, weighted by population (1970-2005) In the EU

10. Rising disparities (II) Moderate rise in disparities, weighted by population (1970-2005) But also in the rest of the world

11. Rising disparities (III) Rapid rise in disparities, weighted by population (1970-2005) In new member states

12. Rising disparities (IV) Rapid rise in disparities, weighted by population (1970-2005) But also in western Europe

13. Rising disparities (V) Stability, weighted by population (1970-2005) In the EU

14. Rising disparities (VI) Stability, weighted by population (1970-2005) But also in the rest of the world

15. Declining disparities Declining disparities, weighted by population (1970-2005)

16. Emergence of a new territorial structure • Nation-states struggling to cope with the changes • Globalisation affecting different subnational spaces in different ways • Primate cities • Intermediate city-regions • Rural areas • Ability of the nation-state to provide suitable development strategies top-down undermined

17. Globalization and development strategies • Traditional development strategies are struggling in this new, more heterogeneous, context • Key characteristics of traditional development strategies are: • Sectoral rather than territorial approach • Top-down rather than mixed or bottom-up approaches • Tendency to focus on large infrastructure or industrial projects… • Often to the detriment of human capital and innovation • Financial support, incentives, and subsidies as key elements of the strategy • These elements are becoming too rigid for today’s evolving context • And often favouring the core at the expense of the periphery

18. Searching for alternatives/complements • Experimentation with alternative approaches: • Territorial • Integrated • Focusing on institutions and governance • Emphasis on sustainability and on the generation of quality work • Locally owned strategies in cooperation with local, regional, national, and international actors • Local Economic Development (LED), aka local and regional development

19. What is LED? • LED is a locally-owned, participatory development process in a given territory • It encourages partnership arrangements between local private and public stakeholders • It enables the joint design and implementation of a common development strategy • It aims to stimulate economic activity and create quality employment

20. Core values • The LED approach seeks to promote: • An inclusive policy process • Equality and representation for all local stakeholders • Formal and informal opportunities for voice and social dialogue • A balanced development strategy with a strong focus on sustainable development and employment

21. LED Territorial approach to development Bottom-up promotion of development from below in all territories Decentralized, cooperation between local public and private bodies Focus on maximizing local economic potential Traditional Sectoral approach to development Top-down approach; centre decides where and how to intervene Managed by the central administration Focus on large industrial projects and financial incentives to attract activity LED versus traditional strategies

22. LED Focus primarily on economic development and decent work Initiated by broad coalitions, including governments, local stakeholders, and international organizations All encompassing approach, involving local firms, residents and social, and political groups Community development Focus on social issues, such as poverty and social exclusion Initiated by a variety of actors, often NGOs or international organizations Seeks to involve primarily previously excluded groups and the poor Local economic vs community development

23. How is this achieved? • Through a balance between strategies and institutions Institutions Strategy

24. Institutions and development strategies 1 2 3

25. Key elements in the strategy DEPENDENCE INWARD INVESTMENT RISK RISK SUBSIDIES TO NON COMPETITIVE FIRMS ROOTING ECONOMIC ACTIVITY HUMAN RESOURCES MIGRATIONBRAIN DRAIN LOCAL FIRMS INFRASTRUCTURE RISK RISK ACCESS BY COMPETITORS

26. What is happenning in Europe? • LED slowly taking hold in the continent • In many cases Europe can be regarded as a pioneer • Third Italy (Emilia-Romagna, Veneto, Tuscany, some districts in Apulia) • Baden-Württemberg (Germany) • Jutland (Denmark) • Mixed urban clusters (e.g. Basque Country, Scandinavian capitals, Stavanger region in Norway)) • Very diverse strategies • But that bring dynamism areas that were often stagnant, declining, and/or suffered from serious social problems • And provide an insurance against economic decline • LED may not be a panacea, but it seems to provide new options to parts of Europe and the rest of the world where traditional policies had become exhausted

27. Development strategies and economic growth in a changing world Andrés Rodríguez-Pose Department of Geography and Environment London School of Economics More information in http://personal.lse.ac.uk/rodrigu1/

28. Discussion Professor Andy Pike Paul Mooney, Chief Economist