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

Development strategies in a changing world Andrés Rodríguez-Pose 1 Three challenges  Forces of change 1.Globalization 2.Urbanization 3.Decentralization  Leading to greater territorial inequality  To the formation of new development strategies

Development strategies in a changing world Andrés Rodríguez-Pose 2 Globalization: rise in trade Module 1: The relevance of LED today Trade in both agricultural and manufacturing goods has been increasing in the last decades Source: Own elaboration from World Trade Organization

Development strategies in a changing world Andrés Rodríguez-Pose 3 Sectoral shift Module 1: The relevance of LED today 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

Development strategies in a changing world Andrés Rodríguez-Pose 4 Urbanization Module 1: The relevance of LED today Source: from World Development Indicators (World Bank 2005) Urban population as a percentage of total population has been increasing in all areas of the world, though not at the same pace

Development strategies in a changing world Andrés Rodríguez-Pose 5 Urbanization and wealth Module 1: The relevance of LED today Source: Own elaboration World Bank data There is a positive association between the degree of urbanization and a country’s wealth

Development strategies in a changing world Andrés Rodríguez-Pose 6 Red: High level of decentralization Orange: Moderate decentralization Yellow: Low or partial decentralization Blue: Decentralization on paper Decentralization: the world ca. 1970

Development strategies in a changing world Andrés Rodríguez-Pose 7 Red: High level of decentralization Orange: Moderate decentralization Yellow: Low or partial decentralization Blue: Decentralization on paper The world in 2009

Development strategies in a changing world Andrés Rodríguez-Pose 8 The consequence: rising disparities Moderate rise in disparities, weighted by population ( ) In the EU

Development strategies in a changing world Andrés Rodríguez-Pose 9 Rising disparities (II) Moderate rise in disparities, weighted by population ( ) But also in the rest of the world

Development strategies in a changing world Andrés Rodríguez-Pose 10 Rising disparities (III) Rapid rise in disparities, weighted by population ( ) In new member states

Development strategies in a changing world Andrés Rodríguez-Pose 11 Rising disparities (IV) Rapid rise in disparities, weighted by population ( ) But also in western Europe

Development strategies in a changing world Andrés Rodríguez-Pose 12 Stability, weighted by population ( ) Rising disparities (V) In the EU

Development strategies in a changing world Andrés Rodríguez-Pose 13 Stability, weighted by population ( ) Rising disparities (VI) But also in the rest of the world

Development strategies in a changing world Andrés Rodríguez-Pose 14 Declining disparities, weighted by population ( ) Declining disparities

Development strategies in a changing world Andrés Rodríguez-Pose 15 Emergence of a new territorial structure  Nation-states struggling to cope with the changes  Globalisation affecting different subnational spaces in different ways 1.Primate cities 2.Intermediate city-regions 3.Rural areas  Ability of the nation-state to provide suitable development strategies top-down undermined

Development strategies in a changing world Andrés Rodríguez-Pose 16 Globalization and development strategies  Traditional development strategies are struggling in this new, more heterogeneous, context  Key characteristics of traditional development strategies are: 1.Sectoral rather than territorial approach 2.Top-down rather than mixed or bottom-up approaches 3.Tendency to focus on large infrastructure or industrial projects… 4.Often to the detriment of human capital and innovation 5.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

Development strategies in a changing world Andrés Rodríguez-Pose 17 Searching for alternatives/complements  Experimentation with alternative approaches: 1.Territorial 2.Integrated 3.Focusing on institutions and governance 4.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

Development strategies in a changing world Andrés Rodríguez-Pose 18 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

Development strategies in a changing world Andrés Rodríguez-Pose 19 Core values  The LED approach seeks to promote: 1.An inclusive policy process 2.Equality and representation for all local stakeholders 3.Formal and informal opportunities for voice and social dialogue 4.A balanced development strategy with a strong focus on sustainable development and employment

Development strategies in a changing world Andrés Rodríguez-Pose 20 LED versus traditional strategies 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

Development strategies in a changing world Andrés Rodríguez-Pose 21 Local economic vs community development 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

Development strategies in a changing world Andrés Rodríguez-Pose 22 How is this achieved?  Through a balance between strategies and institutions StrategyInstitutions

Development strategies in a changing world Andrés Rodríguez-Pose 23 Institutions and development strategies 1 2 3

Development strategies in a changing world Andrés Rodríguez-Pose 24 Key elements in the strategy ROOTING ECONOMIC ACTIVITY INWARD INVESTMENT HUMAN RESOURCES LOCAL FIRMS INFRASTRUCTURE DEPENDENCE ACCESS BY COMPETITORS SUBSIDIES TO NON COMPETITIV E FIRMS MIGRATION BRAIN DRAIN

Development strategies in a changing world Andrés Rodríguez-Pose 25 What is happenning in Europe?  LED slowly taking hold in the continent  In many cases Europe can be regarded as a pioneer 1.Third Italy (Emilia-Romagna, Veneto, Tuscany, some districts in Apulia) 2.Baden-Württemberg (Germany) 3.Jutland (Denmark) 4.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

Development strategies and economic growth in a changing world Andrés Rodríguez-Pose Department of Geography and Environment London School of Economics More information in

Development strategies in a changing world Andrés Rodríguez-Pose 27 Discussion Professor Andy Pike Paul Mooney, Chief Economist