1. The need for local economic development in a globalised world Andrés Rodríguez-Pose Department of Geography and Environment London School of Economics The Programme for Local Economic Development in Jordan (PLEDJ) Sheraton Hotel, Amman, Jordan 24 th March 2011

2. LED in a globalised world Andrés Rodríguez-Pose Page 1 Thomas Friedman 1.Journalist (NYT) 2.Writer 3.3 times Pulitzer Prize winner 4.Guru of Globalisation

3. LED in a globalised world Andrés Rodríguez-Pose Page 2 The world is flat The impact of globalisation (Freedom) 1.Freedom of movement 2.Freedom to adopt best practices 3.Freedom for innovation and creativity to flow 4.Freedom to create your own global and individual supply chains

4. LED in a globalised world Andrés Rodríguez-Pose Page 3 Net result A better world A world where people and places are better off 1.Empowerment 2.Access to higher quality and cheaper goods 3.Better, easier and cheaper connection to friends and family abroad 4.Greater capacity to innovate without having to migrate The world is changing for the better

5. LED in a globalised world Andrés Rodríguez-Pose Page 4 But is this true? Places Bangalore Hub for ITC, software, aerospace.. Clothing and footware Silicon Valley of India: Infosys, Wipro Third largest concentration of millionaires in India Singapore Huge trade hub Dynamic and diversified manufacturing sector Business service centre $30,000 GDP per head No unemployment Triangolo del Salotto Dynamic producer of sofas, armchairs and coffee tables 500 very competitive exporting firms High quality at low prices It all started in 1983!

6. LED in a globalised world Andrés Rodríguez-Pose Page 5 But is this true? Places (II) Detroit Dependence on autoindustry made it vulnerable High unemployment rate More than one third of its residents below the poverty line Asturias Still reliant on large public owned firms… In unprofitable sectors: coal mining, steel, shipyards Rapid decline from one of the richest to one of the poorest in Spain Gansu Specialised in mining and heavy industries But struggling to adapt to changes and keep pace with the rest of China One of the poorest provinces Migration Environmental problems

7. LED in a globalised world Andrés Rodríguez-Pose Page 6 But is this true? People Nitesh Shetty From middle-class, aspiring tennis player… To owning 4,000 apartments in Bangalore David Beckham From talented aspiring football player at Man Utd academy… To global icon Joao Rocinha, Brazil Absent father Mother abandoned North East for a better life in Rio Struggling with menial jobs and occasional scavenging

8. LED in a globalised world Andrés Rodríguez-Pose Page 7 But is this true? People (II) Wen From rural village in Guandong province… To swetshop in Shenzhen Andrés Alternative between a live in a cosy Spanish university… Or London

9. LED in a globalised world Andrés Rodríguez-Pose Page 8 Globalisation and its implications There are winners and losers from globalization Our perception about whether there are more winners or losers will depend on: 1.Our sources of information 2.Our frame of reference 3.Our ideology and economic interests 4.The way we measure things Hence, globalisation offers opportunities and threats Need to make the most of the opportunities And to minimise the threats But need to act strategically and to plan in advance… Rather than wait for a crisis and events to take over

10. LED in a globalised world Andrés Rodríguez-Pose 9 Three challenges Globalization Urbanization Decentralization Leading to greater territorial inequality

11. LED in a globalised world Andrés Rodríguez-Pose 10 Globalization: rise in trade Trade in both agricultural and manufacturing goods has been increasing in the last decades Source: Own elaboration from World Trade Organization

12. LED in a globalised world Andrés Rodríguez-Pose 11 Sectoral shift 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

13. LED in a globalised world Andrés Rodríguez-Pose 12 Urbanization 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

14. LED in a globalised world Andrés Rodríguez-Pose 13 Urbanization and wealth Source: Own elaboration World Bank data There is a positive association between the degree of urbanization and a countrys wealth

15. LED in a globalised world Andrés Rodríguez-Pose 14 Red: High level of decentralization Orange: Moderate decentralization Yellow: Low or partial decentralization Blue: Decentralization on paper Decentralization: the world in 1970

16. LED in a globalised world Andrés Rodríguez-Pose 15 Red: High level of decentralization Orange: Moderate decentralization Yellow: Low or partial decentralization Blue: Decentralization on paper The world in 2011

17. LED in a globalised world Andrés Rodríguez-Pose 16 Moderate rise in disparities, weighted by population (1970-2005) In Europe The evidence: Rising disparities

18. LED in a globalised world Andrés Rodríguez-Pose 17 Rising disparities (II) Moderate rise in disparities, weighted by population (1970-2005) But also in the rest of the world

19. LED in a globalised world Andrés Rodríguez-Pose 18 Rising disparities (III) Rapid rise in disparities, weighted by population (1970-2005) In new member states of the European Union

20. LED in a globalised world Andrés Rodríguez-Pose 19 Rising disparities (IV) Rapid rise in disparities, weighted by population (1970-2005) But also in western Europe

21. LED in a globalised world Andrés Rodríguez-Pose 20 Stability, weighted by population (1970-2005) Rising disparities (V) In Europe

22. LED in a globalised world Andrés Rodríguez-Pose 21 Stability, weighted by population (1970-2005) Rising disparities (VI) But also in the rest of the world

23. LED in a globalised world Andrés Rodríguez-Pose 22 Declining disparities, weighted by population (1970-2005) Declining disparities

24. LED in a globalised world Andrés Rodríguez-Pose 23 Emergence of a new territorial structure Greater competition among firms, cities, and territories 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

25. LED in a globalised world Andrés Rodríguez-Pose 24 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 todays evolving context

26. LED in a globalised world Andrés Rodríguez-Pose 25 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

27. LED in a globalised world Andrés Rodríguez-Pose 26 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

28. LED in a globalised world Andrés Rodríguez-Pose 27 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

29. LED in a globalised world Andrés Rodríguez-Pose 28 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

30. LED in a globalised world Andrés Rodríguez-Pose 29 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

31. LED in a globalised world Andrés Rodríguez-Pose 30 How is this achieved? Through a balance between strategies and institutions InstitutionsStrategy

32. LED in a globalised world Andrés Rodríguez-Pose 31 Key elements in the strategy ROOTING ECONOMIC ACTIVITY INWARD INVESTMENT HUMAN RESOURCES LOCAL FIRMS INFRASTRUCTURE DEPENDENCE ACCESS BY COMPETITORS SUBSIDIES TO NON COMPETITIVE FIRMS MIGRATION BRAIN DRAIN

33. LED in a globalised world Andrés Rodríguez-Pose 32 Types of LED programmes Property-based strategies Business support programmes Skill and human resource approaches Combination of different approaches

34. LED in a globalised world Andrés Rodríguez-Pose 33 Property-based strategies Assumes constraint to growth is provision of affordable space Manifestations include: 1.Incubators 2.Science parks 3.Managed work spaces 4.Export processing zones, etc. Disadvantages: 1.What is convenient can win out over what is needed for growth 2.There is limited evidence of impact of this type of approaches in many emerging countries on their own 3.Some of them may create excessive dependency

35. LED in a globalised world Andrés Rodríguez-Pose 34 Business support programmes Assumes businesses have insufficient managerial or other expertise to grow on their own, that they need expert advice Promote business coalitions, clusters and similar Help tailor innovation, innovation reception, commercialisation, skills, training and similar programs Set up a one-stop-shop for business assistance, such as Business Link Dangers: 1.The perils of generalism - loss of focus on providing specific services well 2.Parachuting in experts

36. LED in a globalised world Andrés Rodríguez-Pose 35 Skills and human resources Assumes businesses dont have skills to compete/ prosper/survive Industry-education alliances 1.Danish Ministry of Educations Action plan for promoting a culture of entrepreneurship in Denmark (European Commission 2000). 2.Goals is to promote enterprise in school curriculum, improve perceptions of entrepreneurs. Disadvantages: 1.Difficulty to measure 2.May compromise broader learning

37. LED in a globalised world Andrés Rodríguez-Pose 36 Combination approaches Interaction b/t LED policies + regionaleconomy LED outcomes (outputs) New businesses/jobs New businesses/jobs Better survival rate/retained jobs Better survival rate/retained jobs New products/ services/patents New products/ services/patents Tax revenue Tax revenue Prosperity, poverty reduction, GDP Prosperity, poverty reduction, GDP Policies(inputs) Property provision Property provision Skill building Skill building Business support Business support Financing FinancingAssistance Others (indirect) Others (indirect)

38. LED in a globalised world Andrés Rodríguez-Pose 37 Partnerships and funding Partnerships are needed for both leadership and funding Leadership: 1.Generally requires strong involvement from local authorities -In some cases, LED can be done with the implicit acquiescence of local authorities, but never against the authorities 2.Other forms of leadership are rare, but possible 3.Wide horizontal coalitions are a must -Leaving stakeholders without voice generally creates problems down the line

39. LED in a globalised world Andrés Rodríguez-Pose 38 Partnerships and funding (II) Funding: 1.Development grants -Easy to manage -But do not involve real partnerships -Can create dependency -To be used sparingly and to kick-start a process 2.Debt and equity -Ideal ways to get funding for projects and firms -But debt traps and banking failures limit their viability -Important role of public sector in stimulating the process: colateral, back up

40. LED in a globalised world Andrés Rodríguez-Pose 39 Partnerships and funding (III) 1.Institutional investment -Development banking and social investment -Difficult to set up -Requires broad coalitions and consensus -But interesting results 2.Community lending systems -Credit unions, microfinance, LETS -Ideal in areas with weak and/or poor state presence, but with a good sense of identity -Social capital and stable partnerships are a must -Take up rates – especially in the case of LETS – may be low

41. LED in a globalised world Andrés Rodríguez-Pose 40 What is happening across the world? LED slowly taking hold Very diverse strategies But there seems to be dynamism in areas that until recently were stagnant, declining, and/or suffered from serious social problems LED may not be a panacea, but it seems to be giving new options to parts of the world where traditional policies had become exhausted

42. The need for local economic development in a globalised world Andrés Rodríguez-Pose Department of Geography and Environment London School of Economics More information in http://personal.lse.ac.uk/rodrigu1/ Recent working papers http://repec.imdea.org/