"Globalization and localization are transforming many aspects of our human experience today, and countries will either prosper or falter on how effectively they can grab on to these two forces and harness their energy," says Shahid Yusuf, leader of the 1999/2000 World Development Report team
(percentages of total countries )
Source: Diamond 1996; Freedom House, Freedom in the World, 1998
GDP per capita
(1995 US dollars)
Source: World Bank, World Development Indicators, 1999
Localization—the growing economic and political power of cities, provinces, and other sub-national entities—will be one of the most important new trends in the 21st century, according to a new World Bank report released today. Together with accelerating globalization of the world economy, localization could revolutionize prospects for human development or it could lead to chaos and increased human suffering, the report says.
According to the World Development Report 1999/2000: Entering the 21st Century, improved communications, transportation and falling trade barriers are not only making the world smaller, they are also fueling the desire and providing the means for local communities to shape their own future. Faced with popular demands for greater self-determination, national governments from Africa to Latin America, and from Europe to South East Asia are devolving power to the local level—with mixed results.
"Globalization is like a giant wave that can either capsize nations or carry them forward on its crest," says World Bank Chief Economist and Senior Vice President Joseph Stiglitz, who oversaw the team that prepared the report. "Successful localization creates a situation where local entities and other groups in society—the crew of the boat if you will—are free to exercise individual autonomy but also have incentives to work together."
Given that cities account for an ever-increasing share of national incomes, in addition to shortly becoming home to most of the world's population, the stakes are high for getting the twin forces of globalization and localization working at optimal pitch.
Cities aside, localization can take the form of a general demand for broader popular participation in politics—such as the democracy movements in Poland and Brazil in the 1980s, South Korea in the 1990s, and Indonesia today. Or it can take the form of demands for greater local autonomy, which may lead to decentralization or official recognition of a local cultural identity, as in Canada, Spain, and Uganda.
When it works, decentralizing power to the provincial and local level can result in more responsive and efficient local government. "There will be less room for close business dealings, more calls for accountability, and a continuing move away from the authoritarianism practiced in various parts of the world between the 1960s and the 1980s," the report predicts.
But localization can also result in over-burdened local governments being unable to provide local infrastructure and services. Localization can threaten macroeconomic stability, and hence economic growth, if local governments borrow and spend heavily and need to be bailed out by national governments. And at the extreme, demands for local autonomy can lead to ethnic strife and civil war.
Globalization also offers a mix of opportunities and risks. Expanded markets and the spread of technology can lead to higher productivity and improved living standards. But they can also lead to instability and undesired changes: fear of job losses due to the influx of foreign imports, financial instability due to volatile foreign capital flows, and threats to the global environment.
"Globalization and localization are transforming many aspects of our human experience today, and countries will either prosper or falter on how effectively they can grab on to these two forces and harness their energy," says Shahid Yusuf, leader of the 1999/2000 World Development Report team. "The world is becoming smaller, but in the process, it is also becoming more complicated. This makes a comprehensive and pragmatic approach to development more important than ever before."
The first half of the report focuses on three areas in which global cooperation is becoming ever more crucial: trade, financial flows, and environmental issues, such as bio-diversity and climate change. The second half considers three key aspects of localization: decentralization, cities as the engine of economic growth, and making cities livable.
Yusuf says that as globalization shrinks the world, and localization multiplies the range of policy environments, successful development strategies will pay off more quickly in the new century than in the past. By the same token, the consequences of flawed strategies will be revealed sooner and more painfully.
The report identifies what it calls "four critical lessons" of development experience in the past half-century, to help guide countries and local communities as they devise their development strategies:
- Macroeconomic stability is essential for achieving the growth needed for development.
- Growth does not trickle down, so therefore, development efforts must address human needs directly.
- No one policy will spur development; a comprehensive approach is needed.
- Sustained development must be socially inclusive and flexible enough to adapt to changing circumstances.
These lessons, the report says, are central to how the World Bank envisions its work in the 21st century and to the way in which it proposes to tackle the principal development challenges ahead. Further, there is a need for development thinking to move beyond simplistic notions of economic growth to embrace a more comprehensive view of peoples' lives.
"So far, economic commentary has focused on the onset of globalization with much less attention paid to the forces of localization," explains World Bank President James D. Wolfensohn. "In both cases, however, what matters most is moving beyond traditional concepts of economic growth, to putting people—their health, welfare, education, opportunity, and inclusion—at the heart of the development agenda for the 21st century."
Helpful links: To access the press release, full report, slide presentation and Q&A, visit the World Development Report site at http://www.worldbank.org/wdr/2000/.