European Union Local Economic Development: The Local, National and International Environment

Local Context

According to the US Council for Urban Economic Development (CUED), local governments are the primary, but not exclusive, institution for local economic development [although (and probably because) the discipline is becoming increasingly holistic and is involving an ever broader range of partners, local government is becoming an increasingly important player]. Local government has three key roles in local economic development:

• to provide leadership in policy making.

• to administer policy, programs and projects.

• to be the main initiator of economic development programs through public spending, regulatory powers, and their promotion of industrial and small business development.

Crucially, local governments are also responsible for local, physical infrastructure and other components of the local business climate that facilitate or hinder business prosperity. Finally, local governments are key information providers to business and communities in terms of opportunities, laws and regulations, service and resource availability, and other issues.

Understanding and capitalizing on local resources is the best way to promote economic development. To accomplish this, local governments need to build partnerships.

The Organization for Economic Co-operation and Development (OECD) has a large ongoing research program on LED. In common with other research findings, they have identified common features in integrated policy responses to urban policy development. This OECD interpretation of the local delivery of economic development services is typical in that it emphasizes partnership and local service delivery. This does not mean that national, regional and even supra-national organizations shouldn’t be involved in LED, but it does mean that there should be a ready acceptance that regions and cities are appropriate areas for managing LED.

National, international and global organizations have major roles to play in the successful delivery of LED. There are national and international schemes that are successful and are being delivered at a local level. Of course, the advantage of these broader based schemes is that not only do local areas have access to additional funding, they also are able to benefit from best practice examples and capacity building. Research has identified particular areas where supra-national initiatives (by the EU in this case), have provided a key policy framework for the development of local economic development initiatives in urban areas, rural, and interestingly in particular sectors such as regenerating communities in declining steel production areas. So it is important to recognize that institutions at every level of governance are important in LED.

Increasingly LED actions are carried out by local government in partnership with private sector and community organizations. It is recognized that there is a broad community of interest that now addresses LED issues. Holistic local economic development is done best with a comprehensive and inclusive participation of the public, private and not-for-profit sectors and that regional, national and international input to LED can be very helpful to LED strategy making and implementation.

The National Context

Communities embarking on LED activities should be aware of what they can do and what is out of their direct control. LED activities occur within a wider national and international context and these contexts profoundly influence the effectiveness of LED efforts. National government influences LED by making fiscal and economic policies that structure the economy, providing programs and funding for LED, as well as setting the nation’s financial, legal, and physical infrastructure. National governments create the economic and political environment in which local economic development can take place and structure how the locality accesses the national and global marketplace. Put simply, national governments set the tax, regulatory and legal structures that shape the overall national business climate, which helps or hinders business growth. [Also, national governments can be helpful, or a hindrance, in terms of the delivery of industrial policies, regional development programs, national economic development initiatives, business incentive programs and so on.] Whilst the national and international contexts matter fundamentally, local economic development is about what communities can do to improve their economic and social well-being. National governments are [normally] no longer the main providers of services, program ideas and financing. [Although they can be very helpful in initiating policies and practices that can be used in the local areas.]

Regional Context

Regional trading relationships are becoming an increasingly important influence on economies and therefore on LED. Whilst the EU is the most sophisticated in terms of economic, social and political integration, most nations are involved in at least several regional trading relationships that result in both opportunities as well as certain limits and controls being placed on the business climate and consequently LED.

For example, as well as establishing common regulations and standards, the EU is also a significant economic development player. Approximately one-third of the EU budget targets economic development initiatives in one form or another, as such it has both a major role to play and is a key influencer in LED initiatives. No other regional bodies participate in economic development initiatives on the scale of the EU.

The Global Dimension

Integration of the global economy is increasing competitive pressures, especially on the already hard hit large industrial sectors, agricultural sectors, and the nascent small- and medium-sized enterprise sector. The increased competition emerging from globalization affects both the prosperity of individual businesses and whole communities. For businesses, achieving the capacity to compete globally will entail considerable entrepreneurial and export development. Moreover, competitiveness between places also includes important quality of life issues as local conditions give certain places an advantage in economic development. These conditions can include such assets as education, transportation and communication infrastructure, workforce skills, science and technology base, presence of advanced services, cultural attributes, environmental conditions, and recreational amenities.

The role of global organizations, especially the World Trade Organization and GATT, are becoming crucial, even at a local level. LED strategists need to be aware of policy developments at a global level, especially the role and eligibility of business incentive programs, sustainability issues and the increasing concerns about child labor, safety at work and so on. LED may well be local, but must be delivered within a global dimension.

Conclusion

It is within this global and local context that the World Bank has developed its City Development Strategy initiative. It has recognized the importance of cities and their urgent need to develop local solutions to local problems. A key test for the Bank and its partners at this time is to enable the targeted cities to develop appropriate, locally led, sustainable LED strategies and action plans. The fact that the Bank operates at a global level does not preclude it from becoming an active partner, or indeed an initiator of urban local economic development.  The question is, how to do it most effectively?

Source

Swinburn, Gwen. Local Economic Development: Good Practice from the European Union (and beyond). Draft for Consultation. 2000.

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