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European policies and projects
Prof. Guglielmo Wolleb, 2013-14
Local development: basic theory
Topics
What is local development Advantages of local development
Consistent with citizens’ preferences Enhancement of endogenous resources Better local knowledge Widening human base of development “Learning by doing” Institutional building Enrichment of social capital
Topics
Governance of local development
Decentralisation of institutions
Institutions, public goods and collective action
Policy integration
What local development policy is not
What is local development?
Various definitions Three essential ingredients for local
development: Planning and implementation of strategies
specifically tailored to the features of well delimited areas
Strategies aimed at the enhancement of local resources
Informed and aware participation of local subjects in strategy
Three ingredients in detail
What is local development?First ingredient: Planning and implementation of
strategies specifically tailored to the features of well delimited areas
How to identify an area suitable for local economic development ? What does ‘local’ mean exactly? How to draw boundaries of an area for local dev't? “Local” refer to areas with homogenous internal
characteristics These characteristics may relate to the economy,
population, society, institutions or to other variables e.g. ethnicity, language etc.
Homogeneity can also be seen as the space of action for subjects closely interacting in the fields of production, institutional or of social relationships
What is local development?
For these reasons homogeneity of a territory is always relative to the variables used
One possible delimitation of the areas is that relationships take place directly, face to face, and on a continuous base
Local is usually sub-region or sub-province This delimitation does not often coincide with
administrative borders. This is problematic because responsibility for policy is distributed along administrative borders.
What is local development?
Second ingredient: strategies aimed at the enhancement of local resources
A second problem refers to the social and economic content of local development
Not all dev't in an area can be defined as local dev't
Local dev't implies utilization and enhancement for economic ends of endogenous resources
What is local development?
Local resources can be tangible or intangible, physical or human
Can be natural or cultural heritage, endowment of human capital, production specialisations, social capital or other specific to that territory
Local dev't means businesses take account of physical and human characteristics of a territory and do not treat the area as an empty space
What is local development?
Third ingredient: informed and aware participation of local subjects in strategy
To be local, local actors must play a significant active role in the planning, drawing up and implementation of a strategy
Local dev't is not wholly or mainly drawn up by centres outside the area
Advantages of local development
Consistent with society’s preferences Enhancement of endogenous resources Better local knowledge Broadening human base of development “Learning by doing” Institutional building Enrichment of social capital
Consistent with society’s preferences
Local actors know better their preferences and are better able to formulate consistent economic and social goals
Local participation in elaborating dev't strategy makes it more congruent with local system of preference (local function of social welfare) and maximises local economic well-being
Enhancement of endogenous resources Each area has partly specific or idiosyncratic dev't
resources Often not used optimally Often in backward areas. In fact, under-exploitation leads
to backwardness Reasons for under-exploitation are often internal to area
(internal constraints on dev't) Full and better use of
resources through strategies calibrated to the characteristics of the area provides an opportunity for dev't for all areas and an opportunity to reduce regional imbalances
Better local knowledge
Local actors know endogenous resources best
In addition to codified knowledge (knowledge that everyone can access and that are easily transmittable and independent of specific places) also local "know-how“ exclusively possessed by local actors living and / or working in the area
Knowing more about their territory, local actors can plan more efficacious strategies
Broadening the human base of development
Local actor involvement broadens and improves human resources underpinning dev't
Taking part in strategic decision-making incentivates personal involvement and commitment. Local actors are active, identify with decisions and make greater effort
This may have positive effects on efficacy and efficiency and hence on economic dev't
“Learning by doing”
Cooperation in planning strategy allows socialisation of knowledge and put in motion “learning by doing” processes
Local actors meet, exchange opinions, mutually enrich knowledge
Local actors learn by doing, from success and failure and analysing best practices. Continuous monitoring and evaluation improves management of intervention
Institutional building
Local institutions also learn by doing
Local institutions within a framework of participative political processes, make more contact, cooperate in decisions and weave closer ties
Institutional building can have positive effects on economic dev't
Enrichment of social capital
Participation in decisions by adopting forms of direct democracy is generally associated with the formation of local social capital
Continuous direct contact, sharing choices, cooperation in the implementation of policies can increase mutual trust between the actors, civic pride, density of their network relationships and facilitate collective action
Richer social capital lowers transaction costs, encourages production of public goods and creation of externalities with possible positive effects on dev't
Governance of local development
Many advantages of local dev't are linked to active participation and capacity to cooperate of local actors in planning and implementing dev't strategies
But effects of participation and cooperation are not automatic but depend on the framework of rules, responsibilities and procedures, that is on the governance of local dev't policy
Issues in governance:
Governance of local development
Governance is not the same as government Governance – running of area characterized by
cooperation between different actors, institutional and other, pursuing the same ends. This is in contrast to a more rigid and hierarchical division of responsibilities where each actor separately pursues different ends
Today these two modes of management are not radical alternatives. Forms of governance coexist with traditional forms of government. Coexistence is not necessarily easy.
Governance of local development
Institutional cooperation can be vertical or horizontal Vertical cooperation – between different levels of
institutions. E.g. in European Cohesion Policy, the EU, state, region, municipality
Horizontal cooperation – same level institutions. E.g. different municipalities in one province, different regions in one country.
Partnership – cooperation with private entities. May be only private bodies or mixed public – private actors
Multilevel governance entails cooperation at all these levels. Difficult to enact.
Governance of local development
Precise norms required. Overall normative framework generally laid down by highest level institutions
Financial resource allocation, monitoring and evaluation of policies, technical assistance also carried out by highest levels
Local actors organize coalitions, plan detailed strategy and implement projects
Through concertation Concertation must be regulated and managed. Not
spontaneous or anarchic. Local actors lay down operating rules
Governance of local development
Main problems of concertation: Who needs to be involved?
Distribution of powers among different local actors
Blend of “Direct democracy” and “delegated democracy”
Competence and experience accumulated over time by local actors
Governance of local development
Who needs to be involved? Concertation normally inclusive but it is not
always opportune for all parties to be involved in all decision-making processes
Potentially important actors, stakeholders or knowledgeable actors, should never be excluded
But too many participants (or the wrong participants) lengthen time, raise costs and reduce efficacy
Governance of local development
Distribution of powers among different local actors
Outcomes of concertation affected by the asymmetry of legal or factual power of various local actors
Strong actors can sway outcome away from the collective interest
Governance of local development
Blend of “Direct democracy” and “delegated democracy”
Which decisions must be taken in a full meeting and which should be delegated to specific political or technical bodies?
Too many full meetings imply the risk of scarcely innovative choices and distributive outcomes or of purely political and not technically optimal solutions.
Too much delegation entails the risk of solutions favoured only by small groups without broad consensus
Governance of local development
Competence and experience accumulated over time by local actors
Quality of design and efficiency of management depend on the capabilities, skills and experience accumulated by local actors
Weak and inadequate skills, low administrative efficiency, lack of familiarity with collective action strategies can lead to weak and inefficient performance
Decentralisation of instituions
A corollary of the importance of participation in local dev't is the importance of a decentralized institutional system
Simpler to organize efficacious local actor participation in a decentralised system
In decentralised system local institutions should better reflect citizens’ preferences
They have greater powers and therefore more control over dev't strategies and policies
Decentralisation of institutions
At the same time citizens have more control over the work of local institutions
Local actors have more autonomy because they depend less on vertical relations with the centre and more on internal horizontal relationships
Degree of decentralization and characteristics can obviously differ greatly from one institutional system to another. Highest degree of decentralization in federal systems in general
Big move towards decentralisation in EU and other European countries in recent years
See the introduction of the principle of subsidiarity in the European Treaty (Maastricht 1992) and then in the Italian Constitution (2001)
Decentralisation of institutions
The principle of subsidiarity states that public intervention should be made at the institutional level as close as possible to the citizen, unless there are reasonable grounds for believing that the intervention can be undertaken more efficiently at a higher level
This principle therefore does not go into the issue of which is the best level for an intervention. Burden of proof is on the upper level to produce good reasons for carrying it out
The principle of subsidiarity states as well that public intervention must be made, wherever possible, taking into account and valuing the contribution of individual citizens and organized associations
Decentralisation of instituions
The alternative to a decentralized institutional system is a centralized system with local branches that depend on the centre. There are also cases of local institutional dev't in this institutional context
Institutions, public goods and collective action
Institutions may play a driving role in local economic development
This role is associated with the production of public goods and with the promotion of collective actions
Let see in detail the link between institutions, public goods and collective action in the framework of local development
Institutions, public goods and collective action Local dev't is facilitated by the creation
of favourable overall conditions for economic activity Favourable contexts made possible by production of
public goods Public goods - no rivalry in consumption and no
excludability conditions Club goods - no rivalry in consumption, but targeted to
a specific set of subjects (those who belong to the club) with the exclusion of other subjects (those who do not belong to the club)
local public goods - assets of the club where club members are people who live and / or work in a given area within which the public good exerts its impact
Institutions, public goods and collective action Some of these goods have an important effect on the
competitiveness of enterprises as they create positive externalities for firms operating where these public goods produce their effects
positive externalities refer to advantages in terms of increased earnings or cost reductions deriving from production or consumption by third parties
E.g.: construction of a road by the public sector brings advantages in terms of reduced costs of all companies operating in that area, the promotion of a technical school by a business association brings advantages of revenues or costs for all firms in terms of availability of skilled labour
Institutions, public goods and collective action Public goods can be tangible or intangible. Tangible:
transport infrastructure, computer networks, education and health facilities. Intangible: trust, social cohesion, knowledge
Public goods can be produced by different entities and in different forms
Public Institutions at different levels are responsible for defining the production of public goods . For local dev't the role of public Institutions that produce local public goods is of particular importance
Public goods can also be produced by private entities. It may be appropriate to offer incentives for the production of public goods
Some public goods may be the result of unintentional actions or processes
Institutions, public goods and collective action
Public goods often require collective action Collective action is justified in situations where
individual actions for achieving their particular goals do not lead to an optimal collective outcome
The management of commons is a typical case requiring collective action
Subjects who participate in collective action can be purely private bodies or there can be private-public partnerships
Collective action involves cooperation between different actors taking part
Institutions, public goods and collective action This cooperation is achieved through consultation
processes where different subjects compare their different points of view and seek a common solution to common problems
Cooperation does not necessarily mean that the interests of participants are convergent. There may be no common solution
The role of Institutions in the choice of strategy and alignment of the different positions is very important. Institutions can play a non-partisan role, make choices with a long-term time horizon, take risks associated with innovative choices
Institutions, public goods and collective action
Social capital also plays a key role in collective actions
Social capital endowment makes positive outcome of collective action more likely. Lowers risk of opportunistic behaviour and facilitates the alignment of individual positions
Institutions, public goods and collective action
Efficacy of public good heavily dependent on outcome of collective action. Three risks of collective action : produces no outcome
leads to compromise solution that does not serve collective long-term interests
leads to solution serving minority rather than collective interests
Policy integration
It is often said that dev't policy must include integrated sets of measures
What is integration and what forms can it take?
Policy integration
Local dev't requires closely integrated policies. Sets of complementary and synergic measures with the same objective
Integration allows concentration of resources for priority objectives. Lack of integration leads to dispersal of resources and multiple objectives.
Sets or packages may include widely differing types of intervention
Integration in local policy is mainly horizontal: multi-sector packages
Policy integration
Examples: Restoration and re-opening of cultural monument Access to the area improved Services to increase exploitation of the monument Marketing measures to publicise the monument and its
availability Monument linked to others cultural goods in a circuit to
increase level of attraction Training courses for personnel involved in the
management of the monument
Policy integration Local policies vs. sectorial policies A sectorial policy is e.g. a national
policy aimed at a specific industry Sectorial policies may also require forms of
integration: chain policies A chain policy brings together interventions
aimed at the value added chain
Policy integration Chain policy not aimed necessarily at the same
area as the various links of the chain can be located at distance from one another
The objective is often to avoid specialization in the low value added segments of the chain
E.g.: Intervention linking farm to food production Intervention linking food production to food
machinery production Intervention aimed at strengthening distribution
networks of agri-food products
Policy integration
Policy integration also occurs when policy is implemented by different levels of institutions
European, national and local policies need to be consistent. Their goals and impact must be consistent
Frequent problem in the literature is sectorial policies that increase territorial imbalances, thus conflicting with cohesion policy
What local development policy is not
It is important to avoid misunderstandings.
What local development is not
What local development policy is not
not self-referential or self-sufficient: Skills available outside may be lacking in the local
context
External intervention may be necessary in order to break up local collusion mechanisms
The optimal size of many interventions is greater than local
What local development policy is not
not spontaneous because
It takes place within a system of rules imposed by the centre
It requires its own system of rules for operation
Success of local development strategy largely depends on adequate system of national and local rules and on their interplay
What local development policy is not
Not in contrast with the processes of globalization because mobile resources are attracted
to competitive and attractive local contexts synergy between the enhancement
of immobile resources and attraction of mobile assets
globalization has reduced the regulatory power of nation states and made regional and local government more relevant
What local development policy is not Not confined to traditional industries
Many cases of local dev't based on Hi tech In Italy, local development studies reveal
systems of small enterprises specialised in traditional sectors
But elsewhere numerous examples of local dev't in hi-tech sectors such as biotechnology, IT and media
Specific characteristics of local systems and types of public good creating external economies vary
What local development policy is not
not the only possible form of development Economic dev't may also be the result of
government policies not specifically targeted to a region or economic conditions not depending on local actors
Long term there may be no gap between endogenous and exogenous dev't
Endogenous dev't may result from previous exogenous dev't
What local development policy is not The opening of a large ‘external’ company can, for
example, lead to the spread of knowledge and expertise in the area, and this becomes a specific asset of the area
This legacy is incorporated into local resources and can be used in case of closure or relocation of company
More generally, an external event can produce long-term changes or enrichments (as well as dissipation or depletion) in the endogenous resources of a territory
What local development policy is not Local dev't is not the only possible form of dev't,
and local dev't policies are not the only possible policies of dev't
Optimum territorial dimension varies from policy to policy
Depends on economies of scale and on the area on which it exerts its impact
Some policies can only be national, supranational or global. E.g. policy against global warming is necessarily global, enhancement of Po river valley is interregional etc..
In some cases the same policy may have local and extra-local components. E.g. and environmental policy also has local dimensions