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

Development strategies and economic Development strategies and economic growth in a changing worldgrowth in a changing world

Andrés Rodríguez-Pose

Department of Geography and EnvironmentLondon School of Economics

Newcastle University 17 June 2009

Development strategies in a changing world Andrés Rodríguez-Pose 2

Three challengesThree challenges

Forces of change1. Globalization2. Urbanization3. Decentralization

Leading to greater territorial inequality To the formation of new development strategies


Globalization: rise in tradeGlobalization: rise in trade

Module 1: The relevance of LED today

0

50

100

150

200

250

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

year

Ind

ex 1

990

= 1

00Agriculture

Manufacturing

Trade in both agricultural and manufacturing

goods has been increasing in the

last decades

Source: Own elaboration from World Trade Organization


Sectoral shiftSectoral shift


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

Year

Ra

tio Brazil

China

IndiaMexico

USA

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


UrbanizationUrbanization


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

0

10

20

30

40

50

60

70

80

90

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

World

East Asia and Pacific

Middle East & North Africa

South Asia

Sub-Saharan Africa

Europe & Central Asia

Latin America & Caribbean


Urbanization and wealthUrbanization and wealth


Source: Own elaboration World Bank data

6

8

10

12

0 20 40 60 80 100

% of urban population 2003

Lo

g o

f G

DP

per

cap

ita

2003

There is a positive association between the degree of urbanization and a country’s wealth


Red: High level of decentralizationOrange: Moderate decentralizationYellow: Low or partial decentralizationBlue: Decentralization on paper

Decentralization: the world ca. 1970Decentralization: the world ca. 1970


Red: High level of decentralizationOrange: Moderate decentralizationYellow: Low or partial decentralizationBlue: Decentralization on paper

The world in 2009The world in 2009


The consequence: rising disparitiesThe consequence: rising disparities

Moderate rise in disparities, weighted by population (1970-2005)

Spain

0.05

0.10

0.15

0.20

0.25

1980 1983 1986 1989 1992 1995 1998 2001 2004

France

0.05

0.10

0.15

0.20

0.25

0.30

1980 1983 1986 1989 1992 1995 1998 2001 2004

Finland

0.00

0.05

0.10

0.15

0.20

0.25

1980 1983 1986 1989 1992 1995 1998 2001 2004

UK

0.05

0.10

0.15

0.20

0.25

1980 1983 1986 1989 1992 1995 1998 2001 2004

Germany (W)

0,00

0,05

0,10

0,15

0,20

0,25

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

In the EUIn the EU


Rising disparities (II)Rising disparities (II)

Moderate rise in disparities, weighted by population (1970-2005)

Australia

0.00

0.05

0.10

0.15

0.20

1990 1992 1994 1996 1998 2000 2002 2004

Thailand

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1994 1996 1998 2000 2002 2004

India

0,25

0,30

0,35

0,40

0,45

0,50

0,55

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Mexico

0,45

0,50

0,55

0,60

0,65

0,70

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000

But also in the rest of the worldBut also in the rest of the world


Rising disparities (III)Rising disparities (III)

Rapid rise in disparities, weighted by population (1970-2005)

Czech Republic

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

1990 1992 1994 1996 1998 2000 2002 2004

Poland

0.05

0.10

0.15

0.20

0.25

1990 1992 1994 1996 1998 2000 2002 2004

Romania

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

1990 1992 1994 1996 1998 2000 2002 2004

Hungary

0,15

0,20

0,25

0,30

0,35

0,40

0,45

0,50

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Slovakia

0,15

0,20

0,25

0,30

0,35

0,40

0,45

0,50

0,55

1990 1992 1994 1996 1998 2000 2002 2004

Bulgaria

0,00

0,05

0,10

0,15

0,20

0,25

0,30

1990 1992 1994 1996 1998 2000 2002 2004

In new member statesIn new member states


Rising disparities (IV)Rising disparities (IV)

Rapid rise in disparities, weighted by population (1970-2005)

Ireland

0.00

0.05

0.10

0.15

0.20

0.25

1980 1983 1986 1989 1992 1995 1998 2001 2004

Norway

0.00

0.05

0.10

0.15

0.20

0.25

0.30

1980 1983 1986 1989 1992 1995 1998 2001 2004

Sweden

0.00

0.05

0.10

0.15

0.20

0.25

1980 1983 1986 1989 1992 1995 1998 2001 2004

But also in western EuropeBut also in western Europe


Stability, weighted by population (1970-2005)

Italy

0.15

0.20

0.25

0.30

1980 1983 1986 1989 1992 1995 1998 2001 2004

The Netherlands

0.00

0.05

0.10

0.15

0.20

0.25

0.30

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Switzerland

0.00

0.05

0.10

0.15

0.20

0.25

1980 1983 1986 1989 1992 1995 1998 2001 2004

Rising disparities (V)Rising disparities (V)

In the EUIn the EU


Stability, weighted by population (1970-2005)

USA

0.00

0.05

0.10

0.15

0.20

0.25

1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004

Canada

0.00

0.05

0.10

0.15

0.20

0.25

1981 1984 1987 1990 1993 1996 1999 2002 2005

South Africa

0.30

0.35

0.40

0.45

0.50

0.55

0.60

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Rising disparities (VI)Rising disparities (VI)

China

0,20

0,25

0,30

0,35

0,40

0,45

0,50

0,55

0,60

0,65

0,70

0,75

0,80

1978 1981 1984 1987 1990 1993 1996 1999 2002 2005

But But also in also in the rest the rest of the of the worldworld


Declining disparities, weighted by population (1970-2005)

Brazil

0.30

0.35

0.40

0.45

0.50

0.55

1989 1991 1993 1995 1997 1999 2001 2003

Belgium

0.25

0.30

0.35

0.40

0.45

0.50

1980 1983 1986 1989 1992 1995 1998 2001 2004

Declining disparitiesDeclining disparities


Emergence of a new territorial structureEmergence of a new territorial structure

Nation-states struggling to cope with the changes Globalisation affecting different subnational spaces in

different ways1. Primate cities2. Intermediate city-regions3. Rural areas

Ability of the nation-state to provide suitable development strategies top-down undermined


Globalization and development strategiesGlobalization 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


Searching for alternatives/complementsSearching 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


What is LED?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


Core valuesCore 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


LED versus traditional strategiesLED 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


Local economic vs community developmentLocal 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


How is this achieved?How is this achieved?

Through a balance between strategies and institutions

StrategyInstitutions


Institutions and development strategiesInstitutions and development strategies

1 2

3


Key elements in the strategyKey elements in the strategy

ROOTINGECONOMICACTIVITY

INWARD INVESTMENT

HUMAN RESOURCES

LOCALFIRMS

INFRASTRUCTURE

DEPENDENCE

ACCESS BY COMPETITORS

SUBSIDIES TO NON

COMPETITIVE FIRMS

MIGRATIONBRAIN DRAIN


What is happenning in Europe?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 Development strategies and economic growth in a changing worldgrowth in a changing world

Andrés Rodríguez-Pose

Department of Geography and EnvironmentLondon School of Economics

More information in

http://personal.lse.ac.uk/rodrigu1/


Discussion

Professor Andy Pike

Paul Mooney, Chief Economist

Documents

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