Welcome to this MOOC on Local Economic Development (LED). Local economic development refers to the processes by which local governments, businesses, and civil society groups get together to raise income sustainably and improve their lives in a well-defined area. It’s about creating jobs, securing livelihoods, improving infrastructure and managing local resources. What do I learn? We will be dealing with questions such as the following. Why does economic development take place in some areas of the world and not in others? Why doesn’t it happen in your place? What prevents people from having the lives they want to live right there? Could your region make more of the opportunities of globalization and new technologies? Did the promises of decentralization in your country fail to deliver better public services and more responsive governments? If these are the questions you are asking yourself, this is the right course for you. It explores the where, who and how of economic development. Please have a look at our list of contents for the coming 8 weeks: 1. What is LED? What drives it? 2. How does globalization shape LED? 3. How does decentralisation affect LED? 4. How does competitiveness affect innovation? 5. What are entrepreneurship and its dimensions? 6. Why are value chains and clusters so important? 7. What are some LED strategies? 8. Your project How will I learn? In each week you will be able to access the content of the videos, suggested readings and additional videos for selective deepening. You will also find assignments that you have to complete if you want to earn a certificate for this MOOC. We will first introduce our “toolkit”, a series of theories and concepts that will help you read the situation in your locality. We will explore the main factors affecting local economic development, such as globalization, decentralisation, and competitiveness. We will discuss key components, like entrepreneurship and innovation and look into the organization of local economies into clusters, value chains and learning regions. We will conclude by deepening on some specific constructs that make local economies grow to benefit their communities. You will also contribute your ideas in the discussion forums, where you will learn from other participants around the world. What makes this course special? There is plenty of information in Internet on local economic development, which is mostly prepared by international donors or multilateral organisations. So what does this course do differently? First of all, the course is offered by academics that have significant published research on local economic development. This course gathers a wealth of academic knowledge that often fights the assumptions on what things are supposed to be like. Second, the instructors of this course have participated in dozens of capacity building projects in Latin America, Asia, Eastern Europe and Africa. Putting learning at the centre, they worked with communities, local governments, international donors and business associations. They often found a significant distance between theory and practice in local economic development, and this has been the basis of learning. Third, the course is acutely aware that each region is different and does not attempt to offer a one-size-fits-all recipe. It singles out key factors that drive local economic development and enables participants to do their own learning process, defining local problems and appropriate solutions. The aim of the course is that participants come up with their own ideas on how to promote local economic development. How will I get a certificate? If you want a certificate for participating in this MOOC, you will need to complete a small assignment each week and participate in the discussion forums. In the end of the MOOC, you will put these contributions together in one final document, your Capstone Project. I hope you find this course exciting and that you get to share our passion for promoting local economic development. Your instructors Dr. Georgina M. Gómez, ISS Prof. Emeritus AHJ (Bert) Helmsing, ISS Dr. Jan Fransen, IHS
Defining Local Economic Development (LED)
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Del curso dictado por Erasmus University Rotterdam
Local Economic Development
7 calificaciones
De la lección
Introduction to Local Economic Development
This week introduces the “local” in economic development and explains why LED is a particular way of pursuing development. Video 1 reflects on why LED takes place in some areas and not in others. Video 2 identifies the main drivers of local economic development. The videos have been prepared by ISS Emeritus Professor Bert Helmsing.
Conoce a los instructores
Georgina GomezAssociate Professor in Institutions and Local Development
ISS
Bert HelmsingEmeritus Professor of Local and Regional Development
ISS
Peter KnorringaProfessor of Private Sector & Development
ISS
Jan FransenHead of Education & Training
Institute for Housing and Urban Development Studies (IHS)
Ronald WallHead of the Urban Competitiveness and Resilience
IHS
[MUSIC]
Welcome.
My name is Bert Helmsing.
And I'm an emeritus professor of the International Institute of Social Studies
of Erasmus University Rotterdam, where I work for
more than 40 years on the topic of local and regional development.
And my professional experiences as a teacher, adviser and researcher,
stretch from the Indian countries of South America to countries of Southern and
Eastern Africa.
And I've also benefited from the interaction with students from
all over the world.
Let's begin by taking a look at the map of Mother Earth.
What do you observe?
Some areas are light up,
strongly, indicating a concentration of economic activities.
Other areas light up less, and large part of territories remain
literally in the dark, little or no economic activity there.
Now, take a look at your own country using Google Maps.
You will observe considerable geographical variation in the concentration
of economic activity as evidenced by roads and built up areas.
This indicates that economic development and growth does not take place everywhere.
This leads us to one question.
Why does economic development take place in some areas and not in others?
At the end of this video, you will be able to answer this question at the local level
and be able to define local economic development.
My view of local economic development has been strongly influenced by what I
saw happening in many countries following structure adjustment in the early 1980s.
International organizations like the World Bank and the IMF were willing
to provide structure adjustment loans but on one condition, that governments would
roll back their direct interventionist controls over markets and production.
Their main message was less government and more market.
Reforms focused on reducing government, and
markets were expected to emerge spontaneously.
However, for a long time, the private sector investment response
to structure adjustment was not forthcoming, but, why?
What delayed the investment response?
Three fundamental issues were ignored.
One is that markets rely on functioning economic institutions,
which help to reduce the cost of doing business.
These institutions regulate, spread information, reduce risk and,
in general, contribute to reduce transaction cost.
If these costs are very high,
few people will be willing to start their enterprise or expand their business.
This refers, not only to the rule of law and
property rights, but also to practices, norms and
standards that are specific to particular products, industries and occupations.
And, certainly, at early stages of development of an industry,
markets and market supporting institutions are insufficiently developed.
These institutions need to be crafted and built up over time and often from scratch.
Local action to build such institution is an important factor
determining economic performance in an area.
And the second issue that is that markets do not emerge automatically.
Investment opportunities do not reveal themselves so easily.
Information is hard to come by, and risks can be very high.
More importantly, investment in one by one economic actor
is dependent on the simultaneous and parallel investment by other actors.
So, for example, a small entrepreneur or farmer who wants to innovate
in a cash crop could spend a lot of time and efforts to grow a new crop,
only to find out that there are a very few local buyers or that packaging,
transport and finance are bottlenecks.
In my example, complementary investments would be needed,
in a packaging plant, in transport equipment, in roads, and
all require effective responses by banks or traders.
So success is critically dependent on simultaneous,
complementary investments by other actors, including government.
In order for complementary investments in private and
public investments to emerge, collective and public action is needed.
And this implies economic coordination,
which constitutes a key ingredient of local economic development management.
In other words, the opportunities and constraints for
a local producer are embedded in the opportunities and
constraints of an entire industry in an area.
Particularly in situations where potential markets are small and
networks between economic actors are poorly developed,
a deadlock may result and keep an area in economic isolation.
The third issue is that even if markets exist,
they do not necessarily allocate resources efficiently.
There can be effects on third parties that are not incorporated
in prices of goods and services.
There are different types of such market failures and
some of them play a positive role in local economical development.
So let me elaborate on four types of such market failures.
First of all,
there are important knowledge spillovers of existing economic activities.
Information about the ins and outs of an industry are,
as Alfred Marshall already said many years ago, are in the air.
And all local producers can benefit from this pool of knowledge.
This facilitates learning and lowers the cost for local firms but
also makes the place attractive to new entrepreneurs and
for other firms to locate in the same area.
Much of this knowledge is in tacit form.
So if many firms grow a new crop, they can learn from each other about
how to combat disease merely by observing and interacting with each other.
Second are network externalities.
These facilitate information exchange and coordination between economic actors,
just as interrelated and support services in the example I gave earlier.
The farmer knows who can provide particular inputs and services.
And these network externalities often require locational proximity, closeness.
Their presence is also a powerful factor that attracts other firms to the area.
Conversely, the paucity of these network externalities
will deter funds and people to converge on an area.
The third type of externality emerges from entrepreneurial failure.
Entrepreneurial failure is a private loss, but
many others can learn from this an avoid making the same mistakes.
This raises the probability of success of their own startup or investment decisions.
And, lastly, the converse is also true.
The external effects arising from entrepreneurial success.
As it is well known that successful entrepreneurial activity attracts other
people to start their own firms, thanks to the presence of role models.
But, furthermore, other economic actors, like banks, universities, and
investors, have then also experienced in dealing with startups.
And when all these factors come together in an area,
they can give a powerful boost to economic performance of a particular area.
And this helps to explain why certain areas light up on the Google Maps
while others remain in the dark.
But there is also a powerful non-economic factor.
Many people have an emotional attachment to or
interest in the place where they have been born or where their ancestors lived.
This cannot be reduced to simply some cost of a house or a piece of land.
It also refers to the social networks and
to the local ties that bind, as well as to the norms,
values, and local practices and customs that structure one's life.
This attachment also provides a motivation to enhance the living
conditions in an area for the benefit of future generations.
Both these considerations emphasize that individual actors belong
to a community and have community collective interests at heart.
Overall, these five factors provide an overall rationale for
local actors to come together and engage in local economic development management.
We can now define local economic development as a process in which
relationships between local governments, communities, and civic groups and
organizations, and the private sector are established to manage existing
resources to create jobs and stimulate the economy of a well defined area.
This emphasizes local control using the potential of human,
institutional, physical and natural resources of the area.
It's initiatives mobilize actors and organizations and
resources, develop new institutions and local support systems, and
realize economic coordination through dialogue and strategic actions.
In the next video sessions, we will examine
why local economic development has become such an important issue today.
So keep watching.
[MUSIC]
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