PERSPECTIVES
3.3 THE ROLE OF LOCAL GOVERNMENT: A GLOBAL PERSPECTIVE
3.3.1 Historical Background of Local Economic Development
The issue of catalysing LED planning first arose in Europe and quickly expanded to other industrialized countries (Rogerson, 2015). LED has been interpreted by developed countries as a generic instrument of the development strategy at the lowest level of government that contributes to the national development goals. The beginnings of modern LED techniques, according to Rogerson (2015), may be traced back to the 1960s. LED programmes and projects began in the cities of the industrialised countries, which saw major transformation during the post-war period (Blakely, 1989). Due to global economic changes and technological progress, several of the historic industries that were the main sources of employment and revenue in these cities have declined (Wekwete, 2014). To illustrate this point, in Europe, industries such as textile, shipbuilding, steelmaking, and other traditional heavy industries where the cities were founded have been shifted to other countries around the world, resulting in a flood of deteriorating and devastated cities in other countries (Wekwete, 2014). This economic problem arose in the United States when global capital flows no longer helped the country as they used to, but instead had a detrimental influence on the local economy as factories relocated, resulting in unemployment and economically depressed regions and cities (Blakely, 2009). As a result, it is obvious that there has always been a striking link between the notion of LED and the difficulties encountered by states, such as rising unemployment, poverty and economic deterioration, which have impacted not just the developing world, but even Western Europe, North America and Japan that have been badly impacted (Birkhölzer, 2005).
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Although the LED interest began in Western Europe and North America, LED ideas and practices expanded from the global north to the global south, especially in the 1990s (Rogerson, 2015, Rodriguez-Pose & Tijmstra, 2009; Nel & Rogerson, 2005). In the years ever since, recognition of the LED approach has grown in tandem with the increasing number of socially and economically marginalized people around the world, particularly in places like eastern Germany, which has been dealing with economic change that has resulted in more economic and social problems (Birkhölzer, 2005). LED has been a common development strategy at both the local and community levels in the northern countries in the recent years. Pressure to encourage LED has come from at least two sources: the continuing of unequal and unfair economic outcomes, as well as concerns over a lack of local investment in specific regions (Rogerson, 2015). The first political response to LED thus concentrated on retaining existing investments and attracting new ones by site marketing and investment attraction as well as implementing incentive systems such as grants, tax incentives, or loans, and a major contribution of hard and soft infrastructure (Wekwete, 2014). According to Tassonyi (2005), the traditional LED approach, mostly implemented from the 1950s to the 1980s, was characterised by an attempt to target different companies by placing value on cheap factory services or subsidized infrastructure and relying on the authorities’ direct grants or tax relief granted by the respective tax jurisdiction.
Another component in the global LED arena has been the emphasis on systemic competitiveness, which enables a sustainable local trading environment, fosters networking and collaboration between enterprises, as well as public and private collaborations, while also encouraging the formation of clusters and the enhancement of living standards in local areas (Wekwete, 2014).
According to Heron (2009), literature on LED is divided into two major theoretical streams, the neoclassical and Keynesian tradition, which reigned from the 1950s to the 1970s, and the school of political economy, which has dominated since the 1980s. This comment demonstrates how the establishment and promotion of the LED method was affected by solely commercial or economic-political issues at some point. As a result of this influence, the evolution of the LED as an alternative development method has been related to more comprehensive development theories and literature such as neoclassicism or Keynesianism, neoliberalism, globalization, post- development, and bottom-up approaches, as well as decentralisation (Akudugu, 2013).LED and
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national economic development (NED) theory are well-established topics taught in the majority of the developed-country universities (Tello, 2010). The modern LED does not have its own theory, but its techniques and explanations are based on traditional development theory and debates.
LED is generally characterized in the economic literature and from the perspective of the industrialized economy as changes that affect the local economy’s potential to thrive, create jobs, and create new wealth for local citizens (Tello, 2010). According to Akudugu (2013), LED is founded on such a wide range of theories because of its relatively long implementation in developed nations and the methodologies originally offered in the multidisciplinary faculties of economics, regional development, planning and political economy of development. Because of these overarching theories, LED may be comprehended to a large extent (Akudugu, 2013).
Internationally, several sorts of LED techniques have been applied, which match closely to the LED’s mixed theoretical legacy. The first is the urban efficiency method, which was utilized in cities in the United States in the 1980s and is characterized by municipal investment in infrastructure and service delivery to boost productivity and lower the cost of living. Second, the entrepreneurial and sectoral approach of Italian industrial areas and Silicon Valley, which is concerned with supporting the local economy in leading sectors and the progressive community- based approach, which is defined by strategies involving collaboration between low-income community members and their organizations. Finally, there is the radical redistributive and socialist perspective, which is concerned with interventionist measures of equal wealth distribution, as used in Liverpool (DPLG, 2001).
Because of globalisation, local economic development (LED) has emerged as one of the most important planning approaches for developing local economies (Rogerson, 2015). LED initiatives have become increasingly important in international development as globalisation has progressed. However, it is widely assumed that LED use began in developed-world cities in the late 1960s and early 1970s, in the context of global economic restructuring and decentralisation, as well as the failure of traditional approaches, slow economic growth and poverty, and structural adjustment programmes (Agbevade, 2018; Rogerson, 2015; Rogerson & Rogerson, 2010;
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Rodrigues-Pose & Tijmstra, 2005). LED initiatives in such nations, according to Rodrigues-Pose
& Tijmstra (2005), were aimed at tackling socio-economic difficulties that arose as a result of persistent locality-specific development problems. Thus, LED in the developing world emerged as an alternative development strategy for addressing persistent socio-economic problems such as unemployment, poverty, slow economic growth and regional inequalities, and was aggravated by other factors such as debt crisis, imposed structural adjustments, sovereignty or currency devaluation, natural and political shocks (Dyosi, 2016; Rodrigues-Pose & Tijmstra, 2005).
Though the LED ideology originated in the developed world, LED found its prevalence into the developing countries as a response to these developmental challenges. A majority of developing countries are characterised by appalling socio-economic development problems.
In Latin America, LED practices and implementation of regional policies can be traced back to the early 1960’s (Tello, 2010). Most countries in Latin America have persistently encouraged LED strategies to curb their developmental problems. In Brazil, for instance, as the largest economy in Latin America, LED strategies have been remarkably surging over the past few decades (Barberia & Biderman, 2010). In the African region such as Sub-Saharan Africa, LED literature and practice is relatively scant because LED as an alternative approach to development is a recent phenomenon compared to the developed world and therefore less attention was given to it in the local governance system (Agbevade, 2018; Oduro-Ofori, 2016; Rodrigues-Pose &
Tijmstra, 2005). Furthermore, in Sub-Saharan Africa, LED experiences have mostly concentrated on the social part of LED to the exclusion of the economic dimension, resulting in local development rather than true local economic development initiatives (Rodrigues-Pose &
Tijmstra, 2005). Globalisation, decentralisation, and urbanisation are all factors that have contributed to the emergence of LED in many emerging countries.
Globalisation, urbanisation and decentralisation gave birth to the territory-based approaches to local development, thereby taking LED to the forefront (PLATFORMA, 2015). According to Rogerson (2015) and Rogerson and Rogerson (2010), globalisation played a significant role in the reconfiguration of planning approaches towards local and regional development.
Globalisation's developmental issues prompted a major reassessment of the validity of previous
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approaches to development planning, resulting in the rise and strengthening of LED, particularly in developing countries (Rogerson & Rogerson, 2010). Because of cross-border trade and contacts, globalisation is a process that involves the interconnection of global economies, governments, cultures, and populations. According to Dyosi (2016), the effects of globalisation and the increased inability of many national governments to play significant developmental role at local levels necessitated the urgent need for localised strategies in the developing countries.
Other reasons why globalisation gave rise to the significance of LED in developing countries is the new context of economic development and strategies of global firms and their choice of locations to establish new businesses or migrate the existing ones across the nations (PLATFORMA, 2015). Thus, the impact of globalisation played an important role in the emergence of local economic initiatives in most developing countries. Globalisation is believed to have played a fundamental role in international development and facilitated socio-economic transformation, thereby improving the standard of living for a majority of people including those in the developing countries. Rapid urbanisation is another factor that contributed to the prominence of LED in developing countries. Although it is the least urbanised continent, Africa is at the heart of a rapid demographic transition, which is in the process of taking her from predominantly rural to predominantly urban (PLATFORMA, 2015). Urbanisation in these countries is associated with socio-economic transformations (reforms) and globalisation processes.
Another reason that attracted most developing countries to the LED approach was their pursuit of decentralisation and their responsibility to encourage economic development at the local government level (Dyosi, 2016). After independence, most African countries were characterised by centralised macroeconomic and sectoral management of policies, which led to significant inequalities and glaring inefficiencies in the provision of services (PLATFORMA, 2015). Thus, because of centralised policies, implementation obstacles, and a lack of institutional coordination, LED has eluded the majority of African countries and failed to fulfil the intended objectives (Agbevade, 2018; Wunsch, 2014). As a result, a paradigm shifts from top-down to bottom-up approaches to local development was required, with the goal of reducing reliance on
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central government and donor finances by mobilizing local resources to implement LED projects (Masuku, Jili & Selepe, 2016). Decentralisation emerged as a technique to overcome issues in policy creation and implementation, as well as to enhance local democracy and participatory development in underdeveloped nations, because of such inefficiencies. Though decentralization improved development in certain ways, it did not produce the anticipated results due to an over- emphasis on political, social, and administrative development at the expense of economic decentralization. (Agbevade, 2018). Such failures prompted the emergence and significance of LED as an alternative strategy or approach to local development in developing countries across the world.