The Hindu Business Line : Call for balance between local and global forces

WHILE the world economy is increasingly moving towards centralising tendencies, strategies for local economic development have become all the more crucial. Vigorous and conscious initiatives for local economic development are critical for reducing poverty and inequalities.

Two recent studies on the global development experience highlight the need for development action at the local level. The experience of development during the past one decade of active globalisation has led to the emergence of a new developmental paradigm called `Local Economic Development' (LED), Dr P. M. Mathew, Director, Institute of Small Enterprises Development (ISED), said here.

This new paradigm initiated by the International Labour Organisation (ILO), and further cemented by the findings of the `Commission on the Social Dimensions of Globalisation,' advocates a bottom-up approach of local economic development, as against the present top-down approach.

Most developing countries , he said, have passed through some initiatives for decentralisation of power during the past couple of years. Political decentralisation also necessitates an associated economic decentralisation, which along with political power, leads to a more equitable distribution of resources and opportunities among a larger number of people.

However, the experience in most developing countries show that economic decentralisation has not taken place to the extent it should have happened. The evidence is best available from the experience of enterprise development at the local level.

What does the comparative experience of the North and the South foretell? What lessons do they provide for future action? These are issues, which need detailed investigation, he pointed out.

For a long time, urban development was not considered an entirely correct goal for development policy. Lipton's thesis of "urban bias" played a crucial role in making this happen. Policies of less developed countries until recently were geared to arrest this trend. The experience in the globalisation era demonstrates that the process is getting aggravated.

Finally, information, research, and other systemic social activities rely on international networks. They inhabit virtual worlds that will shape our future. These cyber systems, however, are anchored in cities. Therefore, like globalisation, urbanisation also cannot be easily controlled or managed.

Recent studies by ILO show that globalisation and economic liberalisation contribute to an increase in several territorial inequalities within many of the countries that have liberalised their economies.

The phenomenon of `jobless growth' leads to a further swelling of the ranks of the informal economy. The `new economy' leads to more of social polarisation. As a result , growth momentum tends to get confined to a few "successful regions, which have something to offer to markets beyond the traditional realm of the local and regional spheres.

Studies indicate a pattern involving three types of centres, which can be termed as successful. These include large metros (for example, Mexico city, Madrid and Bangalore; intermediate industrial regions (Brazil, Maharashtra in India, coastal provinces of China); and tourist regions ( Cancun in Mexico, Bali in Indonesia).

Regions and localities struggle to adapt their economic fabric to the new environment, while economic activity itself has become increasingly footloose. The competitive advantage that some territories enjoyed in the past due to unique factor endowments, or proximity to raw materials, is becoming less important.

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