Why Is Local Economic Development Key to Sustainable Development?

By Thomas C. England

Why is Regional and Local Economic Development Important?

Regional and Local Economic Development (LED) is perhaps the most important key to sustainable growth, poverty and hunger reduction, and elevation of indices of well-being of a people and society. Focusing on local economies in development work is crucial because local economies – while framed by national policy – are the only “natural” economies. In contrast, a national economy is a macroeconomic generalization defined as the sum of a nation’s production of goods and services. This macroeconomic generalization is useful for purposes of public policy development, measurement, and to design economic interventions and provide development financing. But changes in national economies only happen as the economies of cities and their regions change.

Is LED the same as Localization or Locally Led Development?

LED – as ME&A practices it – is not the same as “localization” or “locally led development” but is an important form of them. These are broader terms that encompass many kinds of development initiatives. LED involves many of the same themes, including community-based initiatives that can be inspired, designed, implemented, monitored, and evaluated by community organizations and institutions themselves. What is defined as “local” and “community” are normally unique to the location and challenges being confronted. They can be defined by a neighborhood, a municipality, an agricultural sector, or an economic region. What is common to all is a bottom-up approach that often involves the “collective action” of many community stakeholders, groups, and leaders to be successful.

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ME&A has been assisting northern Chautauqua communities in western New York with LED strategies to develop business growth and job creation for more than a decade.

How do you define economic development and LED?

Jane Jacobs, the venerable urbanist and economist says that development is “significant qualitative change.” Economic development then is qualitative change in the economy.

LED is the systematic process by which public, business, and non-governmental sector partners work collectively to create better economic conditions for a locality and its region. The objectives of the LED process can be economic growth, business creation, employment generation, or combinations thereof. The key to the process is the public-private partnership between local governments, private businesses, business associations, nongovernmental organizations (NGOs), and other stakeholders.

Who makes local economic development happen?

In a market economy, the engines of economic development are primarily private businesses that create wealth and jobs. But the private sector cannot succeed without favorable business conditions in which to thrive and grow. Local actors, including NGOs, citizens organizations, local governments and other public sector actors, have a major role to play in helping to establish and maintain those favorable business conditions so that firms in the local region can compete successfully with firms from other regions.

What are some other advantages of a focus on LED?

• LED fosters efforts towards decentralization and is antithetical to government centralization.
• LED supports civil society development. LED is a tangible process through which local government, private businesses and their interests, NGOs, labor interests, and private citizens can work together collectively to develop their economic environment.
• LED supports democracy building because it places local organizations, mayors, and other locally elected officials at the center of economic development policymaking for the community – where they belong.
• LED relates systematically to community development programming and essentially all development programs related to infrastructure, public facility, and social program delivery. All either contribute to or are affected by the local economy.

ME&A worked with municipalities in the Kharkiv Region of Ukraine to develop LED strategic plans and implement business extension services.

Why specialize in LED?

ME&A specializes in LED because finding the answers for sustainable development of underdeveloped or developing nations and peoples requires a thorough understanding of the impediments to and potentials for economic development, so that creative solutions can be designed and delivered. LED is an important – perhaps the most important – key to sustainable development.

What are successful approaches to LED?

For a locality or region that is new to LED, the first steps concern organization (who is involved and how is it staffed). This is followed by completion of a community or regional profile and competitiveness (SWOT [strengths, weaknesses, opportunities, and threats] analysis) assessment; development of an LED strategy; implementing that strategy; and finally, a monitoring and evaluation system for continual feedback on the effectiveness of the strategy so that corrections to it can be made as it unfolds. Emphasis is always on making the process a participatory one, led by all significant stakeholders in the community or region.

Training is an important ingredient in the initial phase of assistance, so that key persons and institutions fully understand the concept and process as well as their particular role and the roles of other stakeholders. Organizational development is often key, which includes a review of alternative models for LED organization and selection of the one that best meets community needs. Hands-on assistance follows to facilitate the assessment phase and based on the results, implementation of the strategy.  Direct financing is also particularly important to local organizations engaged in the process.  Different financial models can be employed based on local circumstances.

What are LED tools and methodologies?

There are a number of tools and methodologies to assess, design, develop, implement, monitor, and evaluate LED programs. These include:

• Stakeholder analysis
• SWOT analysis
• Regional profiling
• Organizational analysis and development utilizing Human and Institutional Capacity Development (HICD) Human Performance Technology methodologies for performance improvement
• Competitive analysis
• Cluster development guidelines
• Cluster committee work sheets
• Cluster assessment guidelines
• LED evaluation survey questionnaires

ME&A worked with Albania, Macedonia, Bulgaria, and Kosovo to prepare their local economies for taking advantage of new business opportunities associated with highway, rail, and pipeline links.