European policies and projects

1. European policies and projects Prof. Guglielmo Wolleb, 2013-14

2. Local development: basic theory

3. Topics • What is local development • Advantages of local development • Consistent with citizens’ preferences • Enhancement of endogenous resources • Better local knowledge • Widening human base of development • “Learning by doing” • Institutional building • Enrichment of social capital

4. Topics • Governance of local development • Decentralisation of institutions • Institutions, public goods and collective action • Policy integration • What local development policy is not

5. What is local development? • Various definitions • Three essential ingredients for local development: • Planning and implementation of strategies specifically tailored to the features of well delimited areas • Strategies aimed at the enhancement of local resources • Informed and aware participation of local subjects in strategy • Three ingredients in detail

6. What is local development? First ingredient: Planning and implementation of strategies specifically tailored to the features of well delimited areas • How to identify an area suitable for local economic development ? What does ‘local’ mean exactly? How to draw boundaries of an area for local dev't? • “Local” refer to areas with homogenous internal characteristics • These characteristics may relate to the economy, population, society, institutions or to other variables e.g. ethnicity, language etc. • Homogeneity can also be seen as the space of action for subjects closely interacting in the fields of production, institutional or of social relationships

7. What is local development? • For these reasons homogeneity of a territory is always relative to the variables used • One possible delimitation of the areas is that relationships take place directly, face to face, and on a continuous base • Local is usually sub-region or sub-province • This delimitation does not often coincide with administrative borders. This is problematic because responsibility for policy is distributed along administrative borders.

8. What is local development? Second ingredient: strategies aimed at the enhancement of local resources • A second problem refers to the social and economic content of local development • Not all dev't in an area can be defined as local dev't • Localdev't implies utilization and enhancement for economic ends of endogenous resources

9. What is local development? • Local resources can be tangible or intangible, physical or human • Can be natural or cultural heritage, endowment of human capital, production specialisations, social capital or other specific to that territory • Local dev't means businesses take account of physical and human characteristics of a territory and do not treat the area as an empty space

10. What is local development? Third ingredient: informed and aware participation of local subjects in strategy • To be local, local actors must play a significant active role in the planning, drawing up and implementation of a strategy • Local dev't is not wholly or mainly drawn up by centres outside the area

11. Advantages of local development • Consistent with society’s preferences • Enhancement of endogenous resources • Better local knowledge • Broadening human base of development • “Learning by doing” • Institutional building • Enrichment of social capital

12. Consistent with society’s preferences • Local actors know better their preferences and are better able to formulate consistent economic and social goals • Local participation in elaborating dev't strategy makes it more congruent with local system of preference (local function of social welfare) and maximises local economic well-being

13. Enhancement of endogenous resources • Each area has partly specific or idiosyncratic dev't resources • Often not used optimally • Often in backward areas. In fact, under-exploitation leads to backwardness • Reasons for under-exploitation are often internal to area (internal constraints on dev't) • Full and better use of resources through strategies calibrated to the characteristics of the area provides an opportunity for dev't for all areas and an opportunity to reduce regional imbalances

14. Better local knowledge • Local actors know endogenous resources best • In addition to codified knowledge (knowledge that everyone can access  and that are easily transmittable and independent of specific places) also local "know-how“ exclusively possessed  by local actors living and / or working in the area • Knowing more about their territory, local actors can plan more efficacious strategies

15. Broadening the human base of development • Local actor involvement broadens and improves human resources underpinning dev't • Taking part in strategic decision-making incentivates personal involvement and commitment. Local actors are active, identify with decisions and make greater effort • This may have positive effects on efficacy and efficiencyand hence on economic dev't

16. “Learning by doing” • Cooperation in planning strategy allows socialisation of knowledge and put in motion “learning by doing” processes • Local actors meet, exchange opinions, mutually enrich knowledge • Local actors learn by doing, from success and failure and analysing best practices. Continuous monitoring and evaluation improves management of intervention

17. Institutional building • Local institutions also learn by doing • Local institutions within a framework of participative political processes, make more contact, cooperate in decisions and weave closer ties • Institutional building can have positive effects on economic dev't

18. Enrichment of social capital • Participation in decisions by adopting forms of direct democracy is generally associated with the formation of local social capital • Continuous direct contact, sharing choices, cooperation in the implementation of policies can increase  mutual trust between the actors,  civic pride, density of their network relationships and facilitate collective action • Richer social capital lowers transaction costs, encourages production of public goods and creation of externalities with possible positive effects on dev't

19. Governance of local development • Many advantages of local dev't are linked to active participation and capacity to cooperate of local actors in planning and implementing dev't strategies • But effects of participation and cooperation are not automatic but depend on the framework of rules, responsibilities and procedures, that is on the governance of local dev't policy • Issues in governance:

20. Governance of local development • Governance is not the same as government • Governance – running of area characterizedby cooperationbetween different actors, institutional andother, pursuing the same ends.Thisis in contrasttoa more rigidand hierarchicaldivision of responsibilities where eachactor separately pursuesdifferentends • Today these two modes ofmanagementare not radical alternatives.Forms of governancecoexist withtraditionalforms of government. Coexistenceis notnecessarily easy.

21. Governance of local development • Institutional cooperation can be vertical or horizontal • Vertical cooperation – between different levels of institutions. E.g. in European Cohesion Policy, the EU, state, region, municipality • Horizontal cooperation – same level institutions. E.g. different municipalities in one province, different regions in one country. • Partnership – cooperation with private entities. May be only private bodies or mixed public – private actors • Multilevel governance entails cooperation at all these levels. Difficult to enact.

22. Governance of local development • Precise norms required. Overall normative framework generally laid down by highest level institutions • Financial resource allocation, monitoring and evaluation of policies, technical assistance also carried out by highest levels • Local actors organize coalitions, plan detailed strategy and implement projects • Through concertation • Concertation must be regulated and managed. Not spontaneous or anarchic. Local actors lay down operating rules

23. Governance of local development • Main problems of concertation: • Who needs to be involved? • Distribution of powers among different local actors • Blend of “Direct democracy” and “delegated democracy” • Competence and experience accumulated over time by local actors

24. Governance of local development Who needs to be involved? • Concertation normally inclusive but it is not always opportune for all parties to be involved in all decision-making processes • Potentially important actors, stakeholders or knowledgeable actors, should never be excluded • But too many participants (or the wrong participants) lengthen time, raise costs and reduce efficacy

25. Governance of local development Distribution of powers among different local actors • Outcomes of concertation affected by the asymmetry of legal or factual power of various local actors • Strong actors can sway outcome away from the collective interest

26. Governance of local development Blend of “Direct democracy” and “delegated democracy” • Which decisions must be taken in a full meeting and which should be delegated to specific political or technical bodies? • Too many full meetings imply the risk of scarcely innovative choices and distributive outcomes or of purely political and not technically optimal solutions. • Too much delegation entails the risk of solutions favoured only by small groups without broad consensus

27. Governance of local development Competence and experience accumulated over time by local actors • Quality of design and efficiency of management depend on the capabilities, skillsand experienceaccumulatedby localactors • Weak and inadequate skills, low administrative efficiency, lack of familiarity with collective action strategies can lead to weak and inefficient performance

28. Decentralisation of instituions • A corollary of the importance of participation in local dev't is the importance of a decentralized institutional system • Simpler to organize efficacious local actor participation in a decentralised system • In decentralised systemlocal institutions should better reflect citizens’ preferences • They have greater powers and therefore more control over dev't strategies and policies

29. Decentralisation of institutions • At the same time  citizens have more control over the work of local institutions • Local actors have more autonomy because they depend less on vertical relations with the centre  and more on internal horizontal relationships • Degree of decentralization and characteristics can obviously differ greatly from one institutional system to another. Highest degree of decentralization in federal systems in general • Big move towards decentralisation in EU and other European countries in recent years • See the introduction of the principle of  subsidiarity in the European Treaty (Maastricht 1992) and then in the Italian Constitution (2001)

30. Decentralisation of institutions • The principle of subsidiarity states that public intervention should be made at the institutional level as close as possible to the citizen, unless there are reasonable grounds for believing that the intervention can be undertaken more efficiently at a higher level • This principle therefore does not gointo the issue of which is the best level for an intervention. Burden of proof is on the upper level to produce good reasons for carrying it out • The principle of subsidiarity states as well that public intervention must be made, wherever possible, taking into account and valuing the contribution of individual citizens and organized associations

31. Decentralisation of instituions • The alternativeto a decentralized institutional systemis a centralized system with local branches that depend on the centre. There are also casesoflocalinstitutional dev'tin this institutional context

32. Institutions, public goods and collective action • Institutions may play a driving role in local economic development • This role is associated with the production of public goods and with the promotion of collective actions • Let see in detail the link between institutions, public goods and collective action in the framework of local development

33. Institutions, public goods and collective action • Local dev'tis facilitated by the creation of favourable overall conditions foreconomic activity • Favourable contexts made possible by production of public goods • Public goods -  no rivalry in consumption and no excludability conditions • Club goods - no rivalry in consumption, but targeted to a specific set of subjects (those who belong to the club) with the exclusion of other subjects (those who do not belong to the club) •  local public goods -  assets of the club where  club members are people who live and / or work in a given area within which the public good exerts its impact

34. Institutions, public goods and collective action • Some of these goods have an important effect on the competitiveness of enterprises as they create positive externalities for firms operating where these public goods produce their effects • positive externalities refer to advantages in terms of increased earnings or cost reductions deriving from production or consumption by third parties • E.g.: construction of a road by the public sector brings advantages in terms of reduced costs of all companies operating in that area, the promotion of a technical school by a business association brings advantages of revenues or costs for all firms  in terms of availability of skilled labour

35. Institutions, public goods and collective action • Public goods can be tangible or intangible. Tangible: transport infrastructure, computer networks, education and health facilities. Intangible: trust, social cohesion, knowledge • Public goods can be produced by different entities and in different forms • Public Institutions at different levels are responsible for defining the production of public goods . For  local dev't the role of public Institutions that produce local public goods is of particular importance • Public goods can also be produced by private entities. It may be appropriate to offer  incentives for  the production of public goods • Some public goods may be the result of unintentional actions or processes

36. Institutions, public goods and collective action • Public goods often require collective action • Collective action is justified in situations where  individual actions for achieving their particular goals do not lead to an optimal  collective outcome • The management of commons is a typical case requiring collective action • Subjects who participate in collective action can be purely private bodies or there can be private-publicpartnerships  • Collective action involves cooperation between different actors taking part

37. Institutions, public goods and collective action • This cooperation is achieved through consultation processes where different subjects compare their different points of view and seek a common solution to common problems • Cooperation does not necessarily mean that the interests of participants  are  convergent. There may be no common solution • The role of Institutions in the choice of strategy and alignment of the different positions is very important. Institutions can play a non-partisan role,  make choices with a long-term time horizon,  take risks associated with innovative choices

38. Institutions, public goods and collective action • Social capital also plays a key role in collective actions • Social capital endowment makes positive outcome of collective action more likely. Lowers risk of opportunistic behaviour and facilitates the alignment of individual positions

39. Institutions, public goods and collective action • Efficacy of public good heavily dependent on outcome of collective action. Three risks of collective action: • produces no outcome • leads to compromise solution that does not serve collective long-term interests • leads to solution serving minority rather than collective interests

40. Policy integration • It is often said that dev't policy must include integrated sets of measures • What is integration and what forms can it take?

41. Policy integration • Local dev't requires closely integrated policies. Sets of complementary and synergic measures with the same objective • Integration allows concentration of resources for priority objectives. Lack of integration leads to dispersal of resources and multiple objectives. • Sets or packages may include widely differing types of intervention • Integration in local policy is mainly horizontal: multi-sector packages

42. Policy integration Examples: • Restoration and re-opening of cultural monument • Access to the area improved • Services to increase exploitation of the monument • Marketing measures to publicise the monument and its availability • Monument linked to others cultural goods in a circuit to increase level of attraction • Training courses for personnel involved in the management of the monument

43. Policy integration • Local policies vs. sectorial policies • A sectorial policy is e.g. a national policy aimed at a specific industry • Sectorial policies may also require forms of integration: chain policies   • A  chain  policy brings together  interventions aimed at the value added chain

44. Policy integration • Chain policy not aimed necessarily at the same area as the various links of the chain can be located at distance from one another • The objective is often to avoid specialization in the low value added segments of the chain • E.g.: • Intervention linking farm to food production • Intervention linking food production to food machinery production • Intervention aimed at strengthening distribution networks of agri-food products

45. Policy integration • Policy integration also occurs when policy is implemented by different levels of institutions • European, national and local policies need to be consistent. Their goals and impact must be consistent • Frequent problem in the literature is sectorial policies that increase territorial imbalances, thus conflicting with cohesion policy

46. What local development policy is not • It is important to avoid misunderstandings. • What local development is not

47. What local development policy is not • notself-referentialor self-sufficient: • Skills availableoutside may be lacking in thelocal context • External interventionmay be necessary in order to breakup local collusionmechanisms • The optimal sizeof many interventionsis greater than local

48. What local development policy is not • notspontaneous because • It takes place within a system of rules imposed by the centre • It requires its own system of rules for operation • Success of local development strategy largely depends on adequate system of national and local rules and on their interplay

49. What local development policy is not • Not in contrast with the processes of globalization because • mobile resources are attracted to competitive and attractive local contexts • synergy between the enhancement  of immobile resources  and attraction of mobile assets • globalization has reduced the regulatory power of nation states and made   regional and local government more relevant

50. What local development policy is not • Not confined to traditional industries • Many cases of local dev't based on Hi tech • In Italy, local development studies reveal systems of small enterprises specialised in traditional sectors • But elsewhere numerous examples of local dev't in hi-tech sectors such as biotechnology, IT and media • Specific characteristics of local systems and types of public good creating external economies vary