SANE Views

Vol.6 No.1, 12 January 2006

Why is Local Economic Development taking the lime light?

Margaret Legum

Delivery, seated in local government, could hardly be more important at this period of history. At one time national governments not only funded local governments, but also called the political shots by policies at local and national level. As a result, local politics could legitimately be regarded as a bit of yawn – of passionate interest only to people fascinated by the minutiae of implementation, or watching budding national figures being nurtured in local politics.

All that has changed. National sovereignty – the arena and capacity of competing political ideals to flesh out a democracy – has declined. All governments, of whatever theoretical hue, are forced to pursue policies that will attract and retain footloose capital – since capital has been given the right to seek returns globally. And those policies are perforce pretty well uniform - obviously favouring capital over labour – regimes of low taxes, costs and wages, and high profits. Naturally.

So there is virtually no serious disagreement between political parties anywhere about economics – that is, about the questions around ‘who gets what for doing what’. Rivalry has predictably become personal, ethnic or regional, in one form or another. That is a tragedy in itself. Even worse is the loss of incentives for political parties to seek alternatives to a system that is clearly not working for the majority of humanity.

An unintended and hopeful bye-product, however, is that the political spotlight has fallen on the local - national political being bereft of issues. Not necessarily for the right reason. Governments have woken up to the fact that, despite national growth and prosperity at the top, whole swathes of their populations are falling into dereliction. Communities, which, though not rich, used to earn livings or make livelihoods – thereby gradually making their way up the class and income ladder - now do nothing but wait passively for charity or handouts, and fall into crime and addiction.

In the US and the UK, children in this class are described as ‘feral’ – wild and uncontrolled. In these communities the neglect and abuse of children is routine and endemic, even automatic; most adults have had no jobs over three generations, and economic activity is rooted in anti-social and addictive behavior. These communities justify the ideology that handouts are demoralizing. The truth is that they are the result of marginalization and despair, not of social support.

But this inescapable global trend – relatively new in Europe, but profound in the US – has focused governments’ minds on Local Economic Development (LED). Governments are asking why some areas are not sharing in the prosperity so obvious in the cities and the capitals? Why are rural areas without economic activity, small market towns becoming ghost towns, prosperous provincial cities squalid discount store pitches? Surely, they reason, there must be some way of regenerating local economies that have declined – some way of helping them share in the growth at the top without changing the system at the top. Some way of making the theory of ‘trickle down’ work.

South Africa shares this global trend, and the consequent interest in LED. Our legislation, a world-class benchmark, starts with the obvious but often overlooked fact that development must be designed and implemented as close as possible to the beneficiaries. That is, the local now has real political power to determine policy

So we have taken an important step towards climbing out of the pit into which the unregulated global market has dropped us. We still lack the vital analysis of the causes of local degeneration – the global competitive market itself. If that market did what it was supposed to do – create and spread prosperity – local economies would automatically flourish. Clearly the opposite is happening. The emphasis on LED as a specific policy initiative is a tacit admission that leaving it to the global market will not do it.

Two articles in the last issue of Delivery illustrate both the needs, and the muddle about how to deal with it. The first – Shopping in Soweto – rightly points out that poor areas are poor because money leaves the communities rather than circulating there. People who live in Soweto spend less than a quarter of their incomes in Soweto, so their buying power benefits businesses outside Soweto.

But the implied answer – affirmation for the arrival of branches of the large national supermarket chains – is hardly a solution. The profits flow out of Soweto in a steady stream, because they are not locally owned. The products are not locally, nut nationally, sourced, so they do not add to the circulation of money in Soweto. The claim that they increase employment is also illusionary. International research shows that supermarkets destroy many times more livelihoods than they create. The article claims that 1,900 new jobs will be created: that is pathetic compared to the unemployed millions. Meanwhile thousands of small entrepreneurs – producers, traders – will be put out of business. Spaza shops, and small producers do not survive the arrival of a national supermarket with its monopoly of sources and economies of scale.

This is beginning to be recognized despite the global denial to protect corporate interests. The new Polish Finance Minister has publicly announced that no more supermarkets will be allowed to operate in that country. The British TESCO chain has already spent $1 bn on 44 hypermarkets and 36 smaller stores. The result had been the destruction of city centers, where skilled people had made good livelihoods; and their replacement by a grand total of 20,000 unskilled, casualised labour. The supermarkets had also destroyed local production in favour of mass produced foreign imports or industrialized agriculture. Profits went abroad.

The second article – A New Take on Local Economic Development – is a gallant attempt to find something new to counteract the repeated failure of local economies to develop. It knocks down the familiar skittles of ‘grow, sew and bake projects’, and points out that development is about more than delivering services to passive recipients. But when it comes to positive steps the recommendations amount to a series of wordy cliques. It turns out this is a plug for a World Bank Primer on LED. So it is not surprising that it pins its hopes on policies to create ‘business-friendliness’ n- policies that have failed dismally to promote local entrepreneurship.

New thinking is desperately needed. Community exchange systems and currencies are being introduced in parts of the Cape (go to www.CES.org.za). So are developments to help people grow and consume their own food locally; and to create local sources of energy. These help to insulate local economies from the ravages of globalizing what should be localized.

We are only at the beginning of LED, after three decades of degeneration of local economies. Delivery magazine will play an important part in that process of thinking, researching and advocating the new.