RECONCEPTUALISING LOCAL ECONOMIC DEVELOPMENT STRATEGIES
Dr Marcus Spiller , Principal & Partner , SGS Economics & Planning
INTRODUCTION Councils these days routinely produce local economic development strategies . These are often required by legislation and are recognised as one of the four pillars for sustainable communities ( the others relating to social , environment and governance parameters ). Councillors are typically vitally interested in local economic development and put considerable effort into working with their executives to bed down these strategies .
Our 30 year history of producing local economic development strategies causes us to ask two key questions . Firstly , have these carefully crafted plans made a material difference ? Secondly , do they properly understand the contemporary economy and , more importantly , the value which Councils can add ?
It may have taken the prompt of a major crisis like COVID-19 , but there seems to be a growing conviction within the economic development community that a fresh approach and a different conceptual lens are required in strategizing for prosperous local communities . This paper presents an alternative approach based on ‘ 3 windows ’ to the local economy .
But before we get into this model , let ’ s remind ourselves of what has come to be the ‘ traditional ’ approach to building local economic development strategies .
TRICKLE DOWN A strong and recurrent thread of local economic development strategies produced over the past 4 decades is a focus on discrete major investments in infrastructure or the attraction of key enterprises to boost local business through supply multipliers .
To an extent , this reflects orthodoxies in broader policy making for economic development at the state and national levels where much effort has gone into identifying and leveraging areas of competitive advantage . These sectors are supported to drive growth through inter-regional and international trade . Meanwhile , to optimise the value of these income injections , the agenda for other sectors in the economy is ‘ micro economic reform ’ to enable rapid flows of capital and labour to where the returns are greatest . This can be summed up as a ‘ trickle down ’ conceptualisation of economic development .
Figure 1 illustrates how the trickledown model applies in local or regional economies . The regional economy relies on external injections of income , primarily via exports to other regions in Australia and internationally , to fuel the multiplier effects which drive job creation . These multiplier effects are diluted to the extent that the regional economy ‘ leaks ’ income to external providers of goods , services and capital .
Boosting the region ’ s prosperity therefore depends on maximising export income while containing income leakages . The capacity to do this depends on a number of enabling factors relating to skills , leadership and infrastructure at the economy wide level and access to capital and innovation at the firm level .
The traditional approach , depicted in this way , provides a ready checklist for the production of an economic development strategy . You begin with your ‘ hero exporters ’ and look to see how they can be made more effective in inter-regional trade . You then work through the various enablers to ensure that the region is maximising multipliers from its exporters , including by mitigating leakages of income .
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