Local economic development

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The terms ‘local economy’ and `local economic development’ have a double meaning.

As a descriptive or analytical category these terms cover all economic activities which happen at a local or regional level and/or have an impact on localities. From this perspective the locality is seen as an economic actor in its own right. In traditional economic thinking the locality exists more or less only as a place or space where other economic actors like enterprises, industries, investors, authorities etc. compete and use and exploit their natural and human resources. From a local economic view point the localities, ie. the neighbourhoods, villages, towns, cities and regions are seen as ‘living and organic structures’ (Nicholson) which in English would be called ‘communities’ (‘communautés’ in French and ‘Gemeinwesen’ in German).

But also ‘local economic development’ has a more activity oriented or political meaning as an alternative type of economic development. Instead of development ‘from above’ (carried out from the state or other authorities), development ‘from outside’ (relying on investors) or ‘laissez faire’ (wait and see) it could be characterised as ‘endogenous’ development or development ‘from below and within’.

Local economies have been the basis of the overall economy for centuries but economic growth and especially globalisation have endangered and are finally destroying such local economies. Local economic development is a reaction to these trends in globalisation and an attempt to re-gain power – economic, political and social – in localities. It is a special economic self-help strategy originally invented by and for the losers of globalisation - disadvantaged social groups and disadvantaged communities at a local or regional level. Local economic development is mainly based on practical experience, improved by trial and error and learning from successes and failures of others.

Although there are a lot of corresponding aspects, the term ‘community economic development’ is slightly different and refers to economic development only which is carried out, owned and controlled by representatives of the local community. It could, therefore, be understood as a special type of local economic development.

However, what ‘local economic development’ and ‘community economic development’ have in common is the main aim or objective of their economic interventions which is ‘for the common good’ or ‘community benefit’. This will be achieved by:

- Integrating social, environmental and cultural policies

- Identifying and serving unmet needs

- Protecting and re-establishing local economic cycles

- Building and improving social capital

- Mobilising the untapped resources of local people

- Setting up locally based and accountable enterprises

Concept for a programme of local economic development

Source: Birkhölzer, K. (2008): Local Economic Development and its Potential. Berlin: [www.technet-berlin.de]

The following is an ‘ideal-type’ concept based on the exploration and evaluation of best practice examples all over Europe, identifying successful tools and instruments which could be found behind these examples.

Local economic development has to be understood as a process (not a result) which needs time and patience. Within this process we distinguish between three phases:

- a first phase of building ground in the community (steps 1 to 4) - a second phase of further community development (steps 5 to 7) - a third phase of establishing a working community economy (steps 8 to 9) In the centre of the model we have placed the community as the main actor. But a group of people has to come together to form a community initiative or organisation to start with the process. Without such a body nothing will happen.


Related topics


Source: Birkhölzer, K. (2008): Local economic development and its potential, [1]

Lokale Soziale Ökonomie