Globalisation and Restructuring

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From the course by Erasmus University Rotterdam

Local Economic Development

10 ratings

Erasmus University Rotterdam

Local Economic Development

10 ratings

Welcome to this MOOC on Local Economic Development (LED). Local economic development refers to the processes by which local governments, businesses, and civil society groups get together to raise income sustainably and improve their lives in a well-defined area. It’s about creating jobs, securing livelihoods, improving infrastructure and managing local resources. What do I learn? We will be dealing with questions such as the following. Why does economic development take place in some areas of the world and not in others? Why doesn’t it happen in your place? What prevents people from having the lives they want to live right there? Could your region make more of the opportunities of globalization and new technologies? Did the promises of decentralization in your country fail to deliver better public services and more responsive governments? If these are the questions you are asking yourself, this is the right course for you. It explores the where, who and how of economic development. Please have a look at our list of contents for the coming 8 weeks: 1. What is LED? What drives it? 2. How does globalization shape LED? 3. How does decentralisation affect LED? 4. How does competitiveness affect innovation? 5. What are entrepreneurship and its dimensions? 6. Why are value chains and clusters so important? 7. What are some LED strategies? 8. Your project How will I learn? In each week you will be able to access the content of the videos, suggested readings and additional videos for selective deepening. You will also find assignments that you have to complete if you want to earn a certificate for this MOOC. We will first introduce our “toolkit”, a series of theories and concepts that will help you read the situation in your locality. We will explore the main factors affecting local economic development, such as globalization, decentralisation, and competitiveness. We will discuss key components, like entrepreneurship and innovation and look into the organization of local economies into clusters, value chains and learning regions. We will conclude by deepening on some specific constructs that make local economies grow to benefit their communities. You will also contribute your ideas in the discussion forums, where you will learn from other participants around the world. What makes this course special? There is plenty of information in Internet on local economic development, which is mostly prepared by international donors or multilateral organisations. So what does this course do differently? First of all, the course is offered by academics that have significant published research on local economic development. This course gathers a wealth of academic knowledge that often fights the assumptions on what things are supposed to be like. Second, the instructors of this course have participated in dozens of capacity building projects in Latin America, Asia, Eastern Europe and Africa. Putting learning at the centre, they worked with communities, local governments, international donors and business associations. They often found a significant distance between theory and practice in local economic development, and this has been the basis of learning. Third, the course is acutely aware that each region is different and does not attempt to offer a one-size-fits-all recipe. It singles out key factors that drive local economic development and enables participants to do their own learning process, defining local problems and appropriate solutions. The aim of the course is that participants come up with their own ideas on how to promote local economic development. How will I get a certificate? If you want a certificate for participating in this MOOC, you will need to complete a small assignment each week and participate in the discussion forums. In the end of the MOOC, you will put these contributions together in one final document, your Capstone Project. I hope you find this course exciting and that you get to share our passion for promoting local economic development. Your instructors Dr. Georgina M. Gómez, ISS Prof. Emeritus AHJ (Bert) Helmsing, ISS Dr. Jan Fransen, IHS

From the lesson

Globalisation

In this week, you will appreciate the pressures and opportunities posed by globalization on the local level. Globalization is conceived as a phenomenon in two tiers. At one level, infinite flows of information, culture, trade, financial flows, and migrants seem to move in all directions around the planet. At another level, globalization is a much more identifiable phenomenon that occurs within closed networks of cities and regions, in which specific actors exchange goods, services, investments and knowledge. As a result, some regions are included and others are excluded. Video 1 addresses the first tier of globalization and defines it as the combination of four flows: trade, financial flows, migration of workers, and their integration in global value chains. This video is prepared by ISS Professor Irene van Staveren, and is part of the MOOC on Pluralistic Economics. You will get a feel of that MOOC too, which we recommend for those that want to deepen their knowledge on economics. Video 2 explores the second level of globalization and maps global networks of cities and regions. It discusses how being included or excluded in these networks affects local economic development. We called this video The Ties that Bind Us. It is offered by South African IHS Professor Ronald Wall.

Globalisation and Trade2:41

Globalisation and Restructuring13:03

Meet the Instructors

Georgina Gomez
Associate Professor in Institutions and Local Development
ISS
Bert Helmsing
Emeritus Professor of Local and Regional Development
ISS
Peter Knorringa
Professor of Private Sector & Development
ISS
Jan Fransen
Head of Education & Training
Institute for Housing and Urban Development Studies (IHS)
Ronald Wall
Head of the Urban Competitiveness and Resilience
IHS

Welcome to this week on Globalization.

My name is Ronald Wall,

working at the Institute for Housing and Urban Development Studies

at the Erasmus University Rotterdam.

I'm an economic geographer,

and urban planner with a fascination for the topic of globalization,

and how this impacts local economies around the world.

Probably, just like you,

I've become increasingly aware that the city in which I live is no

longer only affected by local economic social and environmental forces,

but increasingly by regional and global relationships.

Example, breaks it, the recent global financial

crisis migration into Europe and climate change.

These relationships extend far beyond our borders,

and increasingly tie us together into an interdependent global community.

Based on this, we can say that globalization is equal to the ties that bind us.

We and our local economies are strongly

connected together through networks of information,

culture, trade, financial flows, and transport.

So, do you learn it?

If these global and regional flows are affecting the development of our cities, example,

income inequality and climate change,

should we not include this knowledge in how we govern our local economies?

If so, can we map these networks or taste their effect on the development of our cities?

Do you agree that governing your economy can

no longer only be confined to the municipal scale?

To support your answer,

this video will be based on empirical data to

show you how cities are connected through financial flows,

and how this affects local economic development.

I hope we will stay tied together for the next part.

Let's first have a look at the distribution of foreign direct investment,

otherwise known as FDI into roughly 1200 world cities over the period of 2003 to 2016.

In the video, we see

a three-dimensional GIS animation of these investments into the cities.

The higher the peak,

the more total investment received in a city.

We also see that FDI is very unevenly distributed around the globe.

There is an uneven geography of investment.

Did you notice that the Global North receives the most investment?

Especially regions like Europe,

North America, and Pacific Asia which get the lion's share.

Africa receives by far the least investment.

What could be the reason for this?

In relation to the video,

let's now look at the flow of investment between these cities.

What you see here is a GIS map of the top 1000 investments

taking place between cities in the period 2003 to 2016.

Again, we see that these investment flows are

mostly between wealthy cities in the Global North,

while the Global South has very few linkages.

From this, you might question,

what the effect can be on countries and cities in Africa,

Latin America, and Southeast Asia?

In the map, you will see green cities as well as blue cities.

The green cities represent the outward or source investment sent to other cities.

The bigger the green dot,

the more outward investment.

The blue dots represent the inward or destination investment.

This is the investment received from other cities.

Do you see the legend?

It is clear that cities that have the highest outward investments are the usual suspects,

Paris, Tokyo, London, and New York.

These powerful cities control production and markets around the world.

It should also be clear to you that the strongest receivers

of foreign direct investment are cities like Shanghai,

Singapore, London, and Dubai.

You might also have noticed that seven out of 10 of these are in the East.

Now, let's zoom into Europe.

It is evident here how complex the FDI system is.

The key outward investment cities are cities like London,

Paris, Amsterdam, Frankfurt, and Zurich.

It will also be clear to you that there is

a green outward investment corridor running from London to Milan.

This is one of the core outward investment regions of the world.

Now that you see how unevenly distributed FDI is in the world,

and also in Europe, you may now wonder what

the effect is on FDI and local economic development.

As you will see by the presented quotes of other researchers, these opinions vary.

There is not a straightforward answer to this,

although most research tends to support the fact that FDI has

a direct positive effect on local economic development,

as is the case of the study by Lu and Liu in 2005.

In the next quote, the work of Kinoshita and Lu,

also shows a positive significant relationship,

but they stress that this is not a direct relationship,

but conditional to a country's level of human capital,

infrastructure, and financial, and market development.

This means in other words,

that FDI can lead to economic growth,

but that cities and regions need to play their part in achieving this.

On the contrary, an insignificant relationship has been shown by Onaran and Stockhammer,

where they show FDI and local development do not have any relationship at all.

The variation in these results can be due to geographic scope,

the years of the data observed,

and the quality of the data.

The previous slide explains different views from more mainstream types of analysis.

In the following slide,

I introduce to you a more sophisticated quote by Alderson and Beckfield,

which has always been a strong inspiration to

my own work and forms a bridge to the rest of this video.

It states that world cities, in other words,

local economic development, is not only determined by aspects such as education levels,

innovation, infrastructure, etc., but that a city

depends also very much on its position within the global economic system.

As we have seen earlier,

cities are connected by investment flows,

creating the ties that bind us.

It is this measure of how tied together cities

are and the different metrics used to measure this,

that also determines a city's level of local economic development.

This will be explained next. Please keep connected.

In this next part, based on a very simple example,

I will explain to you the basics of understanding and measuring network data.

In this example, imagine a hypothetical world with only 12 cities, in other words,

dots A to L. The gray colored cities are source cities,

investing into the cities that are colored blue.

Their outward investments are called the Outdegree.

The white lines depict the investments,

and the arrows show the direction of the investments.

The blue cities receiving investments are called the destination cities,

and they express the Indegree.

It will be clear to you that City D receives the most investment,

in other words, an indegree of five.

This is followed by City H with three investments and so forth.

At this point, you might be asking yourself,

what has this got to do with city development?

In this image, we now see the relationship with development.

The indegree is a measure of the number of cities investing in a particular city.

It is a measure of how integrated a city is in the world investment system.

According to the theory,

the more a city is integrated into the global investment system,

the better or worse it will be formed in terms of development.

In this sense, if you look at City D,

due to it having the highest number of city linkages,

it would have the strongest economic integration, and therefore also,

the highest impact on urban properties like prosperity, inequality, or smartness.

City D is followed in order by cities H, G,

and F. Next, how do we convert

the schematic data into useful data that you could use in a statistical analysis?

Here, we see that the original city network diagram

has been translated into a simple matrix table.

It concerns investments from City H to L in the rows,

and the Cities A to L in the columns.

For instance, City A invests in City D, G,

and also H. City B only invests in Cities D and F, and so forth.

Now, we can add up all the investments in the rows to define the outdegree of each city.

If we edit the investments downwards in the columns,

then we obtain the indegree.

These measures can now be added to other city data to test their significance.

I will explain this in the next part.

In this last table,

we see a simple statistical model testing in a real situation

indegree and outdegree measures on the urban sustainability index.

This is a measure of sustainability developed by the research group Arcadis,

and had been done for many global cities.

Some other indicators have been added to the analysis which serve as controls.

These are, for instance, population,

urban land area, and unemployment rate.

The indicators with asterisks stars represent

the indicators that significantly affect sustainability,

marked for your convenience in black.

It is clear from this table that indegree has

a positive and significant effect on urban sustainability.

In turn though, outdegree has no significance on sustainability.

Population has a significant,

but negative effect on sustainability,

while all the other indicators remain insignificant.

This introductory video has introduced you to the concept of

globalization as a network phenomenon of interactions between firms,

and cities, and especially how this affects local economic development.

In other words, the ties that bind us.

The video importantly reveals that a city, or region,

or a country is increasingly influenced by global economic forces,

in this case, foreign direct investment.

In other words, you have discovered that

external network characteristics also importantly determine the performance of cities,

not only local internal ones.

You have also learned how to represent city network relationships, but also,

how this can be interpreted into a network matrix table,

and that network can be calculated and used for further statistical analysis.

Then, based on a real world model,

it was demonstrated to you that network measures

significantly affect the sustainability level of cities.

I hope through this video,

you agree with me that local economic development is dependent on the ties that bind us.

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