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E. Gaule.

Modern Community: the Concept of Local Economic Development Moderni bendruomen: vietins ekonomins raidos koncepcija


Egle GAULE, Dr. Kaunas University of Technology

Global economic crisis in 2007-2009 affected countries slowing down economic growth and increasing unemployment. While governments address the crisis by developing effective strategies of crisis control through macro-economic, structural and fiscal policies, locally-orientated economic policies are rare in broader economic policies. However economic development processes taking place at the municipal level are important in overcoming the global economic crisis and reviving the national economies. Local economic development is a process that brings together resources from within and outside the community to promote economic growth in a systematic and organized manner at the municipal level. While local economic development is widely used in developed and developing countries all over the world (there are prepared various handbooks and toolkits for this) and is extensively investigated (starting from analysis of more general to specific issues) in academic literature, it gained insufficient attention in Lithuania. There are neither prepared comprehensive scientific nor practical studies of local economic development and there are missing the strategically led activities at the local and national levels in Lithuania. Thus, the aim of the research is to give a comprehensive theoretically based overview of economic development processes taking place at municipal level. This article is organized seeking for systemic local economic development issues analysis. The context of local economic development emergence and evolution are analyzed at first. The concept of local economic development is presented further. The substance of local economic development is disclosure by presenting the process of local economic development management, the strategies and tools, the stakeholders and their role, and institutionalization forms. The potential impacts of local economic development are presented further.

The article concludes by the recommendations provided for further directions of local economic development investigation.

The reasoning for coordinating local economic development initiatives

Local economic development has gained the significant attention due to various economic reasons. First, the needs to relieve the effects of economic fluctuations in periods of economic expansions and crises, such as to control the development of economy and unemployment rate are seen as key role of government in economy. Second, globalization creates new challenges and opportunity for industry and workers (Blakely, Bradshaw 2002), i.e. on the one part, the change of the structure of economy reflecting the expansion of production of goods based on innovations and high technologies requires appropriate use of certain fiscal instruments and changes in educational, social security and etc. policies. On the other part, the increasing number of people (especially of highskilled workers), capital, and business that are migrating across the countries creates a strong competition requiring exclusive strategy development and the use of reasonable measures. Widely used phrase Think globally, act locally sounds rather declarative in different contexts but not in this case. Communities, cities and governments increasingly turn to locally focused economic development strategies in response to the challenges of globalization and decentralization. The increase in the level of interaction among national economies over the last two decades of the twentieth century is unprecedented (RodrguezPose 2001). Since the late 1980s, world trade has expanded significantly and foreign direct investment has increased fivefold, with the largest percentage of world trade and foreign direct investment taking place between developed countries due to the


MOGIKIEJI ITEKLIAI: RAIDOS TENDENCIJOS HUMAN RESOUCES: DEVELOPMENT TENDENCIES opening up of borders and the switch from economic strategies based import substitution or central planning to relatively liberal free-market systems. Globalization and economic liberalization is contributing to an increase in social and territorial inequalities within many of the countries that have liberalized their economies (Rodrguez-Pose 2001). In this time one thing is very clear - the forces of economic change do not respect national, regional, local or community boundaries (Blakely, Bradshaw 2002). The forces of nature, demography, technology and industry are such that no local economy can ever count on achieved position of stability and security (Blakely, Leigh 2010). Local authorities are being given significant new powers to encourage them to focus on economic development. Economic theory argues that decentralization results in better allocative efficiency because governments, being closer to the people (and business) are better able to interpret local needs, make better public investment choices. More recent thinking associated with local (and particularly economic) development would add that local governments are best able to interact with the local private sector and other stakeholders (Ford 2004). Realization of foundations of self-governance, the intention for competition and cooperation between local governments increase demand for local economic development. Local governments are committed to working with citizens, groups and communities to create sustainable human settlements that provide for decent quality of life and meet the social, economic and material needs of communities in a holistic way. Promoting robust and inclusive local economies requires the concerted, coordinated action of all spheres and sectors of government, but local governments should play main role in economic development because (The Australia South Africa 2005):

they are permanent structures and can assure stability over time to support economic development, which is a long-term, on-going process rather than a single project; they can play a critical role in supporting other local stakeholders to promote economic development by building partnerships between the municipality, community and business which are a key factor of success in economic development projects; they are the closest level of government to the community and the point of delivery of essential services which impact quality of life.

Through the integrated development planning process, local governments are in a unique position to be able to bring together all stakeholders. This is because they alone perform statutory functions for the whole community, and they alone have the requirement to engage the community in the affairs of the municipality. Bringing together stakeholders ensures that all relevant parties can consider the economic needs of the territory, and develop an economic development approach that fits with local needs, and also those of national and regional governments.

Evolution of local economic development

In its early form local economic development was associated with inter-locality competition to attract mainly industrial investment. The first began in 1930s with the efforts attracting industry into certain territories with tax abatements, loan packaging, and infrastructure and land development, or other assistance for cost of production reduce. The tensions around competitiveness and collaboration have been addressed by trying to use collaboration to further competitiveness, but the tensions between sustainability and economic development have not been addressed at all (Newman 2008). From the late 1960s to early 1970s local economic development took different forms in different contexts, ranging from the public-sector Local Enterprise Boards in the UK to the projects of private-sector led entrepreneurialism in the municipalities of Europe and North America. The distinction between public and private initiative was to be blurred by the rise of coalitions and the increasingly popular concept of partnership, conditioning of government assistance to significant private participation in government approved projects. From 1980s governments shifted their focus to entrepreneurship and assistance to small

they play a key role in meeting the social, economic and material needs of their communities; they are expected to structure and manage their administration, budgets and integrate their development planning processes to give priority to basic needs and promote social and economic development of the community; they themselves impact on the local economy because they employ people from the local area. Indeed in some areas they may be the largest employer in the locality. They also purchase goods and services, develop infrastructure and regulate the development of land, all of which have an impact on the local economy;


E. Gaule. Modern Community: the Concept of Local Economic Development Moderni bendruomen: vietins ekonomins raidos koncepcija and medium business enterprises. A common theme in 1970s and 80s was the role of local actors in defining their autonomy - in taking independent initiative as a response to the globalization and, sometimes even, to unfavorable national policies. The past two-three decades have seen further shifts in the idea of local economic development. The growing attention to locality and community decisionmaking in democratic states facilitates local economic development. Local economic development is a process by which local government and/or community-based groups manage their existing resources and enter into new partnership arrangements with the private sector, or with each other, to create new jobs and stimulate economic activity in a welldened economic zone (Blakely 1994). Local economic development can include various initiatives. Narrowly and commonly local economic development is conceptualized as support for economic growth in the municipality or district by using different means: supporting micro enterprises (run by one or two persons); supporting small business development; providing skill training; encouraging domestic or foreign investment by providing infrastructure like good roads, or reducing crime; providing municipal services, such as transport, education or regulations, which support local economic development. But actually local economic development may involve all such activities and even more, depending on the particular needs of the municipality or territory. The success of local economic development relies on representatives of the public, private, non-government and community organizations working together to make a difference. White and Gasser (2001) establish four features that characterize local economic development strategies: (a) they require participation and social dialogue; (b) they are based on territory; (c) they entail the mobilization of local resources and competitive advantages; (d) and they are locally owned and managed (White, Gasser 2001). Local economic development is not simply locating whatever economic activity in whatever territory area, but acting for the development of local economic system as such. It emphasizes local control, using the potentials of human, institutional and physical resources. Local economic development initiatives mobilize actors, organizations and resources; develop new institutions and local systems through dialogue and strategic actions. Local economic development should be seen as vehicle for development of local economies that by exploiting local opportunities address local needs and contribute to national development goals of economic growth and poverty alleviation.

The process of economic development in municipality

Local economic development process should be based on careful and detailed planning and primarily informed by good practice in urban planning and development (Cunningham, Meyer-Stamer 2005). Local economic development process should be an integral part of a broader process of strategic management. Effective strategic management ensures that priority issues are addressed and limited resources are well targeted. Five main stages or steps in local economic development process may be identified: The local economic development process begins by territorial diagnosis and institutional mapping, i.e. identifying the stakeholders (individuals, public institutions, businesses, community organizations and other groups) with interests in the local economy. The knowledge, skills and resources that each of these stakeholders bring to the local economic development process provide a critical foundation for success. Local economic development initiative needs to be based on a profound investigation of the local economy. Local conditions analysis and assessment helps to acquire knowledge about the local economy and its resources. Each territory and community has a unique set of local attributes that can advance or hinder local economic development. The aim of the local economy assessment is to identify the strengths and weaknesses of territorial socioeconomic and political environment including its human resource capacity, local governments friendliness to all types of business activities. By designing economic development strategy a shared economic vision and goals, objectives, programs, projects and action plans are developed. Well coordinated implementation of local economic development needs an institutional basis the local economic development unit in municipality and/or committee in council of local government or a local economic development agency, a business association, and a stakeholder forum. This process ensures that all major stakeholder groups are given the opportunity to define what is to be achieved, how it is to be achieved, which will be responsible and the timeframes associated with the implementation of the strategy. Local economic development strategy implementation is driven by the action plans. The local stakeholders,


MOGIKIEJI ITEKLIAI: RAIDOS TENDENCIJOS HUMAN RESOUCES: DEVELOPMENT TENDENCIES according to their competence, resources and capacities, implement the bottom-up development strategy using action plans. Good monitoring and evaluation techniques help to quantify outcomes, justify expenditures, determine enhancements and adjustments, and develop good practices. Ongoing monitoring is provided through the formal structures identified and created in step one, and evaluation of specific project outcomes ensures that the strategy continues to lead to the achievement of the local economic development vision, goals and objectives. This information also feeds into the review of the complete local economic development strategy. The five-step planning process should be tailored to complement, and correspond with, other integrated local planning processes. The process of designing and implementing local economic development policy may vary according to the types of policies adopted and institutions established in the municipality. increase local wealth if such assistance leads to an increase in usage of land or labor that would otherwise be unemployable. The wealth of a local economy can also be expanded without any increase in exports or decrease in imports by increasing the local economys productivity profits. Because most economic development programs that increase productivity provide assistance to businesses, most benefits would seem to accrue to the business sector. This raises doubts about whether such programs should be subsidized by the general public, or by taxes or fees on business (Bartik 2004). The importance and feature of local economic development strategies consist in its origin. Local economic development strategies present an alternative to traditional top-down and sectoral policies for economic development and allow communities to take greater control of their economic development processes (Rodrguez-Pose 2001). Local economic development strategies place a strong emphasis on:

Local economic development strategies and tools

Even without government efforts, local economic development will often occur. However, local economic development programs are argued to increase the quantity or quality of local economic development (Bartik 2004). Local economic development may be defined as increases in the local economys capacity to create wealth for local residents either through local job growth, which causes unemployed labor and land to be used or if local resources, such as labor and land, are used more productively. Economic development policies are more likely to increase the total number of jobs in the local economy when these policies assist new businesses or business expansions that add to the local economys exportbase or substitute for local imports. In this context, exports refers to goods or services sold outside the local jurisdiction, for example to residents or businesses in another city. Imports refers to goods or services purchased by local residents or businesses, but produced outside of that local jurisdiction. If the economic development policies encourage expansion of businesses whose increased sales neither increase the local areas exports nor substitute for imports, then these increased sales must come from reduced sales of other local businesses. With increased sales in assisted local businesses counter-balanced by reduced sales in other local businesses, significant increases in total local jobs are less likely. Assisting nonexport base firms can

integrated territorial and systemic approaches. Local economic development strategies should be directed towards the local economy system, acting on economic processes and form the strategic system of interventions. These strategies encourage economic activity by addressing specific economic conditions and sources of competitive advantage, supporting firms and employment opportunities to make them more resilient in the global economy by thorough understanding of all sectors of the local economy and a focus on how the business-enabling environment can be improved in order to retain current economic activity and attract new investment. Firstly, the diagnosis of the economic, social, and institutional conditions of every territory and the identification of the local economic potential are the foundations upon which local economic development strategy is built. Secondly, while traditional approaches have relied on financial support, incentive packages and subsidies in order to attract and maintain economic activity, local economic development tends to shun such activities and concentrates on the improvement of the basic conditions for the development and attraction of further economic activity. strong governance and policy coordination. The greater degree of policy coordination at the horizontal and vertical levels and new practices for transparent and accountable governance


E. Gaule. Modern Community: the Concept of Local Economic Development Moderni bendruomen: vietins ekonomins raidos koncepcija across a range of development partnerships and coalitions are achieved because local economic development strategies are locally initiated, owned, and managed or with strong local support.

to encourage participation of local business enterprises in its local procurement activities. There is no single solution for economic development that will work in every local area. Each area has a unique set of opportunities and problems, and should develop specific approach to local economic development. Municipalities still rely most heavily on subsidy instruments such as tax abatements and tax increment financing, but evidence also indicates that the establishment of public-private partnerships and a more sophisticated marketing approach, for example, are on the rise (Blakely 1994). On the ground of the results of L.A. Reese study, the profiles of economic development strategies may be classified into types (Reese 2006):

participatory policy development and social dialogue. Policy development at local level enables business, public institutions and civic groups participation and thus increases their contributions to strategy design, creates ownership, improves long-term impacts, and facilitates partnership building. The use of participatory mechanisms decreases the risk of conflicts and fosters social cohesion.

The implementation of local economic development strategies has been accompanied by an evolution in available development management methods and tools. Local economic development encompasses a range of disciplines including physical territorial planning, economics and marketing. It also incorporates many local government and private sector functions including environmental planning, business development, infrastructure provision, real estate development and finance. Local governments choose different strategies seeking to affect local economy as well as develop different policy-making and administrative processes using diverse instruments. The activities labelled economic development fall into two categories: direct measures including provision of customized assistance targeted at individual businesses that are thought to provide greater economic development benefits; and favourable environment development including strategic initiatives in which more general tax, spending, and regulatory policies of government are changed to promote local economic development (Bartik 2004). Eisinger (1988) has distinguished supply-side policies and demand-side policies of local economic development (Eisinger 1988). Supply-side policies refer to incentives to attract economic activity into the area, e.g. tax incentives, debt financing schemes, infrastructure investment, regulatory policy, tax increments, land and site development, and financing arrangements. Demand-side policies are strategies to promote new business creation and smallbusiness expansion, government assistance to local businesses in new product development and market expansion, supporting research and development, strategic investment (e.g., business incubators, venture capital financing, and job training programs). Public sector agencies spent money purchasing goods and services from local businesses; seeking

traditional . Municipalities rely heavily on infrastructure investments in water, sewer, and roads, as well as in downtown streetscapes and service enhancements. They use tax policy instruments such as special tax districts (including downtown development authorities and tax increment finance areas), tax abatements, and special development zones such as enterprise or tax-free trade zones as well. Their overall development approach emphasizes traditional activities such as investing in local infrastructure and reduction of business costs through a variety of tax incentives and schemes. opportunistic : Although municipalities use traditional incentives to a large extent, they are significantly higher than other in use of land-based development policies, business assistance activities, marketing, and even progressive policies. marketing: Municipalities focus on marketing activities: promotions such as brochures, videos, and mailings to firms; visits to prospective firms; and targeting foreign businesses as potential development prospects. They make significantly less use of infrastructure investment, and business assistance activities than others. entrepreneurial . Municipalities emphasize a business development approach embracing strategies and policies that build investment from inside, as opposed to more common attraction strategies. They are higher on land development, business assistance, marketing. The entrepreneurial focus is seen in development of export markets, business incubators, research and development subsidies, technical assistance, and training.


MOGIKIEJI ITEKLIAI: RAIDOS TENDENCIJOS HUMAN RESOUCES: DEVELOPMENT TENDENCIES Traditional attraction incentives such as tax abatements and development zones are not used heavily by these municipalities.

infrastructure. Municipalities almost exclusively relay on infrastructure investment and avoid tax incentives, business assistance, and land development policies. passive. There are no coordinated economic development strategies or policies. Municipalities are significantly lower on every activity than are in any other municipalities, with the exception of the presence of an ombudsperson to assist with public and/or private sector relationships.

M. McGuire research results shows, that municipalities depending heavily on regulations, boosterism, and directly provided instruments for their economic development effort operate in a policy-making and administrative environment that reaches beyond city hall or the chamber of commerce only to limited degrees (McGuire M. 2000 ). Traditional top-down policies aimed at achieving economic development have tended to be cut by the same cloth. These have normally consisted in supply-led policies, focused either on infrastructure strengthening or on attracting industries and foreign direct investment. The logic behind this approach was the idea that poor accessibility or the absence of firms that could dynamize the local industrial tissue and generates technological transfers, was at the root of the problems of many lagging areas (Rodrguez-Pose 2001).

identifying and using primarily local resources, ideas and skills in an integrated way to stimulate economic growth and development in the locality (The Australia South Africa 2005). Managing contemporary local economic development requires the ability to facilitate interaction, to mobilize stakeholders, and to reconcile different goals and values among key development actors. The kind of strategic planning and management that drives an internal approach to development must surely involve many actors, both inside and outside the municipality. Similarly, intersectoral governing partnerships and the search for financial and informational resources may require municipal officials to operate outside the government agency (McGuire 2000). Thus local institutional involvement in economic development is an extremely complex process. It requires increased knowledge and cooperation on the part of government officials, business, unions, professional leader and community groups (Blakely, Bradshaw 2002). Local governments take the lead role in conducting the local economy assessment and strategy development and implementation processes. By providing the political leadership and coordination in the local economic development process, local government is:

Institutionalization of community-based economic development

Not too many years ago, the activities of local public sector economic development officials were relatively simple and direct in scope. A governmental agency would perform the recruitment function while local officials occasionally lobbied the agency for help or marketed their community for consideration by the state. Design and management of local development policy were centralized, functionally based, and hierarchically organized through a single government agency (Fosler 1992). Although development policy for some is a function made up of routine administrative responsibilities consigned to a single agency, even the fundamental, routine tasks of the development professional building organizations, designing strategies, marketing the area, seeking out finances, organizing projectscannot be carried out alone or with the same set of actors (McGuire M. 2000). Local economic development is based on local initiative, driven by local stakeholders and it involves

Facilitator Local governments create the environment for economic development through territory and land use planning and management, provision of roads and infrastructure, signage, enhancing safety and security, attracting development funding, streamlining the regulatory environment, collating and interpreting economic information, policy and strategy formulation Coordinator Local governments devise the integrated development planning in consultation with their communities. Economic development will be a critical feature of the integrated development planning through local initiatives and projects, or government programs that support business networks and partnerships, etc. Enabler Local governments facilitate arrangements for local people to get expert assistance and support, information and advice, training (or access or referral to training) and assistance with business planning, for example through a business planning expert seconded from a Bank or a local business Stimulator Local governments stimulate businesses to grow and expand e.g. giving incentives like small business grants; providing premises at low rent; promoting a tourism; giving support for business enterprise centers and/or business incubators.


E. Gaule. Modern Community: the Concept of Local Economic Development Moderni bendruomen: vietins ekonomins raidos koncepcija Developer Local governments provide basic infrastructure to stimulate private sector development e.g. energy supplies, water, roads, sewers, etc. development goals, studying local business enterprises and markets, and establishing strategic plans (Reese 2006). Through a strategic planning process, municipalities learn about their local capacities, the economic problems that must be addressed, and why some activities are successful but others are not (Blakely 1994). Contemporary economic development of municipality often requires that development professionals act as catalysts for orchestrating other governmental and nongovernmental actors in the pursuit of effective development policy strategies. Collaboration and cooperation across multiple actors, organizations, and governments is now the standard modus operandi for many municipalities. Luke, Ventriss, Reed, and Reed (1988) argue that economic development management exists in an interconnected web of community stakeholders, business managers, nonprofit agencies, government departments, and multinational corporations (Reese 2006). The work of the local development professional is increasingly based in intersectoral, interorganizational, and intergovernmental collaboration. In economic development, policymaking resources such as finance, information, and knowledge no longer reside exclusively in the municipality government but with counties, utilities, chambers of commerce, development corporations, and many others (McGuire M. 2000).

Local economic development strategies are often developed with relatively limited ties to regional and/ or national planning processes. Regional and national governments play a key role in funding and ensuring the alignment of strategies with wider economic and spatial planning processes, especially with regard to major investments in economic sector and infrastructure development. Local social, cultural, economic, academic and political stakeholders (i.e. business associations and chambers of commerce, key businesses (local and foreign investors), social organizations and local communities, academics and universities, research foundations, media) participate in assessing the local economy, typically by providing data (especially as it relates to economic structure, human capital, and local endowments) and insights and in implementing local economic development strategiesthrough financing, facilitation, and direct participation. Their participation ensures that the analysis and strategy development resulting from the local economy assessment is tailored to local priorities. External donors and consultants may contribute by funding and technical assistance by establishing standard processes and clear, step-by-step guidelines on the local economic development processes. Consultants undertake specific research and analytical studies when local capacity or resources are lacking, manage and facilitate strategy development processes and facilitate the use of specific strategic frameworks. Three institutionalization forms for coordinated local economic development may occur:

Potential impacts of community-based local economic development

Overall, there are numerous advantages related to the adoption of local economic development. The advantages can be divided into social and economic advantages. Social benefits. The social advantages include: Empower local societies, stimulate broad-based political participation in decision-making and generate local dialogue. People living in areas of the world that have until recently had little say or control over the economic activity taking place in their territory, begin to adopt a more proactive stance with regard to their own future (Rodrguez-Pose 2001). Local economic development attempts to create linkages between communities and governmental institutions (local and national) so that the long-term development process would be closely connected with actual communities needs. Help to make local institutions more transparent and accountable and contribute to the development of the local civil society (Rodrguez-Pose 2001).

Development organizations funded and/or administered by representatives from both private and public sectors have emerged as an alternative mode of governing, combining the private sectors ability to raise funds quickly with the public sectors desire to meet the growing needs of constituents at a lower cost. By establishment of special agency, the development policy efforts in municipalities are increasingly headed, not by the municipalitys chief executive or administrator, but by a full-time director employed by municipal government, a development corporation, or a chamber of commerce. Emergent local economic development approaches in municipality include clarifying


MOGIKIEJI ITEKLIAI: RAIDOS TENDENCIJOS HUMAN RESOUCES: DEVELOPMENT TENDENCIES Fiscal benefits. Evaluating the fiscal effects of economic development requires the use of an econometric model as methodological approach; the actual fiscal effects depend on the jurisdictions tax structure, the capacity of local infrastructure, and the particular local economic development project (Bartik 2004): New jobs will result in increased local profits, wages, sales, and property values, all of which will enhance local tax revenue. New business and new jobs will attract additional households, and the fiscal impact of new households must be considered. The typical household consumes more in public services than it pays in state and local tax. The increase in public services and infrastructure that is directly required by the new or expanded local business enterprises. Fiscal benefits of new business accrue to that local government, while fiscal costs of new households occur for other governmental units in the local labor market, i.e. much of the public service costs of new households are the costs of public education for additional children and students. If there is excess capacity in local infrastructure then additional infrastructure will not be required, and fiscal benefits will be greater. Another issue is whether the local government is willing to accept some losses in public service quality that occur as infrastructure capacity is strained. Employment benefits. The employment benefits occur when new jobs result in employment for persons who otherwise would be unemployed. In addition, local residents may benefit from economic development if it enables local residents who are already working to move up to a better paying job (Bartik 2004). Other benefits and costs. Being complex local economic development may create unfavorable impact as well. Local economic development will usually increase local housing prices, helping homeowners and other local landowners, but hurting renters. Local economic development may have negative environmental effects, such as increasing air or water pollution or solid waste problems, loss of green space amenities, increasing urban sprawl, increasing traffic congestion (Bartik 2004). Local economic development activities may be modified seeking to minimize these negative effects. Local economic development means more than just economic growth. It is promoting participation and local dialogue, connecting people and their resources for better employment and a higher quality of life for residents.

Conclusion: further directions for local economic development investigations

The theoretical analysis of local economic development allows defining it as rather general and simple, but lacking accuracy social theory, while practical analysis of local economic development shows it to be more case sensitive, i.e. local economic development is stimulated or restricted by socio-economical conditions, national political context; interaction between levels of government. Reese and Rosenfeld (2001) stress the importance of historical and cultural features in shaping local economic development strategies and the difficulties of systematically analyzing such features in current approaches (Reese, Rosenfeld 2001). Rather than summarizing statements point by point is more appropriate to provide the further directions of local economic development investigations. Taking into account the results of analysis of local economic development substance and its development and the current public management conditions (especially economic crisis), it can be stated that the importance of the local economic development will only increase in the future. Local economic development should be seen as a prerequisite for making progress at all levels of government. Citation Ife, no longer can we think globally, act locally, but rather it has become necessary to think and act at both local and global levels, and to link the two (Ife 2000). In the light of such perspectives, more complex and comprehensive analysis of local economic development is needed. The further investigations of local economic development should be based on interdisciplinary integration of policies and practices orientated to further analysis of local economic development substance (content and processes) as well as its interaction with other aspects of public governance in the broader context of countries governance. Decentralization encompasses the consolidation of the self-management of sub-national levels of government and the distribution of public spending and income between the different levels of government. The devolution of responsibilities is not necessarily accompanied by transfer of funds or of taxation powers. In circumstances when local authorities tend to be overwhelmed with responsibilities, but are underfunded sufficiently, twofold problems arises. Firstly, the devolved responsibilities (as role and functions of local governments) and provided management tools (e.g. taxing powers, rights of ownership of local public


E. Gaule. Modern Community: the Concept of Local Economic Development Moderni bendruomen: vietins ekonomins raidos koncepcija property, etc.) sets up the basis for local economic development. Secondly, local authorities tend to focus on immediate, pressing problems, such as lack of physical infrastructure and inadequate social infrastructure, solving. This requires more in-depth multi-faceted theoretical and empirical research on interaction of decentralization and local economic development processes. Decentralization creates the basis for community driven local economic development as all approaches of local economic development advocate the involvement of the private sector and civil society i.e. participatory processes and a comprehensive effort in stakeholder participation. Collaboration and cooperation across multiple actors, organizations, and governments is now the standard mode of operating for many municipalities in local economic development processes. Regarding participation, doubts with respect to its effectiveness have increasingly been voiced as participatory approaches moved into the mainstream (Cunningham, Meyer-Stamer 2005). Local economic development aims to get various stakeholders involved in activities; consequently social networking, interaction and discussion are often the main activities in local economic development processes. Ford, J. 2004. Rationale for decentralization [online], in J. Litvack & J. Seddon (Eds.) Decentralization Briefing Notes, The World Bank Institute Working Papers [cited 17 March 2011]. Available from Internet: < Resources/wbi37142.pdf> Fosler, R. S. 1992. State economic policy: the emerging paradigm, Economic Development Quarterly 6: 313. Ife, J. 2000. Localized needs and globalized economy. Bridging the gap with social work practice, in Social Work and Globalization. Special Issue. Joint Conference of the International Federation of Social Workers and International Association of Schools of Social Work. Montreal, Quebec, 5064. McGuire, M. 2000. Collaborative policy making and administration: the operational demands of local economic development, Economic Development Quarterly 14: 278293. Newman, I. 2008. Introduction: the future of local economic development, Local Economy 23(2): 110 121. Reese, L. 2006. Do we really need another typology? Clusters of local economic development strategies, Economic Development Quarterly 20: 368376. Reese, L.; Rosenfeld, R. 2001. Yes, but...: Questioning the conventional wisdom about economic development, Economic Development Quarterly 15(4): 299312. Rodrguez-Pose, A. 2001. The Role of the ILO in Implementing Local Economic Development Strategies in a Globalized World [online], [cited 17 March 2011]. Available from Internet: <http:// emp_ent/led/documents/publication/ wcms_111545.pdf>. The Australia South Africa Local Government Partnership (ASALGP) [online] 2005. Handbook for Provincial and Municipal Elected and Appointed Officials about LED. [cited 15 March 2011]. Available from Internet: < asalgp/resources/documents/asalgphandbooks/4what-is-LED.htm>. White, S.; Gasser, M. 2001. Local Economic Development: a Tool for Supporting Locally Owned and Managed Development Processes that Foster the Global Promotion of Decent Work. A Working Paper prepared and presented for discussion by the

Bartik, T. 2004. Economic development, in J.R. Aronson, E. Schwartz (Eds.) Management Policies in Local Government Finance. 5th ed. Washington: DC. International City/County Management Association, 355390. Blakely, E. J. 1994. Planning Local Economic Development. 2nd ed. Thousand Oaks, CA: Sage. Blakely, E.; Bradshaw, T. K. 2002. Planning Local Economic Development: Theory and Practice. 3rd ed. Sage Publications, Inc., UK. Blakely, E.J.; Leigh, N. G. 2010. Planning Local Economic Development Theory and Practice. Sage Publications, Inc., UK. Cunningham, S.; Meyer-Stamer, J. 2005. Planning or doing local economic development? Problems with the orthodox approach to LED, Africa Insight 35(4): 414. Eisinger, P. 1988. The Rise of the Entrepreneurial State: State and Local Economic Development Policy in the United States. Madison, WI: University of Wisconsin Press.




Local Economic Development Practice Group on 25 September 2001 Geneva: ILO, Job Creation and Enterprise Development Department.


Egl Gaul, dr. Kauno technologijos universitetas

Global economic crisis in 2007-2009 affected countries slowing down economic growth and increasing unemployment. While governments address the crisis by developing effective strategies of crisis control through macro-economic, structural and fiscal policies, locally-orientated economic policies are rare in broader economic policies. However economic development processes taking place at the municipal level are important in overcoming the global economic crisis and reviving the national economies. Local economic development is a process that brings together resources from within and outside the community to promote economic growth in a systematic and organized manner at the municipal level. The main theoretical statements of local economic development by analysis of local economic development content and process, identifying potential social and economical benefits, are reviewed in this article. There are presented an overview of applicable strategies and tools as well as stakeholders and their roles in process of local economic development. The future directions of local economic development investigations are provided.

Del globalios ekonomins krizs 20072009 m. valstybse ltjo ekonomikos augimas ir didjo nedarbas. Valstybi vyriausybs, vykdydamos makroekonomin, struktrin ir fiskalin politikas, stengsi sukurti veiksmingas ios krizs veikimo strategijas, neskirdamos pakankamai dmesio ekonominiams procesams, vykstantiems subnacionaliniu lygiu. Ekonominio vystymo procesai, vykstantys savivaldybi lygmeniu, yra svarbs siekiant veikti globalin ekonomikos kriz ir atgaivinti ali ekonomikas. Vietinis ekonominis vystymas yra sistemingas ir vietos lygmeniu vykstantis procesas, kurio metu, naudojant bendruomenje sutelktus tiek bendruomeninius, tiek bendruomenei nepriklausanius iteklius, sprendiamos problemos ir skatinamas ekonomikos augimas. Straipsnyje apvelgti svarbiausi teoriniai ekonominio vystymo proces, vykstani savivaldybse, aspektai, atliekant vietinio ekonominio vystymo koncepcijos ir proceso analiz, nustatant potenciali vietinio ekonominio vystymo socialin bei ekonomin naud, apvelgiant strategijas ir priemones bei identifikuojant dalyvius ir j vaidmenis ekonominio vystymo procese. Pristatomos tolesns vietinio ekonominio vystymo tyrim kryptys.


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