BASQUE

1. Why was the Basque Country historically among the most prosperous regions in Spain? What went
wrong?

The Basque Country encouraged free trade through its policy of no tariffs. This policy benefited commerce
and played an important role in helping the region become the largest shipbuilding industry in the Kingdom
of Spain. Rich iron ore deposits, forests, and ample availability of hydraulic energy from water supported
the industrial development. The industries, alongside trade, transport, and firearms formed the foundation
of the Basque economy.

The development of the Basque economy continued during the Industrial Revolution. Investments in
transport and communication infrastructure as well as in a dense network of training and educational
centers coupled with favorable tax rates prompted foreign entrepreneurs to modernize traditional sectors
and create new ones. Local entrepreneurs further contributed to the prosperity of the Basque economy by
modernizing the large – scale iron and steel industry and investing in a steam-propelled merchant fleet.
Various other sectors of the economy grew as well, encouraged by investment and technology mainly from
Britain and America.

The prosperity of the region was hindered by the political turmoil in Spain. Francisco Franco takeover of the
region, as well as Nazi intervention, led to the fall of the city of Bilbao in 1937. Franco’s brutal regime
caused many Basque leaders, businessmen, and skilled workers to leave. Labor turmoil, terrorist violence,
and political uncertainty became the new national climate.

2. What was the Basque Country’s economic development strategy in the 1980s?

In 1980, the newly elected president and other government officials soon realized that in order to restore
public confidence it was imperative that the industry is rebuilt. The economic development strategy was
heavily focused not only on rebuilding the industry but also on providing support to help the region’s
businesses survive and grow. The targeted sector were small and medium-sized companies. Subsidies were
given to firms to help them conduct business.

3. Evaluate the new economic strategy introduced in 1990.

The government officials during the 80s as well as the 90s built the region’s economic strategy based on the
goals set after the fall of the Franco regime. Economic policies were effectively designed to respond to both
political and social changes. Top-down initiatives diversified the region’s economy to respond to different
market needs and trends.

4. How was President Ibarretxe’s strategy in the 2000s different? Why were the changes made?

In 2001, President Ibarretxe coined the term “Second economic transformation of the Basque Country” to
launch a new phase of the region’s development. The second transformation would move the Basque
Country towards a modern information society with knowledge-based activities throughout the economy. It
was sought to build on past efforts but move the economy to the next level where innovation was the key
driver. Similarly, the governance of the cluster program was modified. Each cluster organization was asked
to create a Board of Directors comprised of leading CEOs.
5. Why has the Basque country achieved superior economic performance compared to Spain over the last
three decades? What role has the cluster approach played in this success?

The history of the Basque region, with its rich culture and industry, as well as its educated labor force
contributed greatly to the region’s prosperity. Cluster initiatives helped consolidate state of the art sectors
such as bio and nanotechnology. For example, Ikerbasque, a new state-agency, recruited foreign
researchers and scientists to the region. In addition, since the mid-1990s, Basque exports to foreign
countries grew faster than those to the rest of Spain. These cluster policies helped shape an economy based
on knowledge and information, which brought the region into an advanced stage of development.

6. What are the strategic issues facing the Basque Country in 2009? What should the government do?

By 2008, the Basque Country had become the autonomous region in Spain with the highest income per
capita, 33% above the Spanish average and 36% above the average EU-27 level. The country, however, was
facing issues with the manufacturing sector. Similarly, the consumer goods sector, except food and paper,
had almost disappeared. Furthermore, the region’s three private universities and one public university were
ranked in the middle of European universities overall. However, management training was not well
developed and about half of the cluster groups relied heavily on government support.
In 2009, economic activity was falling sharply in the wake of the global economic and financial crisis. Faced
with these challenges, the Basque government should call on the central government for assistance with
these issues.

NYC
1. How did New York City become a leading metropolitan area in the U.S. and the world? What were the
key enabling public policies?
New York City prospered since the seventeenth century when it was founded as a Dutch trading post it has
been a centre of trade and one of the main gateways for immigration to the United States.
NYC location becomes a center of clothing production, which was also the point of entry for silks from
France and China. As well as being the capital of finance and law in the United States, New York is a centre
for the creative industries: fashion, design, art, advertising and more. The creative industries have grown
dramatically over the past decade, with employment in film and television increasing and performing arts at a
time when employment in finance remained static.
NYC had a strong mayor-council form of government. The major managed city agencies, set the City’s
agenda, and proposed the City’s annual budget. In addition to the general operating budget the City had a
capital budget for investments in infrastructure and other assets. “Public benefit corporations” were able to
issue their own debt, and possessed significant independence from elected officials.
NYC had established one of the worlds’ largest networks of Business Improvement Districts (BIDs), which
were public/private, and set special taxes on commercial property owners in designated areas. The port
continued to be an important part of the economy, dominating U.S foreing trade. Financial services and
business services thrived. Sugar, garments, and publishing the most important manufacturing cluster
activities.

2. What cluster emerged first? Why? How has the mix of clusters changed over time? Why?
The first cluster to emerge was the Publisher cluster in the early 1800s to distribute British books to
American readers. It became recognized around the country because of the NYC´s book fairs. Due to this a
new cluster developed, including The New York Times, and the Associated Press.
More clusters joined and become an important part of the dominating economy of U.S such as Tourism that
grew and the entertainment cluster expanded greatly as media companies and record labels established
midtown headquarters. The technology boom boosted the financial services clusters attracting large number
of immigrants with the latest wave having higher average educational levels than previous immigrants though
below that of the native population.
Local clusters such as retailing and health care, serve customer base that went well beyond the local
population. Some retailers in Time Square, for example, generated the 70% of their sales from tourist traffic.
NYC expands and develops more cluster because of the need in the city were growing rapidly, as were
industries.