What is Local Economic Development (LED)? What would ‘pro-poor’ LED consist of in South Africa? Are residual anti-poor strategies still being pursued? This paper examines these questions and explores the still emerging discipline of LED in the context of globalization. The context is important because it created extraordinary pressure on municipalities to become more entrepreneurial. ‘Smokestack chasing’ was the main way in which they reacted to these pressures, to the detriment of each other. The ‘race to the bottom’ witnessed elected officials offering major concessions on taxes and municipal services, often at the expense of their rate base and their citizens’ welfare. In particular, concern about the erosion of ‘public goods’ – whether local or global – has emerged in the wake of this period of intense globalization. Many experts acknowledge that the prior focus on purely market-determined economic development, accompanied by appeals for foreign investment by national and local leaders, led to Local Economic Underdevelopment. ‘Sustainable development’ is back on the agenda. South Africa’s recent LED Policy Paper has also come to decry strategies including “the packaging of subsidies, tax holidays, and free infrastructure/services oriented to attracting outside industry.” Instead, the Department of Provincial and Local Government promotes six “developmental” LED strategies: community-based development; linkage; human capital development; infrastructure and municipal services; leak-plugging in the local economy; and retaining and expanding local economic activity. The old-fashioned strategies are also still evident, however, especially in “Export Processing Zones” (EPZs) “Industrial Development Zones” (IDZs), and “Spatial Development Initiatives” (SDIs) which are characterized by their top-down character, extremely high costs per job created, lack of inter-relationships with downstream/upstream industries, very little employment potential and adverse prospects for women workers. One reason for ongoing state support for SDIs is the prevalence of corporate power in decision-making; another is that the tough work entailed in mapping out alternative strategies has not yet been attempted by most municipalities. That work requires sensitivity to local poverty, and calculations about economic benefits derived by poor people from municipal services provision. In addition to gender equality, improved public health, lower levels of racial segregation, and improved social capital, a renewed commitment to municipal infrastructure investment and service delivery would have enormous positive economic implications for job creation, worker productivity and small enterprise promotion. To achieve bottom-up LED, with all its social and environmental benefits, requires an approach to municipal services provision based upon municipal responsibilities to provide at least a basic minimal amount of water/sanitation and electricity as a lifeline amount, with higher volume consumption attracting much higher (and rising) tariffs. The first step, however, is for municipalities to commit to pursuing LED from the bottom up, through embracing their own capacities, nurturing and sustaining a more genuinely developmental approach to their local economies, and reversing worsening patterns of uneven development that have followed from decades of pursuing non-developmental approaches.
MSP Occasional Paper No.6