The Role of Local and Regional Institutions

New Thinking On Place-Based City And Regional Development

Over recent years there has been a growth in new thinking about the process of local economic development. Across the world local and national governments have moved away from traditional approaches that emphasised the provision of large-scale infrastructure, the attraction of footloose investors and the disbursement of transfer payments designed mainly to compensate for the effects of industrial restructuring and low growth. Under these conditions, peripheral regions in high cost economies often find themselves competing for investment through lowering wages. Such approaches have generally proved to be temporary measures that fail to contribute to the factors that will underpin more sustainable forms of development. The new approaches tend to emphasise the identification and mobilization of endogenous potential; that is, the ability of cities and regions to grow drawing on own resources. The new approach though is applied not just in areas with obvious economic strengths such as major cities – but in all areas. The new “place-based” approaches involve attempts to tap into economic potential that remains unused and not identifiable to outside agencies, so that all cities and regions – potentially at least – can contribute to national development.

This kind of thinking is evident in recent reports by the OECD (2009, 2010 and 2012), by Fabrizio Barca (2009) for the EU and from the Obama administration (White House, 2010), which have pioneered “place-based” approaches. These reports posit a model of regional and local development intervention which is being increasingly adopted, in adapted fashion, in developed and developing countries, in cities and regions, and which at its heart focuses on the identification and mobilisation of endogenous assets, i.e. the region’s internal skills and innovation capabilities. The OECD calls it a “new paradigm” of regional development (see Box 1). Skills and innovative capacity are very important to regional development because they can be used to embed investment in cities and regions in an era of more mobile capital in ways that the provision of low cost labour and infrastructure alone cannot.