Systemic Competitiveness and Local Economic Development

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Systemic Competitiveness and Local Economic Development
Paper for Publication in Shamim Bodhanya (ed.), Large Scale Systemic Change: Theories, Modelling and Practices

Jörg Meyer-Stamer
jms@mesopartner.com

Duisburg January 2008

mesopartner
local economic delivery
www.mesopartner.com

Content 1 2 3 3.1 3.2 3.3 3.4 4 5 6 6.1 6.2 7 Introduction The concept of Systemic Competitiveness Systemic Competitiveness at the local level From the supranational to the local level What do we mean by “competitiveness” at a territorial level? Complex systems and local economic development Local economic development and systemic competitiveness The Systemic Competitiveness of South Africa Consequences for LED and local strategy formulation in South Africa Systemic Competitiveness and approaches to LED Locations with antagonistic stakeholders Locations with aligned stakeholders Conclusion 1 1 5 5 7 9 11 13 15 17 17 21 22 1

Annex: Benchmarking-table to assess territorial Systemic Competitiveness

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Introduction

Why would one address the topic of local economic development under the header of “large scale systemic change“? Is a local economy not, by definition, the opposite of a large system? Actually, it isn’t. There are, of course, local economies that can be comprehensively described on one sheet of paper. But looking at the South African reality, even local economies that at first glance appear to be not complex at all, such as rural places in former homelands, turn out to be relatively complex systems as soon as one takes a closer look. Therefore, an effort to stimulate economic growth of a local economy is bound to involve large scale systemic change. Many local economies are complex systems, and quite a few of them are quite dysfunctional or underperforming, so that the category “large scale systemic change” applies. When one says that LED involves systemic change, this actually has two different meanings. First, most local economies are complex social systems. Instigating change is bound to be an activity that is not trivial, i.e. there will hardly be a linear relationship between input and output. A territorial change process is necessarily subject to complex feedback mechanisms and a variety of unintended consequences. It is important to conceptualise it as a complex process that cannot be planned in any detailed way in advance. Second, the outcome of a territorial change process will be a change in the structure of the system “local economy”, i.e. the set of producers, companies and service providers that generate goods and services. With a sustained LED process the local economy will change its level of competitiveness, its positioning in regional, national and global markets and ultimately its sectoral structure. In this chapter, we will present the concept of Systemic Competitiveness as a framework to analyse economic systems (Section 2). We will explore its applicability to local economies (Section 3). We then investigate the reality of South Africa’s economy from a systemic competitiveness perspective (Section 4). This analysis of South Africa’s economy leads us to the identification of specific challenges for local economic development, highlighting the importance of quite fundamental systemic change (Section 5). We then discuss possible approaches to induce systemic change at the local level (Section 6).

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The concept of Systemic Competitiveness

The concept of Systemic Competitiveness is a heuristic model that combines crucial insights from economics, social science and other disciplines in order to better understand the driving forces of economic development. The intention behind the

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2

formulation of the concept was, first, to allow a more adequate analysis of countries and locations that went beyond reductionist, undercomplex approaches, and, second, to permit a more adequate formulation of policy recommendations, in particular recommendations...
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