Importance of economy in a country

Posted by on June 1, 2012

In order for any community to survive, its citizens must have employment opportunities, and its government must be able to generate revenue to provide services.  Economic development, if done effectively, works to retain and grow jobs and investment within a community.  The tax base that is created through this growth and investment is used by our local governments to provide services such as police, fire department, plowing, senior services, parks/recreation, library services, etc. 

As an economic development organization, or EDO, the Lake Superior Community Partnership’s primary function is to convene, communicate and connect.  Economic developers do not create jobs or increase the tax base themselves.  The private sector makes the investment to create jobs and increase wealth.  Our job is to facilitate people, information, opportunities and even remove roadblocks to allow this to happen. 

Our role in economic development, as defined by the Michigan Economic Development Corporation comes in two forms: business and community development. 

With regards to business development, the LSCP team provides guidance and resources to assist in the three basic forms I mentioned last week:  business retention/expansion, attraction and entrepreneurial development. 

Examples of community groups and organizations that the LSCP has helped to convene and facilitate over the past few years are the Iron Ore Heritage Recreation Authority, Marquette Bikeability Committee, Lake Superior Leadership Academy, and 40 Below: Marquette County Young Professionals Network.  

Walking beside business and community development is our legislative advocacy or “government relations” efforts.  The LSCP, through task force and board recommendations, takes positions on legislative issues that affect and impact our local business community.  We are the “eyes, ears and voice” for Marquette County business by tracking bills, educating our partners and communicating our position to legislators on issues that are of concern to the business climate of our region. 

Over the past few years, it has been brought to the attention of our organization that there has been confusion as to our organization’s purpose.  We’ve received questions such as “Who is the LSCP and what do you do?” “Are you a/the Chamber of Commerce?” and “What do you do for businesses and why should my business join the LSCP?”  

I hope that I have helped answer some of these questions over the years in this column, especially in the last few weeks.  However, all questions will be answered this week at “The LSCP Evolution,” a rebranding event that will unveil our new mission, strategic plan and clearly define “who we are and what we do.” 

The LSCP Evolution will be held at 5pm in the Peter White Lounge in the University Center on the campus of NMU. Anyone is welcome to attend, and guests will be treated to hors d’oeuvres with a cash bar available.  I hope you will join us!

Importance of economy in a country

View from San Bernardo Hill in Salta, Argentina. IStock

What happens when people and economic activity are concentrated in just a few cities within a country? From an economic perspective, we know this concentration can be positive overall – living conditions can improve, poverty rates can decline, companies can learn from each other, and connections can be built between employees and firms.

But what happens to those people who get stuck in poor regions where there are no opportunities? It becomes more difficult for them to access jobs and have a good quality of life. Discontent then often ferments, and civil unrest erupts.

To ensure that opportunities reach all corners of a country and all citizens within its borders, a Territorial Development approach is necessary when designing public policy . This means applying differentiated policies, to differentiated needs - highlighting the importance of programs that take into account the interdependence between different sectors (for example matching investments in road paving with the location of schools) and the relationships between the different government levels.

To apply this territorial approach, the first step is to assess the development landscape along three key dimensions:

  • Scale, because people and firms often concentrate in just a few places, proving that proximity is valuable.
  • Specialization, because when places are better connected, they can either specialize in what they produce best, or diversify and innovate, both of which allow the benefits of concentration to be spatially spread out.
  • Convergence, because spatial concentration of people and firms can be harnessed to improve living conditions everywhere, enabling the convergence of living standards across the territory.

Analyzing these three dimensions in a country can then help policy makers identify and prioritize policies that support economic growth while improving living standards in all territories. The challenge for policy makers is to reconcile these two objectives.

But how can they do this? Our report “Territorial Development in Argentina” (Volume 1 - Diagnosing Key Bottlenecks as the First Step Toward Effective Policy and Volume 2 - Using Differentiated Policies to Reduce Disparities and Spur Economic Growth) addresses this question.

It diagnoses Argentina’s performance in those three dimensions using a wide range of indicators; identifies the main bottlenecks to reconciling the objectives of supporting economic growth while improving living standards; and extracts main lessons from instruments used in more than 20 countries to reduce territorial inequalities.

These instruments include the introduction of institutional frameworks in Australia and the European Union that empower subnational governments to choose the policy instruments that better aligned with their needs; financial performance-based instruments to improve service delivery and strengthen local capacity in the United Kingdom; or funding mechanisms with clear objectives to promote investments in basic infrastructure in Peru or to achieve convergence and growth in the European Union.

While the inventory of instruments is by no means exhaustive, it highlights the most commonly used tools to promote territorial development and it assesses their strengths and weaknesses to extract main lessons that can inform policy decisions. Once the main bottlenecks to promote economic growth and convergence of living standards are identified, we can then design the appropriate instrument to use in the right context.

Our study of these international cases points to the importance of three pillars to enable territorial development: efficient and effective institutions, strong capacities, and alignment of financing to meet responsibilities . A comprehensive Territorial Development Program can bring these together by helping to build better institutions; and providing the framework for subnational governments to take the lead in designing and implementing solutions in their territories, while coordinating investments from different sectors - ultimately enabling the benefits of development to reach everyone, everywhere.