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Local Municipality growth requires independent thinking

When municipalities attempt to foster growth they tend to move in the same direction. The risk is that they invest taxpayers’ money in projects that provide no return and instead run at a loss. This is the claim from a recent report on regional and local growth policies from the Centre for the Municipal Studies (CKS).

“The municipalities tend to do follow one another’s strategic planning, without adequately analyzing the specific needs and potential for their municipality. Hence the need for more systematic knowledge about what characterizes effective local initiatives for growth, "said Gissur Ó Erlingsson, a CKS researcher and one of three authors of the report: Regional and local growth policies: What can and should public authorities do?

The summary shows that too little knowledge exists for investments that produce results when municipalities attempt to promote growth.

"Municipalities are significantly interested in managing economic and commercial policy, but systematic knowledge of what really produces results is in short supply," says Gissur Ó Erlingsson.

The growth of a municipality may for example take the form of 

  • a company establishing itself in the community
  • more tourists and residents are drawn to it by means of marketing and promotion
  • local entrepreneurs initiate new businesses.

"Many communities are investing in flagship projects, but it is not at all certain that this will produce a return, but just might cost taxpayers more money."

The same applies to destination marketing that is used to attract tourists and residents.

The authors of the report concluded that it is important that local municipalities commit time and resources into identifying what suits their local community and will, in turn, promote growth. Another conclusion is to keep in mind the basic task of welfare by securing well-functioning systems for education and health and care.

“Considerable uncertainty exists in terms of the impetus that stimulates growth. Local representatives often seem to be afraid to fail, which is why they prefer to do the same thing as everyone else. However, modern international research shows that a universal recipe for success does not exist. It is therefore important that municipalities analysis their own resources instead of imitating others, "Gissur Ó Erlingsson.

The authors also point out that human trust appears to be important for growth.

“If people trust each other then it is easier to do business. For example, entrepreneurs are more willing to invest when they have confidence in the decision-makers.

Therefore, the effect can be exactly the opposite if politicians or officials abuse their power by, for example, breaking the law regarding public procurement in order to benefit certain local traders.

“It reduces the confidence in the democratic process. Trust is weakened and in turn growth, notes Gissur Ó Erlingsson.

Eva Bergstedt

Eva Bergstedt 2011-06-13

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Last updated: 2015-11-26