Concepts

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PREMISE

“The strength and stability of a local economy depends first and foremost on the appreciation and use of local resources (labour, skills, raw material) to produce outputs for the local market.” 

“Money creates income and employment where it is spent”

STRO strongly believes that firstly, it is necesary to create an estable and diversified local economy, based on local resources, capacities and purchasing power. Local production for local commerce leads to the creation of surplus, and it is only then that an exports based or foreign investment development strategy gains sense. The main disadvantages about promotion of a strategy based exclusively on exports are:

  • Instability of the local economy (lack of diversification).
  • Inequities among regions (some regions get less money because they lack competitive advantage characteristics that makes them attractive for foreign investment).
  • A highly vulnerable local market, if the global demand for products changes negatively.

If external resources are the base for increasing local purchasing power, there is a high risk that:

  • More dependency on foreign sources of money will take place, which leads to a higher external debt and unsustainability.
  • Local purchasing power exits quickly the community by:
    • Interest payments to the private banks sector.
    • Buying prodcuts that are not local.
    • Savings and investments outside the community.
    • Profit transfers from investors from outside the community.

Following a strategy based on local economic development on the first instance, is a matter of attitude, of individual and collective action towards apreciation of already existing assets. When a person decides to maximice his or her local spending and investing patterns, money enters the local economy through a funnel. When the opposite happens, it is as if money bounced on an umbrella, exiting the locality quickly:

Images from: www.neweconomics.org

A development strategy that focuses on local already existing assets, tapping their potential, and following people’s own ideas for development, instead of relying  on fluctuating and vulnerable external agents and resources for succes, is much more likely to bring long term sustainable socio economic development into a community or region.