Local Development in the Global Economy
Sáinz, Juan Pablo Pérez & Andrade-Eekhoff, Katharine
It is now commonplace to affirm that globalization has accentuated the importance of local spaces. Contrary to the supposed worldwide trend toward homogenization induced by global markets,...
...First, it means moving from simple assembly to a more integral production process, and secondly, it calls on them to upgrade from sewing basic clothes to fashion production...
...There are also economies of communication and information when details about suppliers and clients circulate within the cluster...
...All three communities participate in the market through different types of global chains, and their sustainability depends upon their ability to upgrade...
...Competition is clearly based on imitation and population behind a common vision of community not on design innovation...
...tion for higher levels of welfare, in La Palma the The tendency toward imitation also erodes commu- aftermath of the civil war continues to negatively nity capital: When an artisan sees her creative efforts in affect local dynamics...
...Second, the institutions need to interact among themselves in order to avoid redundancy...
...Just as La Fortuna has benefited from decades of nonauthoritarian social development in Costa Rica, higher levels of impoverishment in La Palma and San Pedro Sacatep6quez reflect the exclusionary development models pursued in El Salvador and Guatemala...
...What we reveal is a complex web of dynamics that present promising opportunities for these communities, but that also challenge them to adapt to changing conditions that, if not confronted successfully, could represent serious threats to the communities and their members...
...In other words, will just a few be able to upgrade or will the majority...
...An important characteristic of tourism is that it can create opportunities for small businesses, and the Fortunans have taken advantage of these opportunities, setting up hotels and restaurants, organizing tours and so on...
...Business owners can appropriate the different types of socio-cultural resources available to these communities, thus contributing to the cohesion of the cluster...
...has developed in La Fortuna...
...Yet the generally optimistic picture of La Fortuna must be tempered by concern about two issues that appear crucial to its future...
...tion of brightly painted wooden handicrafts that are sold developing a new design copied by a neighbor and sold in local, national and international markets...
...4 of unpaid family labor, carrying out the activity in the Again, the national setting and specific characterhome in order not to incur infrastructure costs is one istics of the country's past prove to be important example...
...The basis of this interaction constitutes the dialogue between the organized business owners and local government...
...There are four large factories in the community, and their experiences show that both upgrading and downgrading are possible...
...The explanation for this absence can tation are limited somewhat by the market's segmenta- be traced to the partisan political polarization that tion, but there are other negative consequences...
...While in Costa Rica a half-century of to make the shift into accumulative strategies based on national social development was the main explanaa logic of entrepreneurship...
...Another important element in La Palma is of a A little more than half the households in La Palma political-institutional nature...
...Global cities, winning regions, industrial districts, economic clusters, are just some of the terms observers have used to signal the importance of socio-territorial environments that have been more or less able to insert themselves successfully into globalizing processes...
...The second challenge relates to infrastructure...
...This hegemonic project constitutes a local social contract that ensures that the path through globalization is the most decent possible and that the exclusionary effects that globalization tends to bring about are overcome or at the very least minimized...
...However, what is icraft development in La Palma: the type of competi- missing is any sign of the emergence of a hegemonic tion that prevails among the approximately 100 work- process that would unite the majority of La Palma's shops...
...This presents the challenge of upgrading for the San Pedran producers in two ways...
...Or, by contrast, can upgrading be a more collective undertaking that involves the community as a whole...
...The first involves the possibility of obtaining full assembly contracts with firms that are willing to establish long-lasting, cooperative relationships with groups of local producers...
...Third, this interaction needs to lead to the formation of coalitions...
...If upgrading is achieved, then San Pedran producers could rediscover their traditional role in the market and recover that part of their identity lost through subcontracting...
...Among the underlying material foundations of this consensus are social integration and gains in equity in terms of class, gender, ethnicity, etc...
...Clearly, the latter is essential if local development is to take place...
...The use cant agreements, at least for now...
...External economies--including specialization, communication and information-are one such resource...
...The residents of La Palma those that compete based on imitation, creativity staglearned the craft and ended up appropriating it and devel- nates...
...Costa Ricans have enjoyed important social services provided by the state, but these benefits were given to them in top-down fashion, rather than won through political and social struggle...
...Thus, the likelihood of proactive responses to this danger, which could ultimately provide incentives for collective action, seems remote...
...This is essential, for if different workshops can specialize in different parts of the production and marketing processes and work in coordination, the resulting division of labor would generate what we referred to earlier as external economies of specialization...
...Vol XXXVII, No 3 NOVEMBER/DECEMBER 2003 43 0 0 Vol XXXVII, No 3 NOVEMBER/DECEMBER 2003 43RETHINKING DEVELOPMENT Conclusions These three Central American experiences show some of the threats as well as opportunities that communities face in their insertion into the process of globalization...
...3. By community capital we mean the individual appropriation of community resources that are socio-cultural in nature (social norms and values, identity, reciprocity and trust...
...oping their own designs...
...2. "External economy" is a term developed by Alfred Marshall in his studies of local economies in England at the beginning of the twentieth century...
...In this regard, La Fortuna's situation reminds us that the nation still matters...
...The FMLN, now a political party, was the main guerrilla organization engaged in the decade-long armed conflict in El Salvador during the 1980s and is now the principle rival of ARENA...
...This void reflects a fundamental flaw of the Costa Rican model of national modernization inaugurated at the end of the 1940s: a passive approach to the construction of social citizenship...
...Upgrading in the San Pedran cluster is not impossible...
...If this takes place, San Pedro Sacatep6quez will have overcome one of its main limitations, which has been the weakness of local institutions...
...As happens in many first is that those who copy tend to crowd out the inno- Salvadoran municipalities, the confrontation vators in the market niches opened up by the most cre- between the Farabundo Marti National Liberation ative firms...
...handicrafts in La Palma in northern El Salvador...
...Roughly a third of the working population in the urban center An artist at a cooperative in La Palma, El Salvador, painting hand made wood figof this community works in the elabora- urines for export...
...Although our focus here is on the dialectic between the local and the global--and indeed globalization introduces much that is new--legacies of the statecentric era remain powerfully present, and globalization has not meant erasing the old and starting anew...
...Local Development in the Global Economy 1. We have carried out a series of studies over the last decade involving 15 communities in Central America with two common denominators: a) neighborhood communities with b) a cluster of small businesses inserted in the global market...
...The second advantage enjoyed by La Fortuna is that its globalized activity is tourism, one of the most dynamic areas of the global economy and one in which Costa Rica-again the national enters into play-has been able to carve out an important niche...
...Of the three communities we discuss, La Fortuna is clearly the most successful...
...Labor economies, meanwhile, exist when there is a sufficient supply of skilled workers within the cluster...
...When fully internalized, shared values can lead to the consolidation of business identities...
...A four-stage local process appears to us as crucial...
...In addition to the well known types of interventions that can be applied at the level of the individual firm-provision of credit, training, support for technological innovation, etc...
...And since the provision of education relies upon national policy, we are again reminded that regardless of how globally integrated they may be, these communities cannot escape their particular national context...
...This emphasis is hardly surprising given the centrality of the global market...
...Another is community capital, an asset that reminds us that the market is not autonomous but rather is embedded in specific social and cultural contexts...
...It is precisely in terms of this issue that we find the first major dilemma...
...We will highlight some of the more determinant community dynamics--equity, cohesion of enterprises in the cluster and the existence of local institutional support structures--found in the three cases...
...The town's second problem is institutional and reflects disadvantages accruing from the community's status as a secondary district in the cant6n-an administrative division within a province-of San Carlos, the seat of local municipal government, rather than as an autonomous unit of its own...
...Of particular concern is the possibility that international hotel chains will try to gain a foothold in the community...
...The absence of collective action also prevents Fortunans from effectively demanding resources and services from cant6n authorities in San Carlos, thereby limiting their autonomy...
...As one of the main tourist destinations in Costa Rica, a cluster of small locally owned enterprises (hotels, restaurants, tour operators, etc...
...And finally, this process of "institutional thickening" should lead to the formulation of a hegemonic local development project...
...Employment generation must be based in the cluster of small and medium size businesses that characterize these types of communities...
...Finally, our studies have confirmed a fact that is as widely overlooked by policymakers as it's suspected by globalization's critics: Employment in globalized activities does not always lead to a reduction in poverty...
...3 And since it is very difficult to sanction from the Salvadoran capital...
...La Palma: The Hard Road of Handicrafts in Globalization La Palma, located in the northern department of Chalatenango in El Salvador, has a population of just over 10,000 people...
...What is interesting is that, for the first time, the mayor's office wants to have a role in the economic development of the community and not just limit itself to providing basic services...
...communities can also draw on collective resources that reinforce the cohesion of the cluster, leading over time to more widely diffused capabilities and increased competitiveness...
...The first is socio-demographic and involves the need for households to incorporate gender and generational equality in order to maximize income generation...
...1 In all three communities locally owned businesses have engaged in specific activities constituting clusters...
...As they have become more deeply engaged in subcontracting, San Pedrans have stopped selling their own garments directly in retail markets...
...In the first place, we draw attention to experiences in which neither multinational firms nor state policies have been the drivers of change...
...The relatively minimal institutions interact among themselves, developing impact of handicraft activity on poverty rates brings us leadership in coalitions relating to issues of importo probably the most pressing problem affecting hand- tance to handicraft producers...
...A man working, Upgrading poses three principal challenges...
...It is important to note that starting with the social dimension means prioritizing the reduction of poverty and exclusion rather than placing this process on the back burner as occurs when one bets on the "trickle down effect" to overcome social deficits...
...We present each case separately, concluding with a series of reflections regarding the challenges faced by these types of communities inserted into the global process...
...The predatory effects of imi- development...
...Economies of specialization result from the division of labor among firms within the cluster...
...La Palma's migrated to work abroad...
...5 According to the national exporters association, Guatemala is receiving more and more "full package" orders--production of a good from start to finish--since the more simple and low paid assembly work can be done in other countries...
...Our studies of these communities show three factors that are significantly linked to household welfare...
...This crowding out takes place through cut- Front (FMLN) and the National Republican Alliance throat competition that relies on suppressing costs to (ARENA) has impeded the ability to reach signifilevels that preclude enhancing social welfare...
...Labor can be viewed merely as a cost to be minimized or it can be seen as a form of human capital to be developed...
...The type of insertion in the global market, rather than the act of insertion itself, is what matters...
...The Guatemalan case highlights most clearly the issues related to upgrading in the respective market chain...
...Rather, we analyze processes of global insertion "from below" that tend to be overlooked in the mainstream literature...
...Sewing workshops emerged in the town and have subsequently been subcontracted for apparel manufacturing, mostly for maquila companies...
...And the social integration and cohesion of the community is essential...
...The third challenge, and perhaps the most imporat a factory in San Pedro Sacatepbquez, Guatemala...
...In Central America as elsewhere, differences in educational levels provide much of the explanation for differences in social indicators, and La Fortuna has benefited immensely from Costa Rican investments in social development...
...Reaching non-authoritarian family consensus is fundamental...
...Juan Pablo Perez Sdinz is a researcher with the Facultad Latinoamericana de Ciencias Sociales (FLACSO) in Costa Rica...
...tant, is to reverse the deterioration of community capital resulting from an erosion of collective identity...
...Collective action is further discouraged by the sheer dynamism of the tourism industry, which causes Fortunans to believe that opportunities will be available for all without the need to organize...
...The challenge is how to increase the number of winners while minimizing the losers...
...This has encouraged a certain division of labor among the enterprises within the cluster, leading to what economist Alfred Marshall defined in the 1920s as external economies of specialization: the reduction of costs based on factors outside the firm itself that involve the development of its respective sector...
...NACIA REPORT ON THE AMERICAS 42RETHINKING DEVELOPMENT San Pedro Sacatepdquez: Indigenous People Facing Globalization San Pedro Sacatep6quez, a community of 21,000 residents, 80% of whom are Kakchiquel, lies about 15 miles from Guatemala City...
...And finally, the deepening of community norms can encourage forms of competition within the cluster based on innovation rather than imitation...
...The municipal government is trying to obtain a loan from the Central American Bank for Economic Integration to finance this park...
...Is it up to the market, in a selective manner, to allow for the upgrading of the most competitive firms...
...In so doing, they are losing the possibility of permanently recreating their identity as a community of producers and merchants...
...Moreover, this form of competition based on determinants of local capabilities to thrive in the a logic of subsistence means that producers are unable global...
...Though latent at the moment, these two problems may become critical if non-local tourist businesses establish themselves in the area...
...In other words, individuals acting in isolation from one another can access the benefits of globalization...
...Because such clusters tend to be heterogeneous, global insertion is likely to bring about losers as well as winners...
...In this sense, the quality of employment is a strategic issue, and knowledge-in a broad sense-must be understood as a strategic resource for communities attempting to confront globalization...
...First, collective action among local business owners, local government and other community organizations is generally absent and appears nowhere on the horizon...
...Solidarity can be a valuable asset when the community is faced with external threats, and it can encourage the crystallization of business organizations that can strengthen local firms...
...Full package production requires fabric-cutting operations that can only be done in very long rooms...
...Consensus plays a fundamental role in this process...
...Certainly, localities are affected by globalization, but they also create the conditions that make possible their insertion into global markets...
...Katharine Andrade-Eekhoff works at FLACSO in El Salvador Much of the recent discussion of the ways localities have inserted themselves into the global economy has emphasized the nature of local and multinational firms, inter-firm relations and the institutional framework that determines the pattern of economic governance...
...Without a doubt, of the have overcome poverty in recent years, yet globalized three cases considered here, this community shows handicraft production has not played a significant role the greatest degree of institutional density, measured in this process...
...A handful of local business Vol XXXVII, No 3 NOVEMBER/DECEMBER 2003 41 Vol XXXVII, No3 NOVEMBER/DECEMBER 2003 41RETHINKING DEVELOPMENT owners perceive this threat, but there is not a collective consciousness about it...
...Contrary to the supposed worldwide trend toward homogenization induced by global markets, the socio-cultural and political peculiarities of specific places are now understood to be crucial to determining how communities cope with the challenges of globalization...
...First, the presence of sufficient institutions, in particular organized business owners and a supportive local government, is absolutely necessary for success...
...This is a major limitation, since the vast majority of producers carry out their work in their homes, but the municipal government has lands where an industrial park could be established with adequate warehouses...
...In terms of the cohesion in the cluster, a lack of cooperation and association exists, in addition to the serious problem of identity erosion...
...The origin of this economic cluster goes back to the middle of the last century, when commerce replaced subsistence farming as the main economic activity...
...The generation of employment in the globalized activity is significant, but what matters more is the kind of jobs that are created...
...2 Thus, it is not surprising to find that employment in the tourism sector generates higher incomes, with positive effects for the welfare of the households of this community...
...For this to happen, a collective perception of the need to upgrade must emerge, along with a realization that if this does not happen, the vast majority of producers would be excluded from the industry...
...Our reflections are based on the experiences of three Central American communities that have developed economic activities articulating the local with the global: tourism in La Fortuna, a small town in Costa Rica...
...The community's deficient internalization of values and lack of trust, however, could be revitalized through the activation of cooperation and economic association...
...The first approach signals the "low road" toward global integration, whereas the latter envisions a "high road...
...Education is a second factor...
...Greater detail and analysis can be found in our recent book, Communities in Globalization: The Invisible Mayan Nahual (Lanham, Maryland: Rowman and Littlefield, 2003...
...As in much of El Salvador, decreased as the number of local institutional actors and their poverty levels are powerfully associated with the level of interaction particularly related to the globalreceipt of remittances from residents who have ized activity, in this case handicrafts...
...This example demonstrates precisely why the availability of forward-looking local institutions, particularly local government, can have a significant impact on community prospects in global activities...
...4. ARENA is the right-wing political party that has dominated the executive branch of government since 1989...
...The pervades the community...
...Reciprocity, for example, expressed through frequent sharing of tools, raw materials, labor and other resources, can generate sufficient trust leading to cooperative actions among businesses...
...Handicrafts for a fraction of the cost of her time, she will be hard are not a traditional activity in this community, but were put to trust and cooperate with other artisans the next introduced a few decades ago by a group of young artists time around...
...And third, we analyze community dynamics as these evolve in complex interaction with the process of globalization...
...La Fortuna: The Dynamism of Global Tourism La Fortuna, a community of approximately 7,500 inhabitants, is inserted into global markets through its natural tourist attractions, in particular the nearby active volcano, El Arenal...
...Second, we focus on local communities where an economic activity inserted into global markets has developed through the efforts NAC1LA REPORT ON THE AMERICAS 40RETHINKING DEVELOPMENT of a cluster of small firms...
...We have been particularly interested in the use of community capital among business owners and the role this plays in bringing about cohesion within the cluster...
...and apparel manufacturing subcontracting in San Pedro Sacatep6quez, a municipality located just outside of Guatemala City...
...By contrast, in our discussion of globalization from a local perspective, we assign priority to three elements that highlight the importance of local sociocontextual factors...
...In other words, this is a strategy for community upgrading where equity is seen as a vital factor for competitiveness...
...The distant centralized authority in San Carlos, for example, continues to provide support for local agrarian activities, which are of little relevance to a place like La Fortuna, where tourism has replaced farming as the critical driver of local economic life...
...Its location in Costa Rica implies a higher level of economic development and social welfare than is found in El Salvador or Guatemala, and La Fortuna is alone among our three cases as a place where poverty is minimal and social integration is virtually universal...
...The lack of a division of labor among San Pedran firms makes this difficult, and mechanisms need to be found that can replicate the role that former business leaders played years ago in forming one of the first subcontracting associations among workshop owners...
...5. Upgrading refers to the move from simple to more complex processes in the production process, a shift that is associated with increasing revenues and greater possibilities for local autonomy and control...
Vol. 37 • November 2003 • No. 3
