Regionalentwicklung.de

(Reason and goal of a regional economy)

Why do we carry out economic activities?

In order to understand the meaning of local economy it is necessary to think about the basic reason for economy. The question is: Why do we take part in an economy at all?

Do we work for the sake of economic growth? Do we work for the ability to compete on world markets? Or do we take part in an economy to increase stock prices? For some people these reasons represent their personal sense of economy, however for the majority, economy is the social space, where people have to make a living.

People act economically because they have needs that they want to satisfy. Food, habitation, education, culture, enjoyment and travel – these things are not simply available and usable. Goods and services are only usable for us when other people make them possible, by doing economy- because we do economy!

So we undertake economy because of necessity, since there is no supply without economy. Moreover, it is a human desire to be creative and productive. For the most people satisfaction through success at work is as important as the interaction with other people. “Economy” is the collective term for all these activities.

„Work [...] creates life sense.“
The German Federal President and former CEO of the international monetary fund IMF Horst Köhler in his Christmas speech 2006.

We undertake economic activities for two reasons:

1. For necessity, because without economy there is no supply.
2. For the human desire to be productive and creative and to enrich our lives.

How does Economy work?

The economic theory provides us with a classification of economy in sectors:

Figure: Sectoral structure of an economy

According to this segmentation, economy consists of three sectors.

• Primary sector: Basic Production: agriculture, forestry, fishery, mining, energy supply
• Secondary sector: Production of goods: industry, construction, productive craft
• Tertiary sector: Services: commerce, finances, transport, education, culture, health and human to human services

The pyramid illustrates that the sectors on the bottom are the basis for the sectors above. Without the basic sectors, it is not unproblematic to run the superior sectors.
Examples:

• Without a stable food supply (primary sector/basic production), people cannot concentrate on house building or handicraft. Food is crucial for human existence. It is the absolute basis for all.
• Without energy supply (primary sector/basic production), machines cannot be used. Not even electrical light, heating, transport, traffic and (tele-) communication are possible.
• Without a house (construction=secondary sector/ production of goods) it is unlikely that people are able to run a barber's shop, a travel agency, or cultural services (tertiary sector/services)

From this perspective it becomes clear, that a stable economy must be organised bottom-up. The basic supply for people must be superior to all other economy sectors, like the industrial production is superior to services.

Why do we need a regional economy?

Problems of a one-sided globalisation

Contemporary Zeitgeist gives the impression that all questions on the basic supply for the people are solved. It seems that economical competitiveness on global markets is the only question that matters in economy now. Global tendencies, especially in the energy sector, show that this approach is foreshortened. One example is the involvement of the US Government in the Near East (Iraq, Iran), Central Asia (Afghanistan), South America (Venezuela) and Africa in order to assure the supply of oil. Further, there are European efforts to gain access to Russian oil.

A one-sided orientation of economic actors on the global market hides the danger, that the basic supply for people becomes disregarded. The concentration on foreign markets creates dependencies. What happens when export markets break down, maybe because of market saturation or social instability? A collapsing selling market leads to decreasing income. That is less problematic, when the local supply is assured. But what happens, if income from export is necessary to buy commodities like oil, gas or food from far abroad, because the local economy has no alternative products to offer?

The main problem of a one-sided globalised economy are dependencies. In extreme cases these dependencies can cause lacks in supply and social tentions, that threatens the desire for stability.

Moreover, there is the danger that an economy system concentrated solely on the world market loses sight of the people's needs. Where does jobs come from, when the global competition pressure demands constant rationalisation in production processes? And an equally essential question is: What about the human being?

The option of a complement regionalisation

People do not live globally. Measured in global scales, people spend the most of their life time at one place. There they work, live and develop themselves as well as their environment.

An economy that pays attention to that facts, would organise itself more locally and with the people in the centre of all its processes. Regional economy is complementary to global economy and therefore it has got different priorities:
The goal of a regional economy is not competition (e.g. with export goods) on world markets. The goal is an optimal supply for people and to make it possible that people can make a living on the basis of their own abilities.

Regional economy must be understood as addition to a global economy. The problems of a pure global oriented economy -dependency and the danger of instability – can be answered by a support of economical independence and regional self-supply and an adoption of the decentralised economy systems to the needs of local people. Because complexity arises from the concrete, it is possible to create a global economy that is based on the interaction of many single regional economy systems.

A regional orientated economy has remarkable qualities:

• the production comes closer to the consumer, which makes the process of production more transparent for the consumer and helps to assure human rights and environmentally sound methods of production
• housing, work, culture and education come closer together; work and transport distances become shorter, the expenditure of time decreases, polluting emissions decrease
• the dependence of supra-regional and global changes decrease, the global pressure of competition declines
• local resources will be preferred, its intensive use includes unused potential: the capacity utilisation of regional businesses increases, unemployed persons become part of the regional development and find life sense through their contribution to the local economy

A region is well positioned when:

• the basic supply of food, habitation, education, culture, health care, regional transport and regional communication is adequately managed and provided by the people within the region
• it is possible to offer specific goods and services on the world market in order to use the income to buy goods and services from abroad

This setting creates a self-sustaining economy for everything that is necessary to live and an additional supply with special goods. This situation applies to all regions on earth, no matter if it is a developed or a developing country.

How can a regional economy be implemented?

If regional economy is regarded as useful, then the question of its practical handling emerges. There are several approaches which are elaborated further in other articles.

Tools and concepts for regional economy:

• regional currencies / regional money
• small scale technologies: appropriate technologies
• local organisation and labour, like the community model, consume community or approaches like public busses
• decentralised and free concepts like OpenSource, OpenMedia or OpenPatents

Conclusion

Threats emerge due to a strong dependence of regions on the global economy: Regions that concentrate on export goods achieve under economically positive conditions high profits. In more difficult situations such a region loses its possibility to buy the urgently needed goods. That's why a regional organized economy is useful to assure a basic supply. Additionally a specialisation for the global market is helpful. Regional economy is realisable with the help of several concepts and tools like regional currencies, appropriate technologies and further decentralised approaches.