Applying Good Governance Concept to Promote Local Economic Development: Contribution and Challenge

By Liou, Kuotsai Tom | International Journal of Economic Development, January-April 2007 | Go to article overview

Applying Good Governance Concept to Promote Local Economic Development: Contribution and Challenge


Liou, Kuotsai Tom, International Journal of Economic Development


Abstract

This paper examines the application of good governance concept in the area of local economic development and focuses on contribution and challenge issues. The paper includes a review of major concepts of the good governance, the role of government, and the importance of public management reform. On the contribution issues, the paper emphasizes such concepts as the devolution and decentralization policy, the flexibility and choice principle, and the networking and partnership strategy. On the challenge issues, the paper identifies potential problems of the limitation of managerial capacity, the lack of accountability, and the inconsistence of leadership and policy. The implications of both contribution and challenge issues are summarized in the conclusion section.

Key words: good governance, economic development, public management and reform, and public policy.

Introduction

Local economic development has been one major public policy emphasized by many governments for the past several decades. In the United States, for example, local governments are interested in economic development policy because of the changing domestic and international political and economic environment. In the domestic environment, local governments have to find additional resources when they experienced such events as the economic recession, the rise of tax revolt, the federal budget deficit, and the cutback of federal aid. In the international environment, the globalization of the world economy, the increase of foreign investment, the end of Cold War, and the advancement of communication technologies have provided local governments good opportunities to seek new markets for the development. To support the goal of economic development, policymakers have to emphasize reform ideas to improve the operation of their local government systems.

Among various reform ideas, the good governance approach has become a popular reform model in recent years. Researchers have examined the application of governance concepts in various aspects of public administration. For example, Peter and Pierre (1998) study changes of governance to traditional public administration concepts and compare similarities and differences between the New Public Management and the governance model. Kettle (2000) explains the transformation of governances in the areas of globalization, devolution, and the role of government. Hague (2001) discusses the problem of demising publicness of public service under the mode of governance. Lynn, Heinrich, and Hill (2000) promote the theory-based governance research by addressing the need to review the literature of political economy.

To promote economic and social development, researchers have also studied the application of good governance concepts in many developed and developing countries. For example, OECD researchers explain that many governance concepts have been emphasized in various public management reforms of their member countries to support their social and economic development (OECD, 1995a; 1995b; Keating, 1998). In the process of development, Werline (2003) argues that the difference between poor countries and rich countries has to do with governance challenges rather than resource issues. Shepherd (2000) believes that good government may be necessary for economic development, but it is not enough for poverty reduction of social development. Kliksberg (2000) further argues a need to rebuild the state to create a "smart government" for social development. The smart government focuses on the state's strategic role in the society and in the development of an institutional design and managerial capacities to improve the effectiveness of the state performance.

The purpose of this paper is to examine the application of governance concepts in the field of local economic development. The paper consists of three sections: (1) summaries of literature review about the role of government in economic development and good governance concepts; (2) discussions of major contributions of good governance to local economic development; and (3) comments on potential challenges associated with the governance model.

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