19FEB: front and backword economic linkages

Regional Economic Development Essay in honor of Francois Perroux
1988
Chapter 2: The pole of development’s new place in a general theory of economic activity

The essay argues that development historically only happens through the development poles. Development pole can be described as a (big) firm investing into an enterprise that will create profit, physical structures, employment, transportation links etc. The pole can be fixed to region or to (existing) firms. The surrounding population can negotiate with the firm in professional, institutional or informal manners to distribute the forthcoming wealth.
The development poles have the potential to be growth inducing. They inevitably influence the local status quo – create demand for services for new workers, offer business opportunities along new transportation links etc.
The author defines a fundamental difference between growth pole and development pole. Growth means a sustained increase in e.g. GDP; development is the sum of the changes in social patterns and mentalities through which the production device is coupled with the population: Product that serves the population rather than is an ‘alien’ to it.
I wonder if the above argued difference is indeed the major flaw of the recent ‘retrofit – robin hood’ attempts by big firms to pay back to the exploited land. For example The Business in the Community is a company, which helps big international firms do exactly that. BITC helps companies like BP identify a need somewhere in the developing world and plans how to spend money in the region on ‘development’ which will also serve as an eco/poverty conscious marketing tool for the firm. I was aware that this ‘guilt laundering’ has flaws – it is a retrofit, it is using poverty for marketing purposes, it is perhaps a tic-box exercise, but above all it does not connect the product of the big firm with the population in the first place.

The Strategy of Economic Development
Albert O. Hirschman 1958
Chapter 6: Interdependence and Industrialization

The chapter explains forces that drive, allow and create new industries. The author explains that developing country often find themselves in a position of an enclave. Either an export one, where a natural resource is being extracted from the country and exported without leaving much capital behind. For example cotton is collected and exported as a raw material, rather than employing local population and turning cotton into clothes and exporting that. These are called forward linkages. The author shows that the less developed country the more primary sources are being exported. On the other hand an import enclave is also typical for developing countries. In this instance ‘near final’ product are imported into a country, where local population adds final touches to the product. These instances have proven to have better effect on the host country as there are cases where the import has been over time substituted with local resources. These are called backward linkages. The author argues that the more linkages within a country the better and to that it is possible to calculate approximately the ‘value’ of linkages and the correct sequence of starting development in underdeveloped country by introducing new industry.
I would like to hope that the project for Las Lomas Colonia, which identified a demand in housing and local material resources, has a potential to start such industry. In the case local soil caliche can be used for manufacturing of unfired blocks, which can be used for building of homes. The technology needed is a hydraulic press, which can be ‘imported’ from another region. The block making is a backward linkage to the building industry. The raw material is present and so is the greatly unemployed labor resource. What is missing!?