Territorial development in the global learning economy: the challenge to developing countries

In a globalizing economy, what are the developmental prospects for middle-income countries, most of which have suffered more than a decade of slow growth or decline? The set of possible development strategies has been radically altered by the restructuring of world markets; the ways in which developing countries must be integrated into the world economy are now very different from those of the period up to the 1970s. In the face of this, the widely different developmental performances of nations are due to a variety of 'local' factors such as technology, institutions, and governmental policies. Thus, potential integration is based on a paradox: the most successful countries and regions have the most 'endogenous' forms of production, not copies of any supposed global 'best practice'. Several aspects of such endogenous approaches must be considered. These range from the traditional subject of the production-oriented development literature, i.e. 'hard' externalities in production systems, to a dimension which is only beginning to recieve serious attention, i.e. 'soft' externalities in development. These include untraded interdependencies in production systems, especially conventions and rules for coordinating complex systems of economic activity. It is argued that the latter explain a large portion of the differences in performance of middle-income countries in the face of global economic forces.