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, 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. 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.
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. This emphasis is hardly surprising given the centrality of the global market.
By contrast, in our discussion of globalization from a local perspective, we assign priority to three elements that highlight the importance of local socio-contextual factors. In the first place, we draw attention to experiences in which neither multinational firms nor state policies have been the drivers of change. Rather, we analyze processes of global insertion “from below” that tend to be overlooked in the mainstream literature. Second, we focus on local communities where an economic activity inserted into global markets has developed through the efforts of a cluster of small firms. And third, we analyze community dynamics as these evolve in complex interaction with the process of globalization. Certainly, localities are affected by globalization, but they also create the conditions that make possible their insertion into global markets.
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; handicrafts in La Palma in northern El Salvador; and apparel manufacturing subcontracting in San Pedro Sacatepéquez, a municipality located just outside of Guatemala City.[1] In all three communities locally owned businesses have engaged in specific activities constituting clusters.
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. 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. 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.
—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. As one of the main tourist destinations in Costa Rica, a cluster of small locally owned enterprises (hotels, restaurants, tour operators, etc.) has developed in La Fortuna.
Of the three communities we discuss, La Fortuna is clearly the most successful. 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. 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. In this regard, La Fortuna’s situation reminds us that the nation still matters. 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 state-centric era remain powerfully present, and globalization has not meant erasing the old and starting anew.
Just as La Fortuna has benefited from decades of non-authoritarian social development in Costa Rica, higher levels of impoverishment in La Palma and San Pedro Sacatepéquez reflect the exclusionary development models pursued in El Salvador and Guatemala.
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. 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. 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.[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.
Yet the generally optimistic picture of La Fortuna must be tempered by concern about two issues that appear crucial to its future. First, collective action among local business owners, local government and other community organizations is generally absent and appears nowhere on the horizon. 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. 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. 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. In other words, individuals acting in isolation from one another can access the benefits of globalization.
The town’s second problem is institutional and reflects disadvantages accruing from the community’s status as a secondary district in the cantón—an administrative division within a province—of San Carlos, the seat of local municipal government, rather than as an autonomous unit of its own. 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.
Though latent at the moment, these two problems may become critical if non-local tourist businesses establish themselves in the area. Of particular concern is the possibility that international hotel chains will try to gain a foothold in the community. A handful of local business owners perceive this threat, but there is not a collective consciousness about it. Thus, the likelihood of proactive responses to this danger, which could ultimately provide incentives for collective action, seems remote. The absence of collective action also prevents Fortunans from effectively demanding resources and services from cantón authorities in San Carlos, thereby limiting their autonomy.
—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. Roughly a third of the working population in the urban center of this community works in the elaboration of brightly painted wooden handicrafts that are sold in local, national and international markets. Handicrafts are not a traditional activity in this community, but were introduced a few decades ago by a group of young artists from the Salvadoran capital. The residents of La Palma learned the craft and ended up appropriating it and developing their own designs.
A little more than half the households in La Palma have overcome poverty in recent years, yet globalized handicraft production has not played a significant role in this process. As in much of El Salvador, decreased poverty levels are powerfully associated with the receipt of remittances from residents who have migrated to work abroad. The relatively minimal impact of handicraft activity on poverty rates brings us to probably the most pressing problem affecting handicraft development in La Palma: the type of competition that prevails among the approximately 100 workshops. Competition is clearly based on imitation and not on design innovation. The predatory effects of imitation are limited somewhat by the market’s segmentation, but there are other negative consequences. The first is that those who copy tend to crowd out the innovators in the market niches opened up by the most creative firms. This crowding out takes place through cutthroat competition that relies on suppressing costs to levels that preclude enhancing social welfare. The use of unpaid family labor, carrying out the activity in the home in order not to incur infrastructure costs is one example. Moreover, this form of competition based on a logic of subsistence means that producers are unable to make the shift into accumulative strategies based on a logic of entrepreneurship.
The tendency toward imitation also erodes community capital: When an artisan sees her creative efforts in developing a new design copied by a neighbor and sold for a fraction of the cost of her time, she will be hard put to trust and cooperate with other artisans the next time around.[3] And since it is very difficult to sanction those that compete based on imitation, creativity stagnates.
Another important element in La Palma is of a political-institutional nature. Without a doubt, of the three cases considered here, this community shows the greatest degree of institutional density, measured as the number of local institutional actors and their level of interaction particularly related to the globalized activity, in this case handicrafts. La Palma’s institutions interact among themselves, developing leadership in coalitions relating to issues of importance to handicraft producers. However, what is missing is any sign of the emergence of a hegemonic process that would unite the majority of La Palma’s population behind a common vision of community development. The explanation for this absence can be traced to the partisan political polarization that pervades the community. As happens in many Salvadoran municipalities, the confrontation between the Farabundo Marti National Liberation Front (FMLN) and the National Republican Alliance (ARENA) has impeded the ability to reach significant agreements, at least for now.[4]
Again, the national setting and specific characteristics of the country’s past prove to be important determinants of local capabilities to thrive in the global. While in Costa Rica a half-century of national social development was the main explanation for higher levels of welfare, in La Palma the aftermath of the civil war continues to negatively affect local dynamics.
—San Pedro Sacatepéquez: Indigenous People Facing Globalization
San Pedro Sacatepéquez, a community of 21,000 residents, 80% of whom are Kakchiquel, lies about 15 miles from Guatemala City. 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. Sewing workshops emerged in the town and have subsequently been subcontracted for apparel manufacturing, mostly for maquila companies.
The Guatemalan case highlights most clearly the issues related to upgrading in the respective market chain.[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. This presents the challenge of upgrading for the San Pedran producers in two ways. 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.
Upgrading in the San Pedran cluster is not impossible. There are four large factories in the community, and their experiences show that both upgrading and downgrading are possible. Upgrading poses three principal challenges. 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. 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. 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.
The second challenge relates to infrastructure. Full package production requires fabric-cutting operations that can only be done in very long rooms. 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. 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. The municipal government is trying to obtain a loan from the Central American Bank for Economic Integration to finance this park. If this takes place, San Pedro Sacatepéquez will have overcome one of its main limitations, which has been the weakness of local institutions. 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.
The third challenge, and perhaps the most important, is to reverse the deterioration of community capital resulting from an erosion of collective identity. As they have become more deeply engaged in subcontracting, San Pedrans have stopped selling their own garments directly in retail markets. In so doing, they are losing the possibility of permanently recreating their identity as a community of producers and merchants. 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 community’s deficient internalization of values and lack of trust, however, could be revitalized through the activation of cooperation and economic association. 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. 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.
—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. All three communities participate in the market through different types of global chains, and their sustainability depends upon their ability to upgrade. It is precisely in terms of this issue that we find the first major dilemma. Is it up to the market, in a selective manner, to allow for the upgrading of the most competitive firms? Or, by contrast, can upgrading be a more collective undertaking that involves the community as a whole? In other words, will just a few be able to upgrade or will the majority? Clearly, the latter is essential if local development is to take place. And the social integration and cohesion of the community is essential. 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.
Our studies of these communities show three factors that are significantly linked to household welfare. The first is socio-demographic and involves the need for households to incorporate gender and generational equality in order to maximize income generation. Reaching non-authoritarian family consensus is fundamental. Education is a second factor. 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. 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. The type of insertion in the global market, rather than the act of insertion itself, is what matters.
The generation of employment in the globalized activity is significant, but what matters more is the kind of jobs that are created. 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 first approach signals the “low road” toward global integration, whereas the latter envisions a “high road.” 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.
Employment generation must be based in the cluster of small and medium size businesses that characterize these types of communities. Because such clusters tend to be heterogeneous, global insertion is likely to bring about losers as well as winners. The challenge is how to increase the number of winners while minimizing the losers. 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.—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.
External economies—including specialization, communication and information—are one such resource. 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. Business owners can appropriate the different types of socio-cultural resources available to these communities, thus contributing to the cohesion of the cluster. When fully internalized, shared values can lead to the consolidation of business identities. 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. 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. And finally, the deepening of community norms can encourage forms of competition within the cluster based on innovation rather than imitation.
A four-stage local process appears to us as crucial. First, the presence of sufficient institutions, in particular organized business owners and a supportive local government, is absolutely necessary for success. Second, the institutions need to interact among themselves in order to avoid redundancy. The basis of this interaction constitutes the dialogue between the organized business owners and local government. Third, this interaction needs to lead to the formation of coalitions. And finally, this process of “institutional thickening” should lead to the formulation of a hegemonic local development project. Consensus plays a fundamental role in this process. Among the underlying material foundations of this consensus are social integration and gains in equity in terms of class, gender, ethnicity, etc. In other words, this is a strategy for community upgrading where equity is seen as a vital factor for competitiveness. 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.
ABOUT THE AUTHORS
Juan Pablo Pérez Sáinz is a researcher with the Facultad Latinoamericana de Ciencias Sociales (FLACSO) in Costa Rica. Katharine Andrade-Eekhoff works at FLACSO in El Salvador.
NOTES
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. Greater detail and analysis can be found in our recent book, Communities in Globalization: The Invisible Mayan Nahual (Lanham, Maryland: Rowman and Littlefield, 2003).
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. Economies of specialization result from the division of labor among firms within the cluster. There are also economies of communication and information when details about suppliers and clients circulate within the cluster. Labor economies, meanwhile, exist when there is a sufficient supply of skilled workers within the cluster.
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). 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.
4. ARENA is the right-wing political party that has dominated the executive branch of government since 1989. 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.
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.
