Local development policy in a societal crisis: municipal–industry dialogues in Sweden during Covid-19

ABSTRACT

This paper analyses local development policy by investigating how this worked during a crisis situation caused by the Covid-19 pandemic from spring 2020, with major effects on the economy. This empirical study covers local government in Sweden. The results reveal two major findings. First, that decentralized dialogues between local government and industry, being a key facet for local growth policy, were exposed to challenges in striking a balance between nurturing a sense of a shared interest versus upholding the understanding of divergent roles, between the municipality and businesses. Second, that the dependencies for local development policy on the central state were still vital. This is a reminder of the importance of being careful to understand what decentralized development policy refers to and how this involves resources for local actors to adapt this policy to local conditions, as advocated through the ideal of bottom-up approaches for local development.

KEYWORDS:

• governance
• local government
• municipalities
• Sweden
• decentralized development policy

1. INTRODUCTION

In many industrialized countries, policies for growth and economic development have become increasingly decentralized (Pike et al., 2017). This has been driven by a general decentralization discourse (Rodriguez-Pose & Sandall, 2008) and ideals of a place-based approach to strategic development planning, which is shared across powerful international bodies, including the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD) (Barca, 2009; OECD, 2011). This has, in turn, involved increased expectations on subnational (regional and local) political bodies to engage in development policy and realize strategies for growth (Pike et al., 2017). This is the background to arguments that more knowledge is needed about variations in the capacity of local and regional institutions and governance for development (Rodríguez-Pose, 2020; Tomaney, 2014). Such capacity is dependent on various factors and how these interrelate. Knowledge and learning, relational resources, networks, mobilizing others and leadership are widely acknowledged to be important for how governance capacity evolves in this field.

In this paper we analyse local growth policy with a focus on how this involves dialogues with local industry through an investigation into how this worked during a crisis situation with major effects on the economy. This was the crisis period commencing with the outbreak of the Covid-19 pandemic in spring 2020. The empirical study presented in this paper covers local government in Sweden. Based on data up until March 2021 for Sweden, it was found that the pandemic had severe negative effects on businesses’ sales and on tax revenues for the state (Angelov & Waldenström, 2021). It was also noted that the national workforce decreased by 2% when comparing autumn 2020 with autumn 2019 (Häkkinen Skans, 2021). This stress on the economy and the labour market was shared across national economies, and had serious local effects which created a demanding situation for regional policy (Aalbers et al., 2020; Brinks & Ibert, 2020; Willi et al., 2020). This crisis generated major stresses for the industry that led governments to extend ambitious policies to mitigate economic downturn. Hence, the Covid-19 pandemic represents a period in which the institutional foundations of government and governance were exposed to significant demands to act.

Against this background, the aim of this paper is to identify how the time of crisis lay bare structural challenges and structural interdependencies of local government bodies for their implementation of decentralized growth policy. The empirical context for the investigation is the structures for dialogue with industry in a selection of Swedish municipalities and how this played out during the Covid-19 pandemic. The empirical material is derived from interviews with planners who had the role of managing municipalities’ local dialogue with industry. The results illustrate that the municipalities had extensive operational tasks for local development policy during this period, and that local government had the capacity to take steps to support local businesses to some extent. Nevertheless, the time context of the investigation also lays bare challenges for the position of local government in terms of growth policy.

The results of the study reveal two major findings. First, that decentralized dialogues between local government and local industry were exposed to challenges in striking a balance between nurturing a sense of shared interest and upholding an understanding of the divergent roles of the municipality and industry. Second, while the expectations on local government to mobilize its own resources were high, dependence on the central state to provide resources remained vital. In conclusion, the situation resulting from the Covid crisis laid bare how the non-statutory status of decentralized development policy is formed locally through varying conditions and trajectories of governance, which nevertheless remain embedded within multilevel political interdependencies.

The remainder of the paper is structured as follows. Section 2 sets out the wider literature and the analytical frame of this paper. Section 3 describes the empirical study and the empirical context. Section 4 presents the results. Section 5 concludes.

2. DECENTRALIZED ECONOMIC DEVELOPMENT POLICY

Decentralized economic development policy is formed through multilevel governance, as well as through local policy for which dialogues with partners within the specific geographical context is important. To interpret how the wave of decentralized development policy is formed through an interplay between top-down and bottom-up processes, it is important to understand that multilevel governance is closely interrelated with multilevel government (Hermelin & Trygg, 2021). This involves seeing how the increased expectations (primarily top-down) on local and regional political bodies to become involved in development policy interact with the adoption of this ideal across subnational actors. In this way, decentralization can be interpreted as a bottom-up discourse that is encouraged by top-down policy interventions. This reflects the impacts of a ‘developmentalist approach aiming at maximizing the development potential of all regions’ (Barca et al., 2012, p. 146), and that the values of economic development have become ‘a central justification for the decentralisation of power’ (Rodriguez-Pose & Sandall, 2008, p. 69). This decentralization targets subnational political authorities as various local and regional anchor organizations for development.

Pertaining to the unique situation of the Covid-19 pandemic, several previous studies have explored how governance relationships across different levels of government have been formed by this situation. These studies have shown that the character of the interaction between different levels of government is an important factor for understanding local strategies (Askim & Bergström, 2021; Kuhlmann et al., 2021; Pierre, 2020; Van Overbeke & Stadig, 2020). Multilevel coordination can be particularly demanding in times of crisis, due to the importance of being able to reduce the time between a decision being made and its execution (Pierre, 2020). Therefore, it might be expected that central authorities will often try to concentrate on decision-making, and that uncertainty about the role of local bodies could increase (Askim & Bergström, 2021).

This paper uses the term ‘local industry offices’ to refer to the organizations set up within local government for local development policy. Local industry offices have various roles, with the management of local cross-sector dialogues (primarily between industry and local government) being a main task. These organizations are important for facilitating local governance with reference to ‘coordination processes [on a subnational scale] between actors with different backgrounds and agendas’ (Willi et al., 2020, p. 776). The local industry offices are involved in cross-sector dialogues and collaborations that are said to represent an important transformation of societal organization by the turn of the 21st century, whereby ‘the public/private divide had softened’ (Emerson & Nabatchi, 2015, p. 3). This is argued to foster the so-called collaborative governance regime attributed to the rise of challenges that wicked problems represent, and to the resource constraints of the public sector (Emerson & Nabatchi, 2015). This is a context that has raised the expectations placed on the public sector to be involved in collaboration with private companies for experimental initiatives and to facilitate innovations (Morgan & Marques, 2019).

Although the empirical context for this paper relates to local environments and local development policy, concepts for regional governance and development make up an important conceptual framework for the discussion. In this respect, we also recognize how the notion of urban governance – more common among political science scholars (Pierre, 2014) – is an important contribution to the discussion through its acknowledgement of power relations and political transparency. Thus, we assume that cross-sector dialogues for local development policy need to be conceived in relation to how they relate to shared interests and to negotiations about scare resources and conflicting interests.

While decentralized growth policy is a shared development across many countries (Pike et al., 2017), it plays out in different ways across various national planning systems and across various local settings. Also, and with respect to the time context of the investigation of this paper, the Covid-19 pandemic affected different industries in quite different ways, making the local industry structure an important factor impacting the evolution of demands placed on local development interventions. In a review of the effects of the Covid-19 pandemic on the economy and the labour market at a national level in Sweden almost one year after the outbreak, it was concluded that companies and employees in the service sector have been hardest hit by the pandemic. Services that require physical proximity bring many people together or are connected to travel had suffered the most (Häkkinen Skans, 2021). Consequently, municipalities with an economy that is largely dependent on such businesses can be expected to experience strong demand from local companies for an active policy. Additionally, the size and structure of local companies make a difference. Small businesses are, in general, more locally and regionally oriented than large companies (Keating, 2020). Therefore, it can be expected that smaller companies will be more likely to turn to local and regional political bodies in situations of crisis than large corporations. This motivates the analysis of this paper to discuss the local interventions with respect to particular industrial profiles.

Local development policy is implemented by staff at the local industry offices. However, local politicians are also actively involved in operational work for development policy in a Swedish context (Sellers et al., 2020; Hermelin & Olausson, 2020). Here, it is important to understand that local development policy through local government is a non-statutory area in many contexts, and thus provides the scope for local politics to steer the direction, content and organization. According to Dodds et al. (2020), ‘Interpreting and responding to pandemics is always a political act’ (p. 292). This suggests that the role of politicians in terms of local development policy also increased in the crisis situation of the Covid-19 pandemic.

Decentralized development policy is a domain with quite a wide scope and includes managing different roles in relation to local industry and different ways to interact (Hermelin & Trygg, 2021). This involves dialogues with companies and their stakeholders, for which the local industry office is an important organization. It also includes various interventions through the municipality more generally, such as the supply of services and infrastructure in the local environment and facilitating an attractive environment for economic development. Dialogues with private companies are needed to share information and also to foster a shared understanding and invite institutional involvement (with schools, for example) or collaborations in time-specific projects (which may be funded by the EU or the national state). The communication between local government and businesses is also about negotiation on how to distribute and mobilize resources. While this kind of private–public interaction might function well under normal circumstances in a high-trust society such as Sweden, it may be less robust in times of crisis (Pierre, 2020), which is illustrated by the empirical study of this paper. This crisis exposed the municipalities’ need to carry out expedient decision-making and to deal with coordination and mobilization at short notice. The empirical study of this paper reveals how the shared understanding of municipalities’ role in local development was fairly fragile.

3. EMPIRICAL CONTEXT AND EMPIRICAL STUDY

This paper’s empirical context for the management of local development policy during the period of the Covid-19 pandemic, namely Sweden, represents a political and planning system with comparatively powerful local government. Swedish local authorities enjoy extensive legal autonomy. Sweden ranks high in local competence and autonomy indices (Erlingsson & Wallman Lundåsen, 2019; Ladner & Keuffer, 2018; Sellers et al., 2020). This empirical case also represents a structural setting in which the local municipalities have strong fiscal power through income taxation from households, but nevertheless lack such relationships with the corporate sector. In Sweden, corporate taxation is leveraged to the central state.

Substantial tasks devolved to the local planning level are an important reason why local authorities in Sweden have developed into extensive organizations with large financial budgets. The municipalities employ around 20% of the total national workforce. Important mandatory tasks for local authorities include welfare services (social care and primary and secondary education), physical planning and local physical infrastructure (streets, water and sewage), waste management, emergency services and civil defence, libraries and housing. The national government also lists non-mandatory tasks for municipalities, which include industrial development and local development interventions. In summary, it can be stated that Swedish municipalities have three basic roles: to manage local democratic systems and authority mandates, to deliver local infrastructure and welfare services, and to be development partners (SKR, 2020). There are substantial variations between Swedish municipalities in terms of population size, demographic development, level of urbanization and scale of geographical territories. The investigated municipalities represent such a variation. Regardless of population size, the regulation of the competences of local municipalities applies equally to all 290 local authorities in Sweden.

While the municipalities within the Swedish planning system are quite resourceful bodies with substantial competences, they are nevertheless involved in interdependencies across multilevel governance. Sweden is a unitary state with strong central state power. Local authorities are dependent on national regulations stating that local authorities’ support for local economic development policy needs to be designed with regard to the regulation of the municipalities’ business activities in accordance with the Local Government Act (SFS, 2017, p. 725). This means that municipalities and regions may implement measures that generally promote business in the municipality, but not those that benefit individual actors.

The decentralization of economic development policy is primarily driven through soft steering via the central state (Elander et al., 2022). Although municipalities’ obligation to set up local industry offices it is not formally regulated, all municipalities in Sweden have set up organizations to manage dialogue with local industry (Hermelin & Trygg, 2018). This means that the local public sector is engaged in place-based development (Hermelin & Trygg, 2021; Sotarauta & Beer, 2017), which requires priorities to be established (Sotarauta & Suvinen, 2019). The evolution of local development policy in Sweden through local authorities has been described as starting with a strong focus on organizing dialogue with local industry (Hermelin & Trygg, 2018; Persson, 2010). Although the activities of local development interventions have expanded over time in different directions and for a wide range of local interventions, dialogue with local industry remains a key function and one for which municipalities set up local industry offices. Local government decides on the formal arrangements for these offices, which could be a department within the municipal administration – sometimes closely linked to the municipal council and sometimes more distant – or a company, wholly or partly owned by the municipality (Pierre, 1992). The prevailing situation, according to recent national surveys in Sweden, is that most municipalities organize their business functions within the municipal administration (Hermelin & Trygg, 2018; SKL, 2019).

To understand the role of municipalities, it is also necessary to understand their relationships with regional bodies, representing subnational government on larger geographical scale covering the territories of several municipalities within a county. The recent consolidation of the Swedish regional bodies, with expanded responsibilities for development policy, has involved new structures for governance across the subnational levels of municipalities and regions. The Swedish government’s programme for regional development includes expectations for closer dialogues between regional bodies and municipalities (Regeringen, 2015). Overall, however, while there are regulated obligations stating that regional bodies and municipalities need to collaborate, the situation pertaining to practical collaboration is rather unclear (Hermelin & Persson, 2021). This two-tier subnational interdependence together with interdependencies across neighbouring municipalities for development interventions motivates the design of this study, whereby municipalities have been selected within one county and the regional governance relationships of local development interventions are thereby captured.

Interestingly, the decentralization of local economic development policy has not led to a parallel decentralization of resources in the Swedish context. This means that the municipalities’ capacity in this area depends largely on their ability to mobilize resources through national funding and partnerships with regional bodies or other municipalities. During the early period of the Covid-19 pandemic, the municipalities and regional bodies in Sweden were indeed allocated increased funds from the national state to cover the extraordinary costs that the situation entailed for healthcare, schools and public transport. In general, it has been observed that the steering of Sweden’s municipalities via the central state increased during 2020, due to interventions in relation to the Covid-19 situation (Statskontoret, 2021).

Thus, the national context of the empirical study explicates that the local growth policy during the period of the Covid-19 pandemic needs to be understood from the interplay of (1) top-down government and soft steering; (2) various subnational relationships across municipalities and regional bodies; and (3) local political deliberations and cross-sector relations.

3.1. The empirical study

The research design of the empirical study presented in this paper includes empirical material for 10 municipalities within one county in Sweden. This design combines a ‘nested’ empirical study and a convenience approach design (Hagedorn Krogh, 2020). Because regional bodies with county-level territorial scope had important roles in facilitating information-sharing to serve the municipalities in relation to their local development policy during the Covid-19 period, this sample represents a nested case study. In addition, all investigated municipalities are nested within the same national planning system.

A convenience approach was used when selecting the municipalities. The authors of this paper have contextual knowledge from this geographical area in Sweden, which is an important resource for the interpretive strategy for analysis. Thus, we consider that our knowledge about the geographical context, combined with our recognition of national structural conditions for local development policy, allows us to draw conclusions from the empirical scope, including for more general application. The investigated municipalities range from quite small communities with around 5000 inhabitants to cities with a population of more than 150,000. The varying scales of the municipalities, in terms of their population, local employment and institutional capacity, are an important context for how local strategies for development policy evolve.

Table 1 summarizes some statistical information about the included municipalities. This shows that the local workforce varies from around 1000 to almost 90,000. The distribution between public and private sector employment varies, with the largest municipalities having large shares of public sector employment, including employment within the central state, the regional body and local government. The mean share across the municipalities for local government employment is 26%. The highest percentage of private sector employment is for two of the second-tier municipalities in the county. These two municipalities are the locations of major international manufacturing companies. Table 1 also includes a column for share of local employment in manufacturing and in personal services. This shows variations in how dependent the municipalities are for local employment within personal services, which includes activities severely affected by the Covid situation.

Table 1. Local employment in 2020 for the investigated municipalities.

Size category of the municipality based on local employment	Local employment: all sectors	Local employment within the public/private sector (%)	Local employment within manufacturing/personal services (%)^a
City A	89,511	36/64	12/15
City B	68,299	37/63	8/20
Town A	15,630	41/59	12/18
Town B	10,141	28/72	41/9
Community A	4524	32/68	12/17
Community B	3586	34/66	18/14
Community C	3093	37/63	23/19
Community D	1841	33/67	35/12
Community E	1734	32/68	13/22
Community F	1218	34/66	19/12

Note: ^aPersonal services include retail, hotel and restaurant, and cultural services.

The municipalities covered by this study are categorized into three groups relating to the number of local employees: city, town and community. This strategy of anonymising the municipalities protects individual informants, as agreed during the interviews. Despite being nested within the same regional context and national planning system, the sample of municipalities covers quite heterogenous contexts, and is therefore not very relevant for a comparative case study design. By contrast, the sample is more relevant for a complementary case study approach, through which we are able to identify a variety of strategies for local development policy.

Interviews with respondents from each municipality’s industry office were conducted between the end of April and mid-May 2020. This was the time of the initial Covid-19 outbreak, which put strategies for local development policy under great stress. Interview requests were sent to the directors of the local industry offices in all the county’s 13 municipalities. Respondents from 10 of the industry offices were able to participate. In some cases, two respondents were interviewed from the same municipality. This was motivated by the fact that they represented different organizational settings (corporate and administrative) for local growth policy and therefore had slightly different – and thus complementary – insights into the efforts made for the local business community. The interviews were conducted by video call or telephone and were recorded and transcribed in summary form. The interview transcripts were sent back to the interviewees to give them the opportunity to correct any inaccuracies.

The empirical material from interviews is also supplemented with some secondary material. Important secondary data include a web-based seminar organized in March 2020 via the Swedish Association of Local Authorities and Regions (SKR webcast, 2020). We have also included some material from local news media.

An important strength of the interview data is that they reflect the thoughts and experiences in real time, that is, spring 2020, for a period that required making strategic considerations at short notice and under great uncertainty. Nevertheless, it is also important to be aware of the limitation of the empirical material, which describes the experiences of the municipalities but leaves out respondents from industry and politicians.

4. RESULTS: GOVERNANCE RELATIONSHIPS UNDER STRESS

In general, our empirical material shows that the Covid-19 period involved intensified relationships for local development policy across different dimensions of governance interactions. In this context, it is interesting to note that the Swedish government expressed expectations early on during the crisis that the municipalities would play an active role in supporting businesses. This demonstrates the importance of top-down soft steering for how decentralized development policy plays out. A national coordinator was appointed by the government in March 2020, with responsibility for collecting information about the effects of the Covid-19 crisis on the business community and facilitating dialogue between social partners and the business community. This official state representative addressed municipalities and urged them to make themselves visible to local industry, and also encouraged municipalities to be creative and proactive (SKR webcast, 2020).

The local government bodies investigated in this paper had direct contact with state agencies during the interview period through weekly meetings attended by the municipalities’ industry office managers, for which the regional body was the convener. These meetings were attended by various government agencies (e.g., the county administrative board and the Swedish Civil Contingencies Agency – MSB). In this way, there was frequent dialogue between government bodies representing different levels of the political system. Managing the balance of collaboration and the division of labour between the different levels of government during the crisis period was demanding. The respondents’ descriptions of a division of labour between the different levels of government for development interventions reflect the perceived need to resolve the uncertainty and define what can be expected from local bodies.

[It is] to the state that companies pay VAT and employer contributions and so on. So, the money goes from the companies to the state. So, it is the state, I think, that actually has the opportunity to influence the company’s finances. That possibility is very limited for a municipality. (community C)

The participation of state agencies in the weekly meetings arranged by the regional body was strongly valued by respondents from the municipalities, because it was seen as an opportunity to have a voice in relation to the national government and various state agencies. The regional body considered its main role as being to coordinate, simplify knowledge transfer and work ‘upwards’ in an attempt to influence state bodies.

Considering the division of tasks across municipalities and the regional body, some of the respondents emphasized that it is the municipalities that take government roles vis-à-vis businesses through licensing and authority tasks, and the municipalities are also the main bodies for managing communication with the local business community.

So, our [i.e., the municipality’s] role is to work actively with those who live and work here. The regional body’s role is to coordinate us within the municipalities, and they have a very good ambition to do so. (community E)

The advice given by representatives from the national stakeholder organization that municipalities should try to manage the crisis through parallel handling of short- and long-term solutions (Director of Development and Planning, SKR webcast, 2020) can be considered quite unrealistic in view of the impressions gained from the interviews in spring 2020. A general impression from the interviews was a state of uncertainty about how to design efficient interventions and establish what could be considered reasonable expectations of interventions via the municipalities. Our empirical material on local strategies shows that several of the municipalities were initially uncertain about how to respond to the crisis within the business sector. This state of uncertainty made the municipalities strongly motivated to meet each other in order to share experiences. Other municipalities’ initiatives are portrayed as important ‘sources of inspiration’.

The respondents described how their initiatives during this early period of the Covid-19 pandemic took the formal competences of municipalities as starting points. This offered them some tools to support local business, for instance by postponing fees for various authority tasks, including for building permission and for controls within the restaurant and hospitality sector. They were also able to reduce or postpone costs for rent on premises owned by the municipality, safeguard the municipalities’ ongoing procurement and investment strategies, and make payments to private sector suppliers with shorter payment terms (city B).

Respondents from the larger municipalities explained that they also offered their business services to companies located in other municipalities in the county. One respondent who works in a small municipality described that the design of local strategies was largely inspired by efforts made in one of the county’s large municipalities, which was seen to take on a regional leadership role to inspire other municipalities to follow. One respondent from one of the large municipalities stressed the importance of communicating with other large municipalities outside the county, which was useful in providing support for surrounding smaller municipalities.

While this describes how intermunicipal relationships were valued positively for various aspects, there were also experiences of competition between municipalities. This was exemplified by one respondent, who said: ‘it was almost a battle between the municipalities over who did the most’ (town A). Another aspect of this competition was the ability to respond at short notice, to be ‘out early’, and to take the initiative. Among the large municipalities, respondents explained that they offered unique initiatives and had been first to act, while others had followed their lead (city B). According to one respondent, this sense of competition triggered a ‘follow the leader’ mentality (town B).

Business stakeholder organizations (e.g., the Swedish Federation of Business Owners (Företagarna) and the Confederation of Swedish Enterprise (Svenskt Näringsliv)) attended the weekly meetings convened by the regional body, which thus served as a platform for communication across social sectors. Business stakeholders are considered important lobbyists. One of the interviewees explained that ‘the first measures probably came mostly from the suggestions through the national main stakeholder organization for private companies’ (community A).

4.1. Industry structures and dialogues with the industry

How, then, did the structure of local businesses within the local territory of municipalities shape the dialogues with industry and the municipalities’ chosen strategies? And what were the experiences from dialogues with local industry? On the one hand, respondents from a local industry office explained that it is ‘basically the same things [you do] based on laws, rules and what a municipality has at its disposal’ (city B), which highlights the importance of the national institutional legal framework for the municipalities in this area. On the other hand, the interviewees also underlined the importance of local industry in terms of how the municipalities are exposed to expectations and the need for support. Respondents emphasized the importance of developing local interventions that respond to the specific local industrial structure. The varying profiles of the local economies in the investigated municipalities involved varying impacts of the Covid-19 crisis, and hence varying demands from the private companies for communication with the local authority.

One respondent from one of the large municipalities believed that the extensive employment in their area within engineering-based and knowledge-intensive industries makes dependence on an effective school and childcare system critical (city A). This exemplifies how local development policy cuts across the different responsibilities of local authorities. At the time of the interviews, the impression was that some industries, such as private information technology (IT) companies, were experiencing solid development. Meanwhile, the local plastics industry succeeded by restructuring its activities to produce the protective equipment that was in demand as a result of the pandemic. This industry was able to recruit labour from personal service industries, which had been badly affected by the pandemic.

The strongly affected industries within personal services, such as retail, restaurants and hotels, are largely located in city centres. Their straitened circumstances appear to have influenced some municipalities’ decisions to offer lunch packages to high-school students and to hold dialogues with property owners to discuss opportunities to reduce rents. Furthermore, a special support package was designed for the cultural and leisure sectors, which include many self-employed people. Several of the large municipalities also have sizeable venues and large-scale sporting, leisure and entertainment events which mainly take place during the summer. At the time of the interviews, it was clear that these would not be able to go ahead during the summer of 2020, and that large venues would not be able to open during the coming season. This was described as causing great concern, and one respondent explained that when the affected companies realized this, ‘the curtain went down for many’ (town A).

Local dialogue with the business community was a key theme in the respondents’ descriptions of their activities during spring 2020. Respondents from the large municipalities explained that this involved listening to business organizations and companies. These dialogues were described as very important.

[There] have been endless conversations with desperate entrepreneurs. … Another important role has been to listen to the companies. Often, when they have ended up in a precarious situation, they just needed to talk about their situation. I feel that it has been very much appreciated that we have taken the time to take in all the misery and listen to them. (Town A)

One of the large municipalities with a comparatively large business sector had to hold tough discussions with companies at a series of industry-specific meetings. This included bringing together the construction industry to explain that the municipality did not intend to make changes in its planned investments, and holding frequent meetings with restaurants and retail businesses representing industries that have been hit hard. This municipality also described how dialogues had been started with local educational actors, such as universities and upper secondary schools, to offer education opportunities for those who may lose their jobs as a consequence of downsizing.

Several respondents from the larger municipalities signalled that they perceived the business community as having high expectations of what a municipality can do for local businesses. They said that it had been a challenge to explain the division of responsibilities between the various political levels to the local industry. For many companies, the municipality is the primary contact with the public sector, and some respondents believed that companies sometimes have misconceptions about what the municipality is responsible for and how much it can do.

Many [companies] expect much more from their municipality than the municipality is able to do. Laws, rules and regulations govern our actions. And the business community does not understand that this is the case. (Town A)

Some suggestions for how we should act in our organisation have left me quite surprised about how companies understand the roles of the municipalities. (Town B)

Respondents from several smaller municipalities explained that they were in close contact with local companies, and that these companies were initially ‘in a state of shock’. This dialogue was primarily with hotels, restaurants and various service companies. They mentioned that being a municipality involves having ‘a lot of personal contact’. Some respondents also said that they had ended up in some ‘rather unpleasant’ situations during their communication with the local business community. Communication has not always led to ‘mutual understanding’ (community A).

Respondents from smaller municipalities explained that the small-scale environment contributes to a local identity and culture that promotes loyalty in support of smaller companies. Several of these municipalities commented that a small organization can be a strength, because it can have close dialogue within the municipality’s organization, as well as with local companies. However, a respondent from this group of municipalities also experienced capacity limitations pertaining to their financial means and organizational structure, adding that ‘things may take a little longer for us because there are few of us’ and ‘it is difficult to keep up with the rapid course of events’ (community A). They explained that dealing with all the available information is a great challenge.

It was also emphasized that the municipality was trying to take the initiative to connect companies with each other, and that the Covid-19 pandemic has in fact also given rise to new solutions: ‘We see new collaborations, new products and services, new ways of selling’ (town A). One representative from a small municipality stated that they had invited companies in the tourism industry to present themselves via the municipality’s channels. However, there were also fears that this way of working might be met with different responses, or that it would mean working ‘too closely’ with these companies (community E).

Among the small municipalities, there are cases with a very small industrial sector and therefore no experience of detrimental local economic effects. The owners of holiday homes in these municipalities had chosen to move into them earlier than usual. This explains why personal services such as the retail trade in more sparsely populated areas were described as not having been significantly affected during the spring (community A). Thus, communities quite dependent on personal services with relations to the tourism industry – that was severely affected through the covid situation – were also for similar reasons gaining benefits from being attractive locations for holiday homes with increased local population and therefore increased local consumption.

Overall, the managers of industry offices whom we interviewed attached great importance to local dialogue with the business community. They explained that this dialogue had been important for developing inspiration and ideas about how to support local companies, but also that communication had been complicated by local companies having high expectations of what the municipalities can offer in terms of support. Dealing with dialogue between the municipality and companies – which can be seen as a core task for the municipalities’ industry offices – was perceived as demanding in spring 2020. Interviewees described experiences of uneasy communication and difficulties agreeing on strategies within this social crisis situation (community A, city B).

4.2. Structure of local government

Above, we have discussed the dialogues between the industry offices and the local industry. This section will explore how the available empirical material discloses the role of local politics and the internal structure of local governments for how they define and implement local development policy.

Above, we described how local politicians in general have important operational roles for local dialogue with industry. This means that the highest political leadership is involved in local development policy. In our interview material, we can identify the respondents’ reflections on their municipalities’ general political standpoints for local development policy and how these formed a basis for crafting strategies within this area during the spring of 2020. Respondents described the value of the political leadership having a strong commitment to industrial development (city A). Politicians from the municipalities investigated in our study explained their strategies to the local news media. The interviewed politicians in the media citations below held the highest executive positions in one of the county’s large municipalities and one of the smaller municipalities.

We have a constant dialogue with the companies.  …  We work in parallel with different ideas to support local industry. It is how we act now that determines how serious this crisis will be for our municipality. (Chairman of the Municipal Board, interviewed in Norrköpings Tidningar, 31 March 2020)

We hope that more people will consider what they can contribute to ease this difficult time. It is extremely important to encourage as many people as possible to shop with our local companies. Our aim is to be a vibrant and attractive municipality, even after this is over. (Chairman of the Municipal Board, interviewed in Norrköpings Tidningar, 24 March 2020)

The local freedom of action within this unregulated area of development policy is evident in the varying and quite unstable organizational forms decided upon through local politics. Respondents from industry offices organized in the form of companies describe how development interventions are managed at a certain organizational distance from the municipality’s administration and local government (town A; community B). In one of these municipalities, the respondent explained that their local company is a platform for working with attitudes and campaigns to shop locally to support the local retail sector in the crisis situation. Such interventions by offices within the administration were assumed to have risked creating concerns about adapting too closely to the interests of local industry. One respondent from a municipality where local development issues are managed by a municipal-owned company explained that this company has endeavoured to influence political decisions to prioritize business issues in connection with Covid-19 (town A).

Furthermore, the local business committees that exist in some municipalities have been central forums for formulating and channelling the business community’s views to the central political leadership. This applies to one of the large municipalities, which explained that a series of industry-specific dialogues were held in which the highest political officials were represented (city B).

One respondent from a large municipality explained that decisions on initiatives were initially made where ‘budget and responsibility lie’ (city A). For example, decisions on postponing municipal permit fees lay with the local government committee for physical planning (Samhällsbyggnadsnämnden). This illustrates how interventions for local industry were a concern for municipality divisions beyond the specialized industry offices, and for organizations where the local municipality works in partnership with others. An example of this is the role of local science parks within the larger municipalities. Although decisions were described as being made via the administration, respondents stressed that this included close and continuous dialogue with the highest political level (city A, community D).

5. CONCLUSIONS: HOW A CRISIS REVEALED STRUCTURAL CONDITIONS FOR LOCAL GROWTH POLICY INTERVENTIONS

This paper has discussed conditions for local development policy during a crisis (Aalbers et al., 2020; Brinks & Ibert, 2020; Willi et al., 2020). The aim has been to identify how the time of crisis lay bare structural challenges and structural interdependencies of local government for its implementation of decentralized development policy. The results of the presented study of 10 municipalities in Sweden reveal two major findings. First, decentralized dialogues between local government and local industry need to strike a balance between nurturing a sense of shared interest versus upholding the understanding of divergent roles. Second, decentralized economic development policy is involved in multilevel government relationships, in which the central state has an important power position.

Looking first at multilevel governance, the municipalities’ development policy activities during the crisis showed the dependency on the national government, for example, through soft-steering, information-sharing and funding. Nevertheless, it was also identified how the municipalities developed several strategies derived from their local competence and resources. The intensive regional interaction across municipalities was important. Communication between subnational actors, facilitated through the regional body, was important for developing and spreading ideas to support industry via formal mandates from municipalities. The municipalities’ strong commitment to joining the regional body’s platform for sharing experiences was motivated by a need to relate their own activities to a benchmark, something that is to be expected for the non-statutory status and fast-moving target of development policy. Concerning such horizontal relationships between municipalities, the role of the larger municipalities within regional cooperation is important. These municipalities adopted a leadership role at the beginning of the crisis, helping and supporting the smaller municipalities. This shows the structural interdependencies of local government for local development policy in relation to other municipalities, as well as to other levels of government. Governance relationships across and within tiers of the multilevel national system evolve in both top-down and bottom-up directions. In this process, the municipalities’ regulated and unregulated tasks became interrelated, whereby the regulated tasks became important tools for achieving development policy goals.

While this discussion about multilevel governance relationships applies to how local development interventions in Sweden take place more generally, the aspect of the varying spatial and industrial structure of the investigated municipalities focuses on different conditions for different geographies. This helps to reveal the conditions for cross-sector dialogues that local development policy demands. Municipalities with local industries and companies that were severely affected by the crisis were particularly exposed to high expectations from local businesses for local interventions. Respondents’ descriptions can be interpreted as explaining how established social relations of trust and mutual understanding for cross-sector collaboration that take time to develop (Malecki, 2012) were quite precarious in this stressful situation.

In particular, the way respondents explained their experiences of unrealistic expectations from businesses demonstrates the lack of mutual understanding in the relationships between municipalities and industry. While this can be interpreted as reflecting a sense of panic among companies in this crisis situation, we suggest that these experiences from dialogue with industry reveal expectations from businesses that have been nurtured through the established local and personal contact and assumptions about shared interests. This may have camouflaged important distinctions between the responsibilities and logics of the public and private sectors (Hadjimichalis, 2006). Local industry offices manage dialogues with local industry that can be quite informal and can nurture social capital, embedding ideals of loyalty and assumptions about shared interests that risk creating an unstable foundation on which to work for local development policy. The empirical results illustrate that the focus of executing local development policy through dialogue with industry has, to some extent, fostered excessively high expectations about what the municipalities can do for local industry in such a crisis situation. This is most likely related to a low understanding of how the public sector is organized and governed, combined with a sense of urgency and a worrisome situation that results in businesses being quite focused on their own organization in the short term. This has adverse effects on development and upholding elements of mutual understanding, which is important for efficient collaboration across organizations (Emerson & Nabatchi, 2015).

One policy implication that can be drawn from this is that local bottom-up strategies for development policy, which have been widely promoted, need to be cautious when it comes to the balance between close and arm’s-length relationships when interacting with local industry. The establishment of local social capital is widely associated with positive connotations, and – we would argue – can also be uncritical, with a risk of being simplistic. However, trust – and, in a wider sense, expectations about stability – can also be counterproductive for industrial development that demands restructuring. While the crisis situation that forms the empirical context for this study is an extraordinary situation, industrial restructuring is a normal state.

In conclusion, the non-statutory status of local development policy for which top-down soft steering has important impacts means constantly renegotiated expectations. This explains how the empirical material describes that the municipalities themselves were quite unsure about their own roles. The operative roles of the municipalities’ highest political leaders in local dialogues with industry reflect the political executive’s strong position in dealing with these issues in Swedish municipalities. This has also been observed in previous studies (Sellers et al., 2020), and confirms the importance of the bottom-up formation of this policy. This bottom-up character is also demonstrated through the various ways that the municipalities have organized local industry offices, which in turn seemed to make a difference in terms of how the municipalities responded to the crisis. The question of political legitimacy was more of a focus for municipalities where the local development office is closer to the political leadership. By contrast, respondents from municipalities where the interventions were managed through development companies explained that this offered a more independent platform in relation to the political leadership, and that these companies could have lobbying-like functions for promoting the interests of local industry. Thus, it seems that for industry offices organized via companies, mutual understanding was easier to maintain between this organization and local industry.

The precarious situation for local industry offices during the Covid-19 crisis also highlights a critical dilemma for decentralized local development policy if it is not accompanied by sufficient resources to act, referring to the regulatory framework, financial means and knowledge capacity. High expectations formulated through state representatives and the business community, combined with limited resources and significant uncertainty about what to do in this unprecedented situation, are probably important explanations for the interviewed strategists being motivated to become intensively involved in horizontal communication across municipalities. Thus, in this situation of crisis, the decentralization of development policy largely became a question of delegating dialogues. The central state stepped in, urging the local government to be proactive and organizing significant financial support programmes for businesses. Even in institutional contexts where the autonomy and capacity of local government are high, it is primarily the state that has the efficiency and legitimacy to handle crisis situations. This is a reminder of the importance of being careful to understand what decentralized development policy refers to, and how this involves resources for local actors to adapt this policy to local conditions as advocated through the ideal of bottom-up approaches for local development work.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.