charting a new course for rural america
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Charting a New Course for Rural America. Mark Drabenstott Vice President & Director Center for the Study of Rural America Federal Reserve Bank of Kansas City www.kansascityfed.org. Center for the Study of Rural America, FRBKC. Three key questions for today:. - PowerPoint PPT PresentationTRANSCRIPT
Charting a New Course for Charting a New Course for Rural AmericaRural America
Mark DrabenstottMark Drabenstott
Vice President & DirectorVice President & DirectorCenter for the Study of Rural Center for the Study of Rural
AmericaAmericaFederal Reserve Bank of Federal Reserve Bank of
Kansas CityKansas Citywww.kansascityfed.orgwww.kansascityfed.org
Center for the Study of Rural America, FRBKC
Three key questions for Three key questions for today:today:
1.1. Is the Is the currentcurrent course working? course working?
2.2. What challenges must be met? What challenges must be met?
3.3. How to answer these challenges? How to answer these challenges?
Center for the Study of Rural America, FRBKC
High Growth
Low Growth
MSA
Rural Employment Growth1992-2002
Overall, economic gains Overall, economic gains uneven across rural uneven across rural
America. America.
Calculations based on BEA, REIS dataCenter for the Study of Rural America, FRBKC
Income 1992 to 2002
Top 11Counties
Remaining 104 Counties
68%
32%
Contribution to Statewide Income Growth 1992-02
68 percent of income growth is 68 percent of income growth is due to the top 10 percent of due to the top 10 percent of
counties with the largest counties with the largest increasesincreases
Source: BEA, REIS data
Economic gains are highly uneven in Economic gains are highly uneven in most statesmost states
Missouri
Center for the Study of Rural America, FRBKC
Ag Policy and Rural Ag Policy and Rural AmericaAmerica
Farm Dependent CountiesFarm Dependent Counties1.1. The rural economy is too diverse for ag policy to be effective The rural economy is too diverse for ag policy to be effective
“rural development policy.”“rural development policy.”
1950195019991999
Center for the Study of Rural America, FRBKCSource: USDA
Ag Policy and Rural Ag Policy and Rural AmericaAmerica
2.2. Commodity payments do not spur rural economic Commodity payments do not spur rural economic growth.growth.
Top 25% of Counties Dependent on Farm Payments*Top 25% of Counties Dependent on Farm Payments*
Center for the Study of Rural America, FRBKC* Note: Based on 2000-2002 average.
Ag Policy and Rural Ag Policy and Rural AmericaAmerica
2.2. Commodity payments do not spur rural economic Commodity payments do not spur rural economic growth.growth.
Center for the Study of Rural America, FRBKC
Zero to Average (19%)
Above Average (19-463%)
Negative Growth
Employment Growth, 1992-2002
*Note: Dependency determined by Farm Payments as share of Personal Income, 2000-2002 averageSource: Bureau of Economic Analysis, REIS
Ag Policy and Rural Ag Policy and Rural AmericaAmerica
3.3. The Catch 22 of Ag Policy:The Catch 22 of Ag Policy:Commodity subsidies wed regions to commodities and thwart Commodity subsidies wed regions to commodities and thwart innovation.innovation.
Center for the Study of Rural America, FRBKC
Bottom 25% (-242 to 1)
50-75% (1-27)
Top 25% of counties (92 to 1790 est.)
25-50% (27 to 92)
Metro counties
Source: County Business Patterns 1990-2002
Change in Number of Establishments
What is rural What is rural
America’s challenge in America’s challenge in
the 21the 21stst Century? Century?
Center for the Study of Rural America, FRBKC
Globalization changing the rules Globalization changing the rules of the gameof the game
• Globalization of markets for goods, services, capital, Globalization of markets for goods, services, capital, and currencies…and currencies…
• Means commodity industries under intense cost Means commodity industries under intense cost pressures…pressures…
Be big or be gone.Be big or be gone.
• Widespread consolidation of activity…Widespread consolidation of activity…
• Especially in agriculture and manufacturing.Especially in agriculture and manufacturing.
Center for the Study of Rural America, FRBKC
Photo courtesy of USDA
25
30
35
40
45
50
55
1987 1989 1991 1993 1995 1997 1999 2001 2003
25
30
35
40
45
50
55
Percent
United States
Percent
Source: USDA
Brazil and Argentina
Share of World Soybean ProductionShare of World Soybean Production
Center for the Study of Rural America, FRBKC
Ag competition heating Ag competition heating up…up…
especially from South especially from South America.America.
Today’s Economic Today’s Economic Development ChallengeDevelopment Challenge
The vigorous pursuit of The vigorous pursuit of
a region’s competitive a region’s competitive
edge in rapidly edge in rapidly
changing global changing global
markets.markets.Center for the Study of Rural America, FRBKC
3 steps to regional 3 steps to regional competitiveness competitiveness
1.1. Understanding a region’s assets…Understanding a region’s assets…
2.2. Identifying its market opportunities…Identifying its market opportunities…
3.3. And a great strategy that exploits one to And a great strategy that exploits one to seize the other.seize the other.
Center for the Study of Rural America, FRBKC
To succeed, To succeed, two critical ingredients:two critical ingredients:
• The “ The “ fuel fuel ” of innovation.” of innovation.
• The “ The “ engines engines ” of entrepreneurs.” of entrepreneurs.
Center for the Study of Rural America, FRBKC
To compete, To compete, regions have two high regions have two high
callings:callings:1. Producing more innovation “fuel.”1. Producing more innovation “fuel.”
– One part One part researchresearch—going beyond basic —going beyond basic research to link research to regions. research to link research to regions.
– One part One part innovation capacityinnovation capacity——the the willingness and skill to be “change willingness and skill to be “change nimble.”nimble.”
Center for the Study of Rural America, FRBKC
2. Creating a world-class entrepreneurial 2. Creating a world-class entrepreneurial climate.climate.
– Creating the best possible seedbed in Creating the best possible seedbed in which entrepreneurs can sprout and grow.which entrepreneurs can sprout and grow.
Center for the Study of Rural America, FRBKC
To compete, To compete, regions have two high regions have two high
callings:callings:
Both ingredients depend on Both ingredients depend on skilled human capital…skilled human capital…
• To lead development efforts…To lead development efforts…
• To develop new technologies…To develop new technologies…
• To launch new companies…To launch new companies…
• To staff those companies.To staff those companies.
Center for the Study of Rural America, FRBKC
And strong partnerships. And strong partnerships.
GovernanceGovernance is a huge key to reinventing a is a huge key to reinventing a
region’s economy.region’s economy.
Making decisions as a Making decisions as a regionregion……
Instead of as independent jurisdictions.Instead of as independent jurisdictions.
There is no right way to get there…There is no right way to get there…
But status quo will not get you But status quo will not get you there.there.
Center for the Study of Rural America, FRBKC
How to Answer the How to Answer the
Challenge?Challenge?
Center for the Study of Rural America, FRBKC
How to answer the How to answer the challenge?challenge?
1.1. E-ship — E-ship — recruiting.recruiting.
Center for the Study of Rural America, FRBKC
How to answer the challenge?How to answer the challenge?
1.1. Increase E-ship — decrease recruiting.Increase E-ship — decrease recruiting.
Center for the Study of Rural America, FRBKC
RecruitmentRecruitment
RetentionRetention
EntrepreneurshipEntrepreneurship
Policy for Regional Competitiveness
RecruitmentRecruitment
RetentionRetention
EntrepreneurshipEntrepreneurship
Current Policy
Source: Dabson
How to answer the challenge?How to answer the challenge?
2.2. Recognize and support “functional” Recognize and support “functional” economic regions. economic regions.
NW Missouri quest for “bio-pharming”NW Missouri quest for “bio-pharming”
Center for the Study of Rural America, FRBKC
NW Missouri Bio-PharmingNW Missouri Bio-Pharming
• Mother’s milk “immunities”—grown in rice & barley Mother’s milk “immunities”—grown in rice & barley at pennies on the $.at pennies on the $.
• 4,000 hectares of production.4,000 hectares of production.
• Horizontal partnership—university, private sector, Horizontal partnership—university, private sector, state and local government.state and local government.
Center for the Study of Rural America, FRBKC
3.3. Re-engage Higher EducationRe-engage Higher Education
• Past research focused on Past research focused on sectorssectors..
• New focus on linking to New focus on linking to regionsregions..
Center for the Study of Rural America, FRBKC
How to answer the challenge?How to answer the challenge?
Purdue University’s Purdue University’s InnovationInnovation
A new V8 engine for the Hoosier state…A new V8 engine for the Hoosier state…
Discovery ParkDiscovery Park
And a new overdrive transmission…And a new overdrive transmission…
Office of EngagementOffice of Engagement
Center for Regional Center for Regional DevelopmentDevelopment
Center for the Study of Rural America, FRBKC
4. Realign Federal and 4. Realign Federal and Regional Roles. Regional Roles.
• The development landscape is no longer homogeneous—The development landscape is no longer homogeneous—
every region will have its every region will have its ownown development strategy. development strategy.
• FederalFederal officials become supporting actors— officials become supporting actors—
Federal policy enables, not Federal policy enables, not dictates.dictates.
• RegionalRegional officials become lead actors – officials become lead actors –
The owners & crafters of The owners & crafters of region’s region’s strategy. strategy.
Center for the Study of Rural America, FRBKC
Primary Federal RolesPrimary Federal Roles
1.1. Incentives for regional partnering.Incentives for regional partnering.
2.2. Investing in regional leadership capacity.Investing in regional leadership capacity.
3.3. Funding public goods in regions.Funding public goods in regions.
4.4. Investing in basic research.Investing in basic research.
5.5. Creating a national policy forCreating a national policy for
entrepreneurship.entrepreneurship.
Center for the Study of Rural America, FRBKC
Primary State & Local Primary State & Local RolesRoles
1. Building effective structures for regional governance.
2. Ensuring public/private partnering
3. Measuring and understanding regional assets.
4. Identifying regional competitive advantage.
5. Creating an entrepreneurial development system—regional in scope and systematic in approach.
6. Identifying innovations that leverage regional assets—
spatial linking of research.
Center for the Study of Rural America, FRBKC
ConclusionsConclusions
Globalization has had two profound effects Globalization has had two profound effects on the U.S. economy:on the U.S. economy:
1.1. Created uneven pattern of growth across Created uneven pattern of growth across regions.regions.
2.2. Created new drivers of growth:Created new drivers of growth:
• Innovation the fuel.
• Entrepreneurs the engines.
Center for the Study of Rural America, FRBKC
• Regional competitiveness is your new challenge. Regional competitiveness is your new challenge.
• Public-private, regionwide partnerships will be Public-private, regionwide partnerships will be critical to answering that challenge. critical to answering that challenge.
Who will be catalysts in helping these Who will be catalysts in helping these regions form…and in crafting new regions form…and in crafting new policies for regional development? policies for regional development?
Center for the Study of Rural America, FRBKC
Charting a New Course for Rural Charting a New Course for Rural AmericaAmerica
What will be your What will be your development development
agenda?agenda?
• In practice, recruiting remains the # 1 In practice, recruiting remains the # 1 economic development strategy.economic development strategy.
• However, globalization makes it However, globalization makes it expensive, and expensive, and muchmuch less effective… less effective…
Change is on the Change is on the horizon.horizon.
Center for the Study of Rural America, FRBKC