Transcript Rural Development in the United States William A. Galston

Rural Development in
the United States
William A. Galston & Karen J Baehler
Presentation by:
Kenneth Cook
Part 1 Background & Framework
1. Rural America in the 1990s: Trends and Choices
2. Development: A Conceptual Framework
3. Development: An Economic Process
4. Development: A Political Strategy
Trends and Choices
“Rural Renaissance of the 1970s turned
into the rural bust of the 1980s”
Trends and Choices
 Employment Growth: 1979-1987
Metro= 18%
Rural= 8%
 Unemployment Rates: 1979-1987
Rural 1-2.5% greater than metro
Trends and Choices
 Income: (Ratio of rural to metro per capita)
End of 1970s= 77%
1987= 73%
 Wages: (Adjusted for inflation) 1979-1987
Metro= -2% ($450)
Rural= -8% ($1700)
Trends and Choices
 Earnings Penalty: Ratio of metro to rural earnings
8th Grade
College
1974
1.08
1.14
1986
1.18
1.40
Trends and Choices
 Poverty:
1979-1982= 18% (rural)
Late 1980s= nearly 50% higher than metro
1995= 51% (rural); 37% (urban)
Rates for the working poor also increased
Trends and Choices
 Population:
1970s- Rural growth rate exceeded metro rate by
40%
1980s- Rural growth rate fell to less than half the
metro rate
Half of all rural counties lost population during
this period
Trends and Choices
 Location, Location, Location
– Employment in rural counties adjacent to
metro areas grew at more than twice the rate
of nonadjacent counties
– When a metro area performed poorly, the rural
areas near them tended to perform poorly
Trends and Choices
 Structure of the rural economy:
– Resembles the national Economy
– Services- half of all nonmetro Employment
– Manufacturing- less than 1/5
– Agriculture- less than 1/10
– Rural job generation is half of metros
Trends and Choices
The National/Global Context
 U.S. Rural Society & Economy is exposed
to powerful national and international forces
 Three major developments to consider
1. Primary Products Economy
2. Production and Employment
3. Investments in Innovation & People
Trends and Choices
Primary Products Economy
 Detached from industrial economy
– Classic business cycle theory
 Other countries increased materials output
 Materials are less important for production
 Raw material per unit of economic output
– Annual decline- 1.25% (compounded)
Trends and Choices
Production and Employment
 U.S. Agriculture
– Increase in output with shrinking # of producers
 U.S. Manufacturing (past 15 years)
– Production has risen by half
– Decline in employment
Trends and Choices
Production and Employment
 Ratio of Blue Collar Workers
– 1920s 1 in 3
– 1950s 1 in 4
– Today 1 in 6
– By 2010 1 in 10
 Decline in number of workers will continue to
coincide with large increases in output and exports
Trends and Choices
Investments in Innovation & People
 1980s- U.S. Fell behind in investment
– 1989 Japanese investment in plants and equipment per
worker was 3 x that of U.S.
 Reasons for Shortfall
– Historic lows for personal savings
– Soaring federal budget deficit
– Total national savings –6.1% (1970-1980)
– High Real interest Rates
Trends and Choices
Rural America has entered a new era in
which innovation may not guarantee
success, but status quo policies will ensure
failure.
Trends and Choices
Rural Comparative Advantage
 Early U.S. history
– Place-Specific (Land, timber, and minerals)
 1960s and 1970s
– Cheap land, low-cost labor, relaxed regulations
 1980s
– Amenity values
Trends and Choices
The new downside
 Limits on opportunities for development
– Lower population size and density
– Larger distances between people
– Erosion of original advantage
Trends and Choices
Emery Castle
“The economic welfare of the more sparsely
populated areas in linked with, and dependent
upon, economic activity in the more densely
populated areas… It is not a coincidence that the
most prosperous rural areas have close economic
links with other parts of the world and large
urban centers.”
Trends and Choices
Jane Jacob’s Thesis
 Linkages between metro areas and remote
communities
 If linkages are not created the outlook for
remote communities without natural
amenities is bleak
Trends and Choices
Three ways to get things done
1. Politics
2. Market
3. Civil Society
Market and civil society can only exist if
the sphere of politics is not overbearing
Trends and Choices
Current Plight of Rural America
 Market forces did not promote rural
development in the 1980s
 Rural civil society was not able to address
the problems that it was confronted by
 Federal government did little to improve
the long-term outlook of rural America
Trends and Choices
Problems caused by population mobility
 Decrease in rural population causes
decreasing representation in legislative
bodies
 Weakening internal forces pushing for
change
– Exit and Voice
A Conceptual Framework
“Development alters the status quo; it will
therefore be opposed by those who are
satisfied with, or benefit directly from, the
current state of affairs, or who believe that
any alteration is likely to be a detriment.”
A Conceptual Framework
Social Goals
1.
2.
3.


Single-valued
Dominant-valued
Multi-valued
Development has gone through each of these
phases since the postwar development period
Development is a multidimensional
phenomenon
A Conceptual Framework
Development: Specific Features
 Economic Growth
– Development is not equated with increasing
incomes, however, it is not imaginable without
income growth
A Conceptual Framework
Poverty- Part of the problem
 Wolfgang Sachs
– Global poverty discovered after WWII
– The Western economic concept of poverty
“was used to define whole peoples, not
according to what they are and want to be, but
according to what they lack and what thea are
expected to become.”
A Conceptual Framework
In place of the gross concept of poverty
 Frugality
 Destitution
 Scarcity
Capacity to achieve fades away
New desires of high society spiral to infinity
A Conceptual Framework
Equity
Growth strategies that unfairly impact on
the least advantaged members of the
community cannot be justified and should
not be implemented.
A Conceptual Framework
Unfair Impact Principles
 No-Harm
 Maximin
 Equalization
A Conceptual Framework
Integrated rural poverty
 Clusters of disadvantage- 5 features
1. Poor
2. Physically week
3. Isolated
4. Vulnerable
5. Powerless
A Conceptual Framework
 Diversity
– Limited occupational choices are stifling
– More diversity = ability to respond to decline
A Conceptual Framework
 Criteria to Successful Development
1. Social Continuity
2. Long-Range Self-Sufficiency
3. Sustainability
4. Political Responsiveness
An Economic Process
Sources of National Wealth
 Work Force
 Innovation and Entrepreneurship
 Comparative Advantage
 Time Horizons
An Economic Process
Theories of Rural Economic Change
 Income Equalization Model
 Unbalanced Growth Models
 Export Base Model
 Product Cycle Model
 Location Models
An Economic Process
Income Equalization Model
 Capital and labor or mobile and move to areas of
highest return
 Workers migrate from low-wage to high-wage
regions
 Capital flows in the opposite direction
 Leads to convergence of incomes among regions
 Usefulness of this model has decreased
An Economic Process
Unbalanced Growth Models
 Initial advantages cause a polarization of
capital, income, and opportunity
 Core growth creates expanded demand for
goods and services produced at the
periphery
 This model has been less than successful
An Economic Process
Export Base Model
 Capacity to export enables a city to earn an
increasing volume of diverse imports
 Replacement are then devised for these
imports
An Economic Process
Product Cycle Model
 Three Stages
– Innovation
– Growth
– Standardization
 Used to explain rural economies of the 1960s and
1970s
 Routine development is more likely to by located
in other countries with even lower costs than
Rural America
An Economic Process
Location Models
 Regard transportation as the most
important factor
 Can be helpful in cases were their
underlying assumptions are valid
An Economic Process
Location Models
 Determinants of location have shifted
– Cost of transporting heavy and bulky goods
are diminishing compared to speedy flexible
transportation and communications
– Access to markets - Access to raw materials
– Amenities are increasing important
– Increasing degree of dependence
A Political Strategy
Action Versus Inaction
 What is to be done to improve rural America?
– Nothing
– Justify programs by the national interest
– Justify on other grounds
 Community mobilization and visionary public
entrepreneurship may emerge as keys to rural
development
A Political Strategy
Overcoming Economic Obstacles
 Capital
 Human Resources
 Infrastructure
 Diversification