Rural Development in the United States William A' Galston

1
Rural Development in the United StatesWilliam
A. Galston Karen J Baehler

• Presentation by
• Kenneth Cook

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Part 1 Background Framework

• Rural America in the 1990s Trends and Choices
• Development A Conceptual Framework
• Development An Economic Process
• Development A Political Strategy

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Trends and Choices

• Rural Renaissance of the 1970s turned into the
  rural bust of the 1980s

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Trends and Choices

• Employment Growth 1979-1987
• Metro 18 Rural 8
• Unemployment Rates 1979-1987
• Rural 1-2.5 greater than metro

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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)

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Trends and Choices

• Earnings Penalty Ratio of metro to rural
  earnings
• 8th Grade College
• 1974 1.08 1.14
• 1986 1.18 1.40

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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

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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

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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

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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

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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

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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)

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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

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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

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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

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Trends and Choices

• Rural America has entered a new era in which
  innovation may not guarantee success, but status
  quo policies will ensure failure.

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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

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Trends and Choices

• The new downside
• Limits on opportunities for development
• Lower population size and density
• Larger distances between people
• Erosion of original advantage

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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.

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Trends and Choices

• Jane Jacobs Thesis
• Linkages between metro areas and remote
  communities
• If linkages are not created the outlook for
  remote communities without natural amenities is
  bleak

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Trends and Choices

• Three ways to get things done
• Politics
• Market
• Civil Society
• Market and civil society can only exist if the
  sphere of politics is not overbearing

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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

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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

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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.

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A Conceptual Framework

• Social Goals
• Single-valued
• Dominant-valued
• Multi-valued
• Development has gone through each of these phases
  since the postwar development period
• Development is a multidimensional phenomenon

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A Conceptual Framework

• Development Specific Features
• Economic Growth
• Development is not equated with increasing
  incomes, however, it is not imaginable without
  income growth

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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.

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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

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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.

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A Conceptual Framework

• Unfair Impact Principles
• No-Harm
• Maximin
• Equalization

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A Conceptual Framework

• Integrated rural poverty
• Clusters of disadvantage- 5 features
• Poor
• Physically week
• Isolated
• Vulnerable
• Powerless

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A Conceptual Framework

• Diversity
• Limited occupational choices are stifling
• More diversity ability to respond to decline

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A Conceptual Framework

• Criteria to Successful Development
• Social Continuity
• Long-Range Self-Sufficiency
• Sustainability
• Political Responsiveness

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An Economic Process

• Sources of National Wealth
• Work Force
• Innovation and Entrepreneurship
• Comparative Advantage
• Time Horizons

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An Economic Process

• Theories of Rural Economic Change
• Income Equalization Model
• Unbalanced Growth Models
• Export Base Model
• Product Cycle Model
• Location Models

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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

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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

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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

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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

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An Economic Process

• Location Models
• Regard transportation as the most important
  factor
• Can be helpful in cases were their underlying
  assumptions are valid

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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

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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

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A Political Strategy

• Overcoming Economic Obstacles
• Capital
• Human Resources
• Infrastructure
• Diversification