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Rural Development in Rural Development in the United Statesthe United States
William A. Galston & Karen J BaehlerWilliam 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
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) 1979-1987Metro= -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 consider1. Primary Products Economy2. Production and Employment3. 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 Goals1. Single-valued
2. Dominant-valued
3. 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
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 Development1. 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