Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Why Invest in Rural America-And How? A Critical Public Policy Question for the 21st Century

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Why Invest in Rural America-And How? A Critical Public Policy Question for the 21st Century

Article excerpt

Significant portions of rural America are in trouble. For some parts of rural America, the slow slide to no longer being viable-economically, socially, or politically--is within sight. At the same time, without intending it, we are headed back to a rural America of the rich and the poor--of resorts and pockets of persistent poverty. Yet most current rural policies do not meet the needs of rural people and communities; they are designed for the past, not the future.

For years, attempts have been made to change rural policies incrementally, but these approaches have largely failed. It is time to consider more fundamental shifts. Some will see segments of this paper as heresy. But as Huxley said in defending Darwin's theory of natural selection, 'A heretic is someone who sees a truth that contradicts the conventional wisdom of the institution--and remains loyal to both entities, to the institution and the new truth. Heretics are not apostates; they don't want to leave the `church.' Instead they want the church to change, to meet the truths they have seen halfway" (Kleiner).

Let's facts--rural policy in America is unfocuse, outdated, and ineffective.

Today's rural public policy is not the product of contemporary, thoughtful, and informed public debate.

Today's rural public policy is not based on carefully crafted, desired, public policy goals.

Today's rural public policy is largely a "one size fits all" approach to the significant diversity that is rural America.

Today's rural public policy consists of isolated elements of sectoral policy created without regard to extrasectoral effects.

Today's rural public policy is often urban policy that is poorly modified to fit nonurban settings.

Today's rural public policy is often national policy that has been created with little or no thought for its implications for rural communities.

Today's rural public policy is based on the erroneous assumption that there are public institutions that serve the unique needs of rural areas.

In terms of public dollars committed, rural policy now focuses primarily on two areas--agriculture and manufacturing. Neither focus is currently effective. A recent review of the literature revealed not a single study supporting the efficacy of current federal agriculture policy-- including producer subsidies, export enhancements, and publicly supported, efficiency-oriented research--as a basis for rural development. This year's direct subsidies are expected to be approximately $25 billion; there is no convincing evidence that they will improve the economic viability of rural communities.

In fact, current federal agricultural policies are actually hurting rural communities--by absorbing the vast majority of the resources directed to rural areas, by continuing the myth that rural and agriculture are the same, and by making it difficult for rural communities to develop new areas of competitive advantage. Furthermore, these huge payments are likely to translate into higher land prices for farmers, thus raising capital costs, which will lead to more debt and may lead to more intensification of agricultural practices. The intensification of farming may in turn reduce risk taking and entrepreneurship in rural areas, activities contributing to economic growth according to the development literature.

What of the other primary rural policy focus? State-encouraged manufacturing that is dependent on low-wage, low-skill employees for its competitive advantage will rarely be the basis for successful rural economic development. This was a key state government development strategy in many rural areas beginning in the 1950s. Government policies that promoted the transfer of these types of jobs from urban to rural areas worked until the 1980s. But with increased international competition, these jobs are now moving offshore or being replaced with technology. By the 1980s, "a key source of rural disadvantage was excessive concentration of employment and output in 'routine' manufacturing, typically assembly of products at the mature end of product cycles" (Galston and Baehler). …

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