Issues in the Rural Economy

June 2005

Reports of economic sessions of Rural Amerca, Community Issues, a conference programmed by the Institute for Rural Journalism and Community Issues for the Knight Center for Specialized Journalism, University of Maryland, June 12-17, 2005

Globalization demands changes in the way rural America develops its economy

Rural America must change the way it seeks jobs in a globalized economy, and journalists should help public and private policymakers at all levels realize the challenges and choices they face, a leading student of the rural economy said at the "Rural America, Community Issues" seminar at the University of Maryland in June 2005.

The journalists heard from Mark Drabenstott, vice president of the Federal Reserve Bank of Kansas City and director of its Center for the Study of Rural America. He said globalization is "changing the rules of the game in profound ways and extraordinarily rapidly," and means that rural America can no longer use cheap labor, low taxes and cheap land to compete, because "legions of places around the world" now have those advantages.

"We are going to move away from a model of recruiting businesses to rural America to growing businesses in rural America . . . gardening vs. hunting, if you will," Drabenstott said. He said there are "exciting opportunities on the horizon" but he sees "very little discussion" of the challenge. "There is a tremendous opportunity for you to improve the economic literacy of our nation on some of these issues," he told the journalists.

Drabenstott said one key to being competitive is thinking regionally, from town to town and even across state lines. He said people in a self-defined region should ask themselves: What are our distinct economic assets? What market opportunity can we tap that no one else can? How do we exploit our assets to seize that opportunity? To answer such questions successfully, he said, a region needs the fuel of innovation and the engine of entrepreneurs.

To function regionally, Drabenstott said, there must be public-private partnerships; regional assets must be understood and measured, competitive advantages must be identified, and entrepreneurs must be developed.. A big question, he said, is whether the tools of measurement and analysis will be private or public: "Do we leave it to the consultants, or is it a job for the [Cooperative] Extension Service?" he asked.

Al Cross, director of the Institute for Rural Journalism and Community Issues, which programmed the conference, mentioned the Kentuucky extension service's creation, with tobacco-settlement funds, of an institute to train not just entrepreneurs but coaches to train entrepreneurs in the state's most tobacco-dependent region.

Much of rural America will remain dependent on a commodity economy, in which the major imperative is to be the low-cost producer, requiring producers to “be big or be gone,” Drabenstott said. "Agriculture is at a fork in the road," he said, with this choice: "Continue to produce low-cost commodities or growing what will sell instead of selling what you grow … ranging from farm-fresh organic produce to pharmaceutical crops."

Drabenstott had a charge for journalists: "There’s a tremendous opportunity for the press. How you build bridges across your region as a public voice seems to me to be terribly important. … Do you want to simply trumpet your home town and bash all the other towns around you?" He challenged rural journalists to "foster a climate for partnership by public and private leaders" and focus coverage on long-term successes, not short-term ones.

Drabenstott said such processes call for patience, but he quoted an unnamed Texan on the urgency of the challenge facing rural America: “Time is short, the stakes are high, and the alternative is a Third World economy.”

Rural areas need high-speed Internet to compete economically, researcher says

High-speed internet access is no longer a luxury for rural communities because they need it to compete economically, an expert on rural broadband said at the “Rural America, Community Issues”conference.

"If you don't have broadband, certain things don't fall into place as easily," said Sharon Strover, director of the Telecommunications and Information Policy Institute at the University of Texas. Not only do businesses use the Internet to buy, sell, distribute and control inventory, but health care increasingly uses Web-based forms to deliver information, and governments are interested in providing services online because it is cheaper, she said.

“What we’ve also heard from rural communities is that telecommunications was important to them because they are losing population," Strover said. Broadband access can entice young people to "stick around a little longer" and explore career options closer to home. She said terms like “the knowledge economy” can “create a lot of fear in rural areas because they feel like they’re gonna fall behind; they’re not there yet and the rest of the world is.”

When some local governments got into the broadband business, telephone companies began lobbying legislatures to pass laws making municipal broadband more difficult or impossible. The companies say "Get rid of government and we’ll compete," Strover said. “In fact, competition doesn’t just occur after government is no longer there. ... Everybody talks a good line about competition, but in fact, companies hate it." For more of this view, click here.

Strover said the national extent of broadband monopolies is difficult to determine, partly because the Federal Communications Commission signed confidentiality agreements with providers. Journalists may know who their local broadband providers are, but Strover said they face other obstacles writing about the issue: It is "filled with jargon," the technology changes constantly, and the business is regulated at all three levels of government.

Recent data from the census and the Pew Internet and American Life Project show that Internet use by rural Americans is about 10 percent less than for the nation as a whole, but rural broadband use is 50 percent less.

Big-box stores draining, reshaping economies, character of nation’s small towns

When Wal-Mart Supercenters come to towns across America, they drain about 70 percent of their trade from local merchants and reshape the character of the communities, retired Iowa State University economist Kenneth Stone told the national rural journalism conference. Stone's research also shows that the Supercenters have helped some local businesses that don't compete with Wal-Mart, by generating traffic from a wider area.

Stone, who has become known in some circles as “the Wal-Mart Man” because of his studies, conducted some of the first and most extensive research on the economic impacts of malls, discount stores and big-box building materials stores and various forms of Wal-Marts. A study in Iowa showed Supercenters hurt grocery, specialty and apparel stores but helped restaurants and service businesses because of the “spillover” effect of extra traffic.

Wal-Mart, the nation’s largest retailer with about 4,000 stores nationwide, had sales of more than $288 billion last year, and is forecasting more than $416 billion by 2008. But Stone said there are some signs that its growth is beginning to taper off, as Wal-Marts become located more closely together and drain traffic from each other.

When one journalist at the conference said some localities are offering incentives to attract Wal-Mart supercenters, Stone said he strongly opposes such deals.“It takes money from taxpayers to give to big companies who then take it from the local merchants,” he said.

Stone said Wal-Mart, under fire for its business practices, is becoming more media-savvy in its public relations, providing information that it once told journalists was proprietary, and has started to buy run-of-paper advertsing in newspapers. A top Wal-Mart official is scheduled to address this year's National Newspaper Association convention in Milwaukee on Sept. 30. For more on the convention, which runs Sept. 28-Oct. 1, click here.

For reports by the Institute for Rural Journalism and Community Issues on two TV documentaries about Wal-Mart last November, one of which featured Stone and his research, click here.

Agriculture still matters, partly because it provides rural leadership, expert says

Though agriculture accounts for less than 1 percent of America's gross domestic product, it remains important because of its relationship to the environment and, more intriguingly, to the culture and politics of America. So said David Freshwater, director of graduate studies in agricultural economics at the University of Kentucky..

Farmers are still "a key part of the social elite" in rural areas, as leaders in civic, school and political groups, and at the national level they exploit the agricultural roots of the United States and do not align themselves closely with either political party, giving them more leverage on both parties, Freshwater said. "They have an effective voice that greatly outweighs their numbers," he said, attributing that partly to leadership training rural youth get in the Future Farmers of America and 4-H Clubs.

Asked about the effect of the tobacco buyout on Kentucky, the state with more tobacco growers than any other, Drabenstott said it is"incredibly important" because "the tobacco program froze the structure of agriculture in Kentucky in the 1930s," preserving it as a state of small farms and small towns. Without the program, he said, Kentucky will produce as much tobacco, but for less money, and "We'll see a lot of small-town dry-up."

The Institute for Rural Journalism and Community Issues helps non-metropolitan media define the public agenda in their communities, through strong reporting and commentary on local issues and on broader issues that have local impact. Its initial focus area is Central Appalachia, but as an arm of the University of Kentucky it has a statewide mission, and it has national scope. It has academic collaborators at Appalachian State University, East Tennessee State University, Eastern Kentucky University, Georgia College and State University, Indiana University of Pennsylvania, Marshall University, Middle Tennessee State University, Ohio University, Southeast Missouri State University, the University of North Carolina-Chapel Hill, the University of Tennessee-Knoxville, Washington and Lee University, West Virginia University and the Knight Community Journalism Fellows Program at the University of Alabama. It is funded by the John S. and James L. Knight Foundation and the University of Kentucky, with additional financial support from the Ford Foundation. To get notices of Rural Blog postings and other Institute news, click here.




Institute for Rural Journalism & Community Issues

School of Journalism and Telecommunications, College of Communications & Information Studies

122 Grehan Building,
University of Kentucky, Lexington, KY 40506-0042

Phone: (859) 257-3744, Fax: (859) 323-9879

Questions about the web site: Contact Al Cross, interim director, al.cross@uky.edu