In Rural Illinois

by David Bice
Economist, Commodity Futures Trading Commission

As a follow-up to a previous post, “Do People Really Vote Against Their Economic Self-Interest?”, this post will more fully review what an economic revival program could look like for our small towns and rural areas.  The future for these places with current trends shows fewer jobs, lower wages, declining government resources, and smaller, aging populations.  A relative decline versus urban areas that will leave them further behind.  The residents of these areas do not believe the economic future being offered to them by the mainstream is very attractive and not nearly as good as either their current economic situation (as bad as that may be) or, especially, their past one.  So, the question then becomes, how do you give them a better economic future that will move them forward with the rest of the economy?  And, how do you address the challenge of meeting the different needs of the older workers versus those who are younger or still in school?  The needs of the older workers have to be addressed now, while the needs of the younger workers have a longer time horizon to be met.  

It would seem that the way forward is to find a way to draw money from urban/suburban areas into the small towns and rural areas, both by private and government resources.  Making small towns and rural areas economically viable will require a transfer of wealth of no small magnitude, but to not invest the resources means that we will have a growing dichotomy between the more prosperous cities and economically declining rural areas.  In the long run that is not a tenable situation.  The two areas will have to be economically integrated to an extent they never have been and contact between them will have to increase in order for any programs to be successful.  There will likely be some resistance to closer integration by the generally more conservative rural areas with more liberal cities (and vice versa), but economic success has a way of breaking down barriers.  

Given that the two sections of the country have coexisted for several hundred years and are not much more integrated than they were decades ago, it is fair to ask how this might now be accomplished.  Fortunately, we are developing ways to accomplish this that just a few years ago would not have been possible.  High-speed broadband and cellular networks combined with more sophisticated mobile devices can accomplish a lot of this integration and are now a high priority for many states.  With the internet and cellular networks as a backbone, a small town can improve schools with video classes, keep hospitals open, operate businesses whose main customers are in cities, make connections for selling goods worldwide, create videoconferencing facilities, and provide entertainment such as movies or concerts.  They can also integrate a region to pool resources and make a larger market. 

How would this look?  With high speed facilities you can set up call centers and back office operations that are now sent overseas and they don’t have to be located at a single site; you can videoconference with anyone, anywhere and compete for business; you can hold regional get-togethers or simulcasts that would otherwise be unaffordable; telemedicine can keep medical facilities open that otherwise might close and retain medical professionals who will still have jobs; schools can access higher-level classes that allow their students to better compete for college admissions; and overall it will make living in a small town or rural area feel less remote and more connected.  

The provision of these networks alone is not sufficient to bring many of these to fruition, facilities and entrepreneurial centers will have to be established to promote them. Colleges and universities often play this role in more populous areas, but they are not prevalent in most rural areas.  Even community colleges are not common as they will cover a wide region of a state.  What are prevalent, however, are high schools and even elementary schools in the more remote regions.  Higher ed institutions will have their role to play, but the day-to-day work needs to be closer to the people who need the assistance.  Also, high schools tend to have a lot of existing resources and facilities, such as auditoriums and classrooms, that can be utilized without having to construct them.  New facilities, such as teleconferencing, can be more highly utilized if shared by the high school and the public.  High school teachers are well educated and can easily be trained to play a role in business development.  This role would provide a challenge as well as possible monetary rewards that will make teaching in smaller districts more attractive.  Community colleges and other higher ed institutions will serve as regional coordinators and resource providers for the towns in their districts.  

How would this allow for greater economic prosperity?  By removing many of the barriers to communication between cities and towns, especially in an age where instant communication is valued more than ever, this will allow businesses in the rural areas to compete on a more level playing field for providing goods and services.  To the extent that rural areas have competitive advantages, such as lower labor costs, they can be capable of overcoming some of their disadvantages, such as distance.  Many service industries are not tied any more by place, too, so that provides options for new rural operations.  To the extent that rural areas can provide goods that are in high demand in cities, such as organic foods, businesses that can produce them can make the needed connections to find customers.  The reality is that many of these will be small businesses rather than large ones so the number needed to be created will be relatively large.  Many would also be more like boutique or niche businesses as well.  

Providing the funds for these businesses can be a challenge, but with new peer to peer online lending there exists an opportunity for risk takers to provide the funds.  These loans can be higher rates than for other areas given the risks to provide an attractive return and perhaps hire facilitators to monitor the loans.  To the extent that costs are lower in rural areas for overhead, the size of the loans can be smaller so less is at risk.  

Business creation will also be important in addressing jobs for the older workers.  In some areas, existing, but declining, industries may still provide jobs for some, but many will need to find work in different fields.  It is possible, however, to utilize many of the existing skills of these workers and address some of the needs in these areas.  Not everything is cheaper in rural areas, one of the biggest is energy.  Housing is cheaper, but much of it is substandard for current needs.  Retrofitting these houses for energy efficiency and installing solar or wind energy to reduce energy costs will provide a benefit to the homeowners and jobs for older workers.  These workers will benefit directly by employment with newly created businesses as well as indirectly with the increased income in the area providing for added job creation.  An infrastructure program directed at these areas could also absorb a portion of the older workers.  This would serve the purpose of upgrading the infrastructure to better compete for business and provide employment. The infrastructure needs in most areas are not costly, but they are critical.  

All of which make the towns a more attractive place to live and can boost incomes.  Greater involvement by regional colleges, improved infrastructure, and income sustenance for retraining and living would need to be upgraded by state and federal governments.  Other factors, such as the provision of medical insurance, have larger issues for the country as a whole, but are critical for maintaining a rural economy.  Many aspects are already being implemented in parts of the country, but there is as of yet no complete concerted effort.  Lest anyone think this is catering just to these ever-shrinking economically important areas, this applies as well to those parts of our cities and suburbs experiencing many of the same issues and could benefit from such an approach.  The problems of job loss, substandard schools, deteriorating housing, and negative social issues are prevalent in both.  These two areas are natural allies and should work together to make this a reality.  Without an influx of money into these areas, they will be less and less economically viable and more and more isolated from the greater economy.  That is a long-term prescription for growing resentment and possibly conflict.  

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