Economic Development and Wealth Creation in Rural America

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  • 1. Economic Development and Wealth Creation in Rural America An Outcome Focused Approach A presentation to 2007 Indiana Rural Summit November 15, 2007 by John A. Molinaro Aspen Institute Community Strategies Group
  • 2. Who are we?
    • Aspen Institute Community Strategies Group (CSG)
      • A Washington DC based national organization that spurs innovation and action to build lasting prosperity in communities through focused learning
    • Our primary fields of interest include:
      • Supporting the economic success of families
      • Economic, community and workforce development
      • Community philanthropy as a tool for rural development
  • 3. What is “Outcome Focused ” Economic Development?
    • Economic development defined by the desired outcome, not activities or inputs:
      • Abundant, quality jobs and entrepreneurial opportunities that sustain and enhance the well-being and build the wealth of families and communities
      • If it doesn’t lead to this outcome…
      • … it’s not economic development.
  • 4. A bit of history…
    • 1960’s to 1980’s
    • Rapid industrialization swept across rural America
    • Companies sought cheaper land, cheaper labor and less regulation
    • Rural areas could meet these demands
    • Industrial recruiting made good sense because it worked – and set the paradigm
  • 5. Times have changed
    • Today
    • “ The World Is Flat ”
    • Labor-intensive work can and does go anywhere
    • America’s education advantage has eroded
    • Technology is fungible – it flows wherever there is money to buy it
    • Industrial recruiting is a no-win strategy
  • 6. The Rise and Fall of Industrial Recruiting
    • 1950’s – Most of the world’s manufacturing capacity is in the USA, demand is high, cost is no object, so most manufacturing happens close to markets - in large cities with unionized labor
      • Markets drive location – industrial recruiting is irrelevant
    • 1970’s – The “ Japan threat ” forces US manufacturing and telemarketing firms to move to rural areas for cheap land and non-union labor
      • Industrial recruiting successfully attracts these companies
    • Today – The “ China threat ” forces almost all commodity manufacturing offshore and the “ India threat ” erodes technology, service and telecommunications jobs
      • To be stable, jobs must be tied to a place – industrial recruiting is counterproductive – a waste of resources!
  • 7. How can rural places successfully compete today?
    • Four Keys:
    • Regional collaboration
    • Comprehensive approaches, individualized to place
    • Growth from within
    • Finding their unique “Sweet Spot”
  • 8. Why Regional Collaboration?
    • New business models require scale
      • e.g., big-box retailers and Internet vendors
    • Competing requires bulk buying power
    • Fierce competition makes margins thinner
      • More sales needed to break even
    • Niche markets “fill the gaps”
      • Niche markets also require scale
    • Activities once competitive at the local level now require a regional market to survive
  • 9. Example – Hardware Sales
    • 1950’s – Small town independent hardware stores sell 30,000 items one at a time from open bins
    • 1970’s – Larger community hardware chains (e.g., True Value) sell 20,000 items in multi-unit blister packs
    • Today – Most hardware is sold in regional centers
      • Regional center big-box retailers (e.g., Home Depot) sell 10,000 high-volume hardware items – and a whole lot of other stuff
      • Niche chains (e.g., Restoration Hardware) fill the gaps for high-end specialty items – but only in the largest regional center communities
  • 10. Why Comprehensive and Individualized?
    • Issues faced are both complex and interdependent
    • Multiple rural Americas require individualized approaches
      • Delta – Poor schools, plentiful workforce
      • vs.
      • Plains – Good schools, sparse workforce
    • One size does not fit all!
    • Each area must build on its strengths and minimize its weaknesses
  • 11. Why Growth from Within?
    • 95% of all new jobs are created by local “small” businesses (<200 workers)
    • No one truly wins the “Toyota Lottery!”
    • It’s cheaper and easier to keep and grow what you already have
    • Local businesses have “roots” and are less likely to leave
  • 12. What is the “Sweet Spot?”
    • The place where passion , competence and economics coincide!
  • 13. “ Good to Great” by Jim Collins Adapted from “The Hedgehog Concept”  The Sweet Spot What you are deeply passionate about What drives your economic engine Where you have world class competence
  • 14. Focusing on your “Sweet Spot”
    • Focus where you have world-class competence:
      • What you can do as well or better than anyone and your unique regional assets – your competitive niche
        • If someone can do it better, they will and you will lose
    • Focus on what drives your economic engine:
      • The one or two factors you want to maximize to get the most economic return from your activities
        • Focus on maximizing the activities that add value
        • If it doesn’t add value, it’s not worth doing
    • Focus on what you are passionate about :
      • your region’s shared values and vision
        • “ Where there is no vision the people perish” (Proverbs 29:18)
  • 15. “ Good to Great” by Jim Collins Adapted from “The Hedgehog Concept”  Uncompetitive What you are deeply passionate about What drives your economic engine Where you have world class competence Uneconomic Unsustainable
  • 16. So how can you help?
    • There’s a role for everyone in this room
    • Abandon the old paradigm – teach the new
    • Encourage regional efforts
    • Support comprehensive approaches – individualized to place
    • Promote growth from within
    • Work to find your “Sweet Spot”
  • 17. 1. Abandon the old paradigm and teach the new
    • Foundation and nonprofit roles
      • Initiate and support efforts to build new leaders and raise awareness of existing ones
      • Research and convey good practices and provide technical assistance
    • State government roles
      • Restructure programs, rules, and regulations to eliminate incentives and provide disincentives for smokestack chasing
      • No one will unilaterally disarm, the impetus must come from above
    • Community roles
      • Abandon industrial recruitment – it doesn’t work and wastes precious resources!
      • Build on your local assets , industries, and entrepreneurs
  • 18. A new maxim for this new age:
    • Yesterday we defined insanity as:
      • “… trying the same thing over and over again and expecting different results”
    • Today we might more appropriately define insanity as
      • “… trying something that worked in the past and expecting the same results”
    • We must change the paradigm with changing times
  • 19. 2. Encourage the development of regional efforts
    • Foundation and nonprofit roles
      • Use your influence to get people to the table to work beyond their parochial interests
      • Support and participate in efforts to forge regional vision and commitment to action
    • State government roles
      • Continue and expand support for regional initiatives
    • Role for both the State and foundations:
      • Work to devolve control of resources to the regional level
    • Community Roles
      • Bury the hatchet and work with your neighbors!
      • Succeed together or fail alone!
  • 20. The MIF Example
    • 1986 – McKnight Foundation / State of Minnesota partnership devolved control of McKnight’s rural grantmaking and State’s rural economic development lending to the Minnesota Initiative Foundations – regional rural community foundations
    • 20+ year partnership – one of the most effective rural philanthropy and development initiatives ever undertaken
    • Resources attracted and raised in and for local communities more than doubled McKnight and State’s commitment
    • Combining philanthropy and regional development created unique opportunities – to holistically rebuild rural viability
    • Results include tens of thousands of new jobs, transformed regional economies, and hundreds of millions in permanent assets to support rural communities
  • 21. 3. Support comprehensive approaches – individualized to place
    • Foundation and nonprofit roles
      • Adopt promising practices and learn from groups like:
        • The Chapin Hall Embedded Philanthropy Network
        • CFED
      • Research and disseminate models that work
    • Government roles
      • Build flexibility into funding streams
      • Coordinate programs across agencies to address comprehensive regional initiatives
    • Community roles
      • Broaden your vision – work across systems and community boundaries to bring all your assets into play
    • Roles for all
      • Support efforts that fall “outside the box” – if they promote the outcome of increased economic wellbeing for families and communities
  • 22. Getting “outside the box”
    • The Traditional
    • Entrepreneur Development
    • Business TA
    • Loan Packaging
    • “ Gap” Lending
    • Public Infrastructure
    • Regional Marketing
    • Workforce Training
    • The Not So Traditional
    • Healthcare
    • Workforce Housing
    • Childcare
    • Worker Transportation
    • Early Childhood Education
    • K-12 Education
    • Career Pathways
    • Postsecondary Education
    • … and much, much more
    Depending on place, outcome-focused economic development may require investment in and focus on:
  • 23. 4. Promote growth from within
    • Foundation and nonprofit roles
      • Support and provide entrepreneurial development
        • Disseminate or adopt good practice (e.g., RUPRI-CRE)
        • Adopt proven curriculum (e.g. Kauffman/FastTrak)
      • Consider Mission Related Investment in regional loan funds – or create and run one yourself!
    • Government roles
      • Capitalize regional loan programs focused on small business
      • Support SBA programs and the SBDC network
      • Align resources – e.g., workforce development, higher ed, economic development – to support local/regional growth
    • Community roles
      • Adopt/support Business Expansion and Retention programs
  • 24. Remember:
    • If you entice a company to come to a community…
    • … someone else undoubtedly will offer it more to go elsewhere!
  • 25. 5. Work to find community and regional “Sweet Spots”
    • Government and foundation roles
      • Support research, TA, and planning
      • Use your influence to encourage local/regional planning efforts
      • Ensure that needed data is available for rural places on a timely basis
    • Nonprofit and community roles
      • Join together to create a regional consensus/ vision/plan to reach your “Sweet Spot”
  • 26. Finding your “Sweet-Spot”
    • A three step process:
      • Inventory your assets
        • Your world-class competencies and unique strengths
      • Understand your economy
        • The fuel for your economic engine
      • Forge your vision
        • Create shared passion for your plan
  • 27. Inventory your assets
    • Scour your area looking for:
      • Entrepreneurial assets
        • Existing and emerging entrepreneurs, business clusters, etc.
      • Physical assets
        • Geography, scenery, infrastructure, transportation, etc.
      • Human assets
        • Leadership, talent, expertise, workforce, etc.
      • Institutional assets
        • Schools, libraries, nonprofit organizations, etc.
      • Cultural assets
        • History, heritage, culture, etc.
      • Other ???
    • Identify your world class competencies and unique strengths
  • 28. Understand your economy
    • Determine status of your key economic sectors
      • Focus on sectors providing unique community assets
      • Who is doing what and how much of it?
    • Research trends on promising sectors
      • What’s emerging, growing, stagnant, in-decline… …and why?
      • What opportunities and threats do they face?
    • Identify what can fuel your economic engine – now and into the future
  • 29. Find your passion …and your “Sweet Spot”
    • Convene stakeholders to develop shared values, vision and action plan
      • The process must be inclusive
        • Not just the usual suspects
      • Focus on the future requires heavy involvement of “younger” leaders
        • Their passion will be your future
    • Integrate your assets inventory and economic analysis
    • Look for the “Sweet Spot”
      • Intersection of your passion , your world-class competencies and unique strengths and your economic engine
  • 30. Outcome Focused Economic Development:  It’s all about Finding YOUR Sweet Spot What you are deeply passionate about What drives your economic engine Where you have world class competence
  • 31. … and finally A little something for the skeptics among us
  • 32. So you think you have nothing to work with? These places started in a deeper hole:
  • 33. Tupelo Region Northeast Mississippi
    • 1950 – poorest region in poorest state in union
    • Developed a regional vision for improving the economy
    • Created a new entity to serve as the hub
    • Started by helping poor farmers move from growing cotton to raising pigs and chickens
    • Improved farm income boosted mainstreet sales
    • Worked one step at a time to make things better – especially the quality of their workforce
    • By 1980’s became one of the fastest growing areas in the south – because of their quality workforce
    • 2007- just picked for a new Toyota plant
  • 34. Emilia Romagna Rural Northern Italy
    • 1970 – one of the poorest regions in poorest country in western Europe, with 20% unemployment
    • Chief asset and chief liability – 325,000 small manufacturers, many one and two person shops
    • Formed a regional entity to coordinate planning & action
    • Developed a regional plan to capitalize on this asset by creating flexible manufacturing networks
    • Committed resources to organizing what was already there
    • Now the second most prosperous region in western Europe with virtually no unemployment
  • 35. Alice Springs Area Central Australia
    • 1929 book “A Town Called Alice” describes area as literally the end of the earth
    • In early 1970’s, formed a regional entity to look at their future
    • 1974 – regional plan identified tourism as possible economic driver and Ayer Rock, the world’s largest monolith as the chief asset
    • Plan focused resources on airport access, water systems and a resort hotel
    • 23,000 tourists in 1969 grew to over 500,000 today
    • The region’s economy is now booming
  • 36. Some common themes
    • Regional collaboration
    • Incremental, long term focus
    • Built on existing assets and competencies
    • Sound economic analysis
    • Passionate buy-in/support for regional vision and plan
  • 37. Thank you! Contact Info: John A. Molinaro, Associate Director Aspen Institute Community Strategies Group One Dupont Circle NW, Suite 700 Washington, DC 20036 [email_address] 202-736-5856