Economic Development and Wealth Creation in Rural America


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Economic Development and Wealth Creation in Rural America

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