The Seeds Of Rural Economic Growth

I’ll be speaking at the Rural Summit for Europe to be held in Eindhoven, Netherlands tomorrow — I’ll be writing more about that later. Coincidentally, last Friday, the Aspen Institute’s Community Strategies Group and Rural Development Innovation Group hosted a very good panel on rural entrepreneurship in the US.

In addition to the Aspen folks, the panel consisted of:
• Lupe Ruiz, Co-Owner, Wing Champs
• Ines Polonius, CEO, Communities Unlimited
• Dennis West, CEO, Northern Initiatives
• Jeffrey Lusk, Executive Director, Hatfield McCoy Regional Recreation Authority

There are many potential entrepreneurs in the countryside. If you think about it, the family farm is an example of entrepreneurship.

Even more so today, entrepreneurship is essential for the economic viability of rural areas in the face of the relatively shrinking rural population in the US because the traditional approaches aren’t working well.

Two or three decades ago, some manufacturing plants moved to rural areas to save costs, but then manufacturing shifted further to low cost countries. And now, with the increasing use of robotic devices, factories aren’t big employment generators.

Moreover, the use of incentives to get big companies to move to rural areas has been shown to be of limited and ever decreasing value in helping long term economic development. Unlike multinational businesses that rural areas have tried to attract, local entrepreneurs are committed to their communities.

Ms. Polonius noted that every dollar of sales that go to local entrepreneurs is spent several times over before it leaves the area, whereas sales at multi-national companies in rural areas leave much more quickly. As a case in point, Mr. Ruiz noted that when it came time to build his restaurant, he felt an obligation to buy lumber from another local entrepreneur rather than make the drive to Home Depot or Lowe’s where he might have saved a few bucks.

The panel went on for than an hour, so I can only highlight what struck me as the most critical points.

First, without any prompting from me or anyone else, the panelists stressed the importance of broadband for both local business success and also being able to reach markets beyond the local area. Mr. Ruiz was especially proud of the fact that his small town of Raymondville in the Rio Grande Valley of Texas had better broadband than the state capital of Austin did. The service is provided by the Valley Telephone Cooperative — in yet another example of how cooperatives have moved broadband forward in rural areas as the big telecoms companies abandon those areas.

Second, creativity and counter-intuitive thinking are necessary to turn around rural areas. Mr. Lusk pointed out how his area of southern Virginia had a concentration of some of the longest lasting poverty-stricken counties in the US. Where once extraction industries, like coal mining of the mountains, provide some boost to the local economy, that had been on a downturn since the 1950s. Local people wanted to have factories come there, but highway transportation wasn’t great and the land wasn’t flat — it was the Appalachian Mountains after all, very pretty, but not great industrial territory.

They finally turned things on their head and realized that the thing that was preventing industrial development — the mountains — was the basis for future growth of rural tourism. Mr. Lust described the ingenious ways that the Hatfield McCoy Regional Recreation Authority went from ATV off-road trails to encourage other economic development.

Third is the need for risk capital. Although local business folks often think first of going to the bank for funds, there are many fewer local banks around and banks of any kind aren’t generally in the business of helping startups. So, other sources of funds are needed. That’s where non-profits like Northern Initiatives come in. The non-profit organization proclaims that it “provides loans to small business owners and entrepreneurs in Northern Michigan that might not qualify for loans from traditional banks for a variety of reasons.”

Fourth, the development of rural entrepreneurship cannot end with the money, also needs training and coaching. Communities Unlimited offers a cash flow tool to keep entrepreneurs on an even keel. And, as with Wing Champs, they provide a variety of other services to help new business get over the inevitable rough spots.

Similarly, Northern Initiatives puts it this way:

“Each one of our loans comes with access to business services which includes a suite of practical trainings, tools, and resources on topics that matter to every business owner.”

And they even provide a coach to each company they give money to.

Mr. West also noted that some coaching comes from modeling — seeing other local people making money by starting businesses provides both encouragement and education to potential entrepreneurs.

Although these efforts don’t have quite the focus on gazelle second-stage growth companies that the Economic Gardening movement does, they share in common the idea that long term economic growth comes from entrepreneurship and entrepreneurs need help.

Here’s the overall lesson of this panel:

The seeds of entrepreneurship are in the countryside already. For economic growth, those seeds need to be fertilized by the combination of broadband, creativity/counter-intuitive thinking, risk capital and training/coaching.

[You can see a recording of the event at https://www.youtube.com/watch?v=lMIjJMEbzsI ]

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