Rural GA in Rural GA in the Global Economic the Global Economic
OlympicsOlympics
Center for the Study of Rural America, FRBKC
Mark DrabenstottMark Drabenstott
Vice President & DirectorVice President & Director
Center for the Study of Rural AmericaCenter for the Study of Rural America
Federal Reserve Bank of Kansas CityFederal Reserve Bank of Kansas City
www.kansascityfed.orgwww.kansascityfed.org
Globalization is turning Globalization is turning economic development into economic development into
an Olympic eventan Olympic event
• Globalizing markets leave an uneven Globalizing markets leave an uneven economic landscape…economic landscape…
• Where every region must compete in Where every region must compete in global markets.global markets.
• Commodity-driven regions areCommodity-driven regions areconsolidating…consolidating…
• And the edge goes to regions that And the edge goes to regions that innovateinnovate. . Center for the Study of Rural America, FRBKC
How can rural GA How can rural GA compete in the global compete in the global
economic race?economic race?
• How is rural GA doing?How is rural GA doing?
• What must rural GA do to take gold?What must rural GA do to take gold?
• What can you do to help?What can you do to help?
Tracking Tracking CompetitivenessCompetitiveness
Whether a region is…Whether a region is…
losing…losing…
holding its own…orholding its own…or
gaining…gaining…
in its share of national economic in its share of national economic measures. measures.
Checking the ScoreboardChecking the Scoreboard
A few bright spots, but much of the A few bright spots, but much of the South is falling behind the rest of the South is falling behind the rest of the nation.nation.
There is plenty of work to do.There is plenty of work to do.
Income
Top 310Counties
Remaining Counties
74%
26%
Population
76%
24%
Top 310Counties
Remaining Counties
Employment
74%
26%
Top 310Counties
Remaining Counties
Top 10% of Counties Dominate Top 10% of Counties Dominate U.S. Economic GainsU.S. Economic Gains
Source: BEA, REIS
Top 310 Counties for Income GrowthTop 310 Counties for Income Growth
Source: BEA, REIS
Top 310 Counties for Employment Top 310 Counties for Employment GrowthGrowth
Source: BEA, REIS
Top 310 Counties for Population Top 310 Counties for Population GrowthGrowth
Source: BEA, REIS
Up 1.022 to .037
Up 0.0 to 0.037
Down 0.027 to 0.0
Down 0.028 to 0.543
Change in Share of State Income1994 to 2004
Source: BEA, REIS
Change in percentage points
Up 1.278 to .033
Up 0.0 to 0.032
Down 0.028 to 0.0
Down 0.029 to 0.690
Change in Share of State Employment1994 to 2004
Source: BEA, REIS
Change in percentage points
Up 1.687 to .059
Up 0.0 to 0.058
Down 0.024 to 0.0
Down 0.025 to 0.852
Change in Share of State Population1994 to 2004
Source: BEA, REIS
Change in percentage points
Why are the scores so Why are the scores so uneven?uneven?
Globalization has made Globalization has made regions the unit the unit of development…of development…
It takes critical mass to It takes critical mass to muster a muster a team.team.
Globalization has changed the drivers Globalization has changed the drivers of success…of success…
The era of cheap cost is past, The era of cheap cost is past,
the era of innovation and the era of innovation and entrepreneurship has entrepreneurship has
begun.begun.
What must rural GAWhat must rural GA do to compete do to compete
better?better?
Today’s Economic Today’s Economic Development ChallengeDevelopment Challenge
The vigorous pursuit of a region’s The vigorous pursuit of a region’s
competitive edge in rapidly competitive edge in rapidly
changing global markets.changing global markets.
Center for the Study of Rural America, FRBKC
Economic regions matter Economic regions matter more than political ones.more than political ones.
• Business alliancesBusiness alliances — to build market presence — to build market presence and adopt new technologies.and adopt new technologies.
• Community collaborationsCommunity collaborations — to build critical — to build critical mass and pool capital for development.mass and pool capital for development.
• Public-private partnershipsPublic-private partnerships – to ensure public – to ensure public and philanthropic investment aligns with private and philanthropic investment aligns with private investment.investment.
Governance is Governance is critical.critical.
• Governance is about how regions think and act Governance is about how regions think and act
as a regionas a region. It is NOT government.. It is NOT government.
• Who will encourage regional partnerships?Who will encourage regional partnerships?
• Who provides the round table?Who provides the round table?
A special role for nonprofits & higher education!A special role for nonprofits & higher education!
Center for the Study of Rural America, FRBKC
The New Development The New Development ParadigmParadigm
AssetsAssets
MarketsMarkets
EntrepreneursEntrepreneurs
InnovationInnovationRegionalRegionalGrowthGrowth
DriversDrivers
Competitiveness Competitiveness StrategyStrategy
What must the rural What must the rural South South
do to win?do to win?1.1. Understand its economic assets.Understand its economic assets.
What does your region What does your region have have going for it?going for it?
Vision is required…not Vision is required…not the the rearview mirror!rearview mirror!
What must rural GA do What must rural GA do to win?to win?
2.2. Grow more entrepreneurs. Grow more entrepreneurs.
Entrepreneurs are the Entrepreneurs are the athletes on athletes on the economic the economic olympic squad. olympic squad.
Who are the athletes in your Who are the athletes in your region, and how can they become region, and how can they become world-class?world-class?
What must rural GA do What must rural GA do to win?to win?
Entrepreneurs are the new Entrepreneurs are the new engines of growth.engines of growth.
Need lots of them… Need lots of them…
But high-growth ones But high-growth ones especially. especially.
Why does entrepreneurship Why does entrepreneurship matter?matter?
• Places that grow more entrepreneurs have stronger economic growth.
• This occurs...
0
2
4
6
8
10
12
0 5 10 15 20 25 30 35
……at the national level,at the national level,
National Entrepreneurship Index and GDP Growth
Total Entrepreneurship Activity Index (2003)
Average GDP Growth (2004 to 2006)
U.S.
Russia
India
Source: Global Entrepreneurship Monitor, 2003 and International Monetary Fund
China Venezuela
European countries
Hong Kong
Japan
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
0 1 2 3 4 5 6 7 8 9State Non-farm Proprietor Growth (1970-1990)
Employment Growth (Wage and Salary: 1990-2004)
……at the state level,at the state level,State Entrepreneurial Growth and Employment Growth
South Dakota
Alaska
Nevada
D.C.
Colorado
Iowa
Arizona
MontanaND
MS
Idaho
California
Calculations based on BEA, Regional Economic Information System data
-10
-5
0
5
10
15
20
25
-15 -10 -5 0 5 10 15 20
County Proprietor Growth (1970-1990)
Employment Growth (Wage and Salary: 1990-2004)
……at the county level.at the county level.
County Entrepreneurial Growth and Employment Growth
Calculations based on BEA, Regional Economic Information System data
Center for the Study of Rural America, FRBKC
RecruitmentRecruitment
RetentionRetention
EntrepreneurshipEntrepreneurship
Policy for Regional Competitiveness
RecruitmentRecruitment
RetentionRetention
EntrepreneurshipEntrepreneurship
Current Policy
Source: Dabson
This requires a shift in This requires a shift in policy...policy...
And access to equity And access to equity capital…capital…
• Equity capital is the lifeblood of Equity capital is the lifeblood of entrepreneursentrepreneurs
……yet the public policy focus remains debtyet the public policy focus remains debt..
• The South has very limited access to equity The South has very limited access to equity capital.capital.
Center for the Study of Rural America, FRBKC
What must rural GA do to win?What must rural GA do to win?
3. Fuel more innovation.3. Fuel more innovation.
Innovation is what gives Innovation is what gives a region’s athletes an edge in a region’s athletes an edge in the global race…the global race…
It is the fuel that propels the It is the fuel that propels the entrepreneurs.entrepreneurs.
How to create more How to create more of this fuel? of this fuel?
• One part One part researchresearch—going —going beyond basic research to link beyond basic research to link research to regions….”spatial research to regions….”spatial linking.”linking.”
• One part One part innovation capacityinnovation capacity——the willingness and skill to the willingness and skill to be “change nimble.”be “change nimble.”
Center for the Study of Rural America, FRBKC
What must rural GA do to What must rural GA do to win?win?
4.4. Craft a great strategy.Craft a great strategy.
How to exploit assets How to exploit assets to seize to seize markets?markets?
““Competitiveness Competitiveness strategy” is the strategy” is the game plan game plan that puts the team on that puts the team on the court.the court.
A few suggestions on A few suggestions on helping the South compete.helping the South compete.
HowHow to create a competitiveness to create a competitiveness strategy?strategy?
WhatWhat might be the South’s key assets? might be the South’s key assets?
WhatWhat might be the South’s might be the South’s competitive advantage?competitive advantage?
Center for the Study of Rural America, FRBKC
Crafting a Regional StrategyCrafting a Regional Strategy
Job 1 in the South must be crafting a strong Job 1 in the South must be crafting a strong competitiveness strategy for the region.competitiveness strategy for the region.
This means investing in the “competitiveness” This means investing in the “competitiveness” skills of the region’s leaders first.skills of the region’s leaders first.
The Italian Mezzogiorno approach is a great The Italian Mezzogiorno approach is a great modelmodel—the 15% rule. —the 15% rule. In many cases, that means investing in a region’s In many cases, that means investing in a region’s
leaders first.leaders first.
Center for the Study of Rural America, FRBKC
Crafting a Regional StrategyCrafting a Regional Strategy
Who supplies the round table?Who supplies the round table?
Non-profits & higher education can play Non-profits & higher education can play especially useful roles. especially useful roles.
The case of “NEO.”The case of “NEO.”
Center for the Study of Rural America, FRBKC
Center for the Study of Rural America, FRBKC
Getting the Geography Getting the Geography RightRight
How many regions has rural How many regions has rural Georgia?Georgia?
Bottom-up, not top-down.Bottom-up, not top-down.
Who’s in the same economic boat?Who’s in the same economic boat?
What might be “advantage What might be “advantage assets?”assets?”
1.1. The Coast — the drive to the ocean.The Coast — the drive to the ocean.
2.2. Outdoor recreation—hunting worth more than crops?Outdoor recreation—hunting worth more than crops?
3.3. Heritage — civil war, civil rights.Heritage — civil war, civil rights.
4.4. Culture — blues, gospel, story-telling.Culture — blues, gospel, story-telling.
5.5. High-valueHigh-value cost of living — amenities relative to cost. cost of living — amenities relative to cost.
6.6. Central location — U.S. population within a day.Central location — U.S. population within a day.
7.7. Climate — Great 3-season living.Climate — Great 3-season living.
What might be competitive What might be competitive advantage strategies?advantage strategies?
1.1. Country music and craft. Country music and craft.
• Strong evidence that native craft is a powerful Strong evidence that native craft is a powerful asset in a world looking for unique experiences.asset in a world looking for unique experiences.
• Handmade in AmericaHandmade in America (NC) a textbook example. (NC) a textbook example.
• What to invest in?What to invest in?
• Regional collaboration and world-class Regional collaboration and world-class celebration (e.g., Edinburgh Festival).celebration (e.g., Edinburgh Festival).
• Arts and intellectual property educational Arts and intellectual property educational programs.programs.
• Internet and other marketing skills.Internet and other marketing skills.
What might be competitive What might be competitive advantage strategies?advantage strategies?
2.2. World-class elder care. World-class elder care.
• A huge market as the Greatest Generation and A huge market as the Greatest Generation and then Baby boomers seek care. then Baby boomers seek care.
• Faith community in the South could provide Faith community in the South could provide powerful leadership and add value. powerful leadership and add value.
• Big pluses—low cost of living + central location. Big pluses—low cost of living + central location.
• What to invest in?What to invest in?
• Health care system…Health care system…
This could produce a big This could produce a big “two-fer.”“two-fer.”
What might be competitive What might be competitive advantage strategies?advantage strategies?
3.3. The Wild Card — A World Class The Wild Card — A World Class Place for Entrepreneurs. Place for Entrepreneurs.
Entrepreneurship is the process by Entrepreneurship is the process by which regions discover what they do which regions discover what they do bestbest (Zoltan Acs). (Zoltan Acs).
• Once and for all, let the region seize its own Once and for all, let the region seize its own destiny. destiny.
• Tax policy a powerful lever. Tax policy a powerful lever.
• What to invest in?What to invest in?
• World class K-12 entrepreneurial World class K-12 entrepreneurial curriculum.curriculum.
• World-class entrepreneurial support system.World-class entrepreneurial support system.
• Equity funds for the region.Equity funds for the region.
What can rural Georgia do to What can rural Georgia do to win gold?win gold?
Center for the Study of Rural America, FRBKC
1.1. Help the region understand its assets.Help the region understand its assets.
2.2. Make the South a world-class home for Make the South a world-class home for entrepreneurs.entrepreneurs.
3.3. Spur innovation—linking research to Spur innovation—linking research to regions and boosting innovative regions and boosting innovative capacity.capacity.
4.4. Help the South put together a world-Help the South put together a world-class game plan.class game plan.
For further reading…
www.kansascityfed.org