Farm Tonic Will Not Cure Rural Ills

Once again the current and chronic problems in rural America have gained the attention of policy analysts, policymakers, and the public. New studies, such as those undertaken by the Federal Reserve Bank of Kansas City and the Economic Research Service of the U.S. Department of Agriculture (USDA), have substantiated the existence of a wide range of economic problems in the hinterland. Unemployment rates, for example, have increased in rural areas despite upturns in the national economy and record farm subsidies.

As a result of rising concerns about rural society, several new legislative actions, including lengthy hearings and new bills such as those offered by Senator Patrick J. Leahy (D-Vt.) and Representative Thomas E. Coleman (R-Mo.), have been aimed at addressing rural ills. The persistent nature of these problems calls for a look at some of the issues underlying this new debate in rural development policy.

Historically, rural development policy has been guided by the need for stable growth of an economy that depends primarily on agriculture and natural resources. Since at least the 1960s, however, the rural economy has become more and more dependent upon manufacturing and services. Nevertheless, rural problems are still often viewed as farm problems to be addressed by agricultural policies.

To be sure, there are many agriculturally based nonmetropolitan counties and a significant number of industries and services that depend on a strong farm economy. But the long-standing policy prescription of sector-specific medicine (e.g., targeted policies related to certain commodities, such as wheat and corn) now appears to be an inadequate remedy for the problems of an increasingly diverse rural America.

Not only rural America, but the nation as a whole, is in the midst of major economic and social adjustment. These transformations are the result of several forces—demographic shifts, deregulation of industry, decentralization of government, and internationalization of the domestic economy. And, while change is not a new phenomenon in the nation's countryside, this particular set of forces, coupled with existing national policies, has intensified rural difficulties.

Two federal approaches

A rationale for any federal response to the rural ills of the nation rests on two approaches originally examined by Gordon C. Cameron in a study—Regional Economic Development: The Federal Role—for Resources for the Future in 1970. Proponents of the first—termed the national demand approach—assert that over the long term, competitive forces within the market create optimal distribution of economic activity. Therefore, if any area of the country shows symptoms of distress, this should be interpreted as a clear warning that the nation has a declining need to use that area for the production of a particular good.

If these symptoms occur, the proposed remedy is that the federal government should encourage some decline in the level of economic activity in that area. The best way to do this, so the argument runs, is to target federal assistance, such as federal revenue sharing, to an economically stronger area, thus improving the national economy and general welfare.

The second approach, called planned adjustment, assumes that local economic distress exists precisely because competitive forces do not create an optimal distribution of economic activity. Therefore, lagging rural areas suffer not only because of the possible misuse of their own resources but also because external investment—including federal dollars—is routed to overexpanded, and usually metropolitan, areas.

These deficiencies in market forces, it is suggested, can be overcome by helping the depressed rural areas become more economically self-sufficient, retain their population, and identify their comparative advantages over other regions, thereby attracting investment away from overexpanded, less economically advantaged areas. This strategy usually calls for a more active government role in planning, coordinating, and sometimes directing investment decisions.

Over the years one or the other of these approaches has held sway, depending on the administration in power and the prevailing tides of political thought. With both bodies of Congress now controlled by the Democrats and a lame-duck administration beset by other concerns, the more governmentally active, planned-adjustment approach appears in the ascendancy.

People or places?

Most of the burden of adjusting to economic and social change falls on the individual. The traditional preference in policy, however, has been to address the human aspect of such adjustment problems through forms of assistance other than direct aid. For example, U.S. efforts to help farmers have been designed to respond to poor crop production (deficiency payments) or to needy communities (public facility loans) instead of to individual needs. General approval of this reluctance to adopt direct aid measures has been borne out by opinion polls, which consistently indicate public dissatisfaction with welfare programs of any type.

The assistance offered to ailing communities by local economic development efforts has traditionally stressed industrial site development and manufacturing plant location. Such efforts have not focused on the particular needs of the local population and, as a result, have been less than completely successful. There are no guarantees that a new plant will employ locally unemployed people if they do not have the requisite education, skills, or training.

Such development efforts highlight the difficulties of divorcing strategies for site development from those for developing human resources. In the years ahead, it appears that service industries will produce a large proportion of the new jobs in the United States. Future economic development policies may have to elevate job training and similar strategies to a central rather than ancillary position as rural areas move to accommodate service-sector growth.

Another, related concern is the apparent conflict between the objectives of equity and efficiency in providing economic assistance. If policymaking tries to achieve equity, assistance should go to those areas in greatest distress. To achieve efficiency, on the other hand, requires that assistance, being a scarce resource, go to those areas where the potential for growth is greatest.

These objectives are difficult to reconcile for rural America, since the poorest areas are likely to have the least potential for growth. What is involved, basically, is whether rural development should emphasize short-term relief, such as income support and family counseling, or regional economic transformation, such as research about and the development of new enterprises.

Total resources available are severely constrained by the federal budget deficit and by the sluggish economic condition of most rural states. In weighing the hard choices to be made, it is important to recognize that the probable costs in human welfare, such as lost wages in rural areas with little economic potential, could be borne by the increased economic efficiency and earned wages in areas with high potential. Mechanisms for compensating losers by redistributing some of the gains of winners, particularly if these gains are the result of federal action, are not unfamiliar in the realm of public policy.

Both short- and long-term results need to be considered in choosing strategies to develop human resources. Educational investments may improve local talent and marketability, but they may also encourage migration to other areas, as has happened historically with the movement of younger, more educated individuals from rural areas to urban places. Rural decision makers have resisted policies that tend to reduce their constituencies. New policy must accommodate both the individual and the indigenous need for economic development by offering local options and opportunities for employment. Rural communities otherwise risk the continued loss of some of their most able members.

National goal

Some years ago Charles E. Bishop, former president of the University of Houston, said in an address to the American Agricultural Economics Association that, to be viewed meaningfully, rural development must be seen as a necessary element of national development. But until a national development goal can be translated into meaningful rural objectives, it is likely that the economic and social adjustment of rural America will be treated as a secondary effect of problems in the production and marketing of agricultural commodities or manufactured goods.

The formation of a national development goal for rural America would provide the foundation for a useful debate over rural policies. Agricultural interests have helped to articulate for the food and farm sector a clear and compelling set of goals concerning national responsibilities in assuring an abundant supply of nutritious food at reasonable prices. Even if these goals have not been altogether successfully achieved, they have served a purpose in that they have guided policy and program alike.

Agriculture, with its institutional strength and common appeal, will play a prominent role in the success or failure of rural development policy. Groups with related interests, including anti poverty activists, neopopulists, environmentalists, and local officials, will also shape the debate and help determine new policy. While it is admittedly difficult to achieve consensus among any of these groups, recent cooperation between agricultural interests and environmentalists on the conservation reserve program within the Farm Security Act of 1985 offers hope for further cooperative efforts.

Policy formation is, of course, only half the battle. The current federal institutional framework for carrying out rural development policy has been diminished and fragmented. To make up for these deficiencies, some suggest that USDA be given new structure and authority and others seek a more prominent role for state government and local institutions. However, the successful implementation of new policy and new programs will require the skill and the cooperation of federal, state, and local authorities whatever the policy objectives.

Observing the bureaucracy for signs of subtle movement on any policy initiative not girded with large sums of money is like watching a low-scoring baseball game—with the actions of a few key players taking on added significance. As the "game" of formation and implementation in rural development policy goes on, some key players to watch include the Farmers Home Administration of USDA—a lumbering old veteran that some have felt has played out of position as only a lender and that may once again assume a broader, more imaginative role; the state governors—their planning offices in particular having initiated pivotal plays in assessing needs, identifying advantages, and targeting resources; and the land grant universities, especially the Cooperative Extension Services at these institutions—their rural savvy and long reach being potentially game saving if they can recover from a slump in energy and ideas.