Rural GA in the Global Economic Olympics Center for the Study of Rural America, FRBKC Mark Drabenstott Vice President & Director Center for the Study of Rural America Federal Reserve Bank of Kansas City

Globalization is turning economic development into an Olympic event Globalizing markets leave an uneven economic landscape…Globalizing markets leave an uneven economic landscape… Where every region must compete in global markets.Where every region must compete in global markets. Commodity-driven regions are consolidating…Commodity-driven regions are consolidating… And the edge goes to regions that innovate.And the edge goes to regions that innovate. Center for the Study of Rural America, FRBKC

How can rural GA compete in the global 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 Competitiveness Whether a region is… losing… holding its own…or gaining… in its share of national economic measures.

Checking the Scoreboard  A few bright spots, but much of the South is falling behind the rest of the nation.  There is plenty of work to do.

Income Top 310 Counties Remaining Counties 74% 26% Population 76% 24% Top 310 Counties Remaining Counties Employment 74% 26% Top 310 Counties Remaining Counties Top 10% of Counties Dominate U.S. Economic Gains Source: BEA, REIS

Top 310 Counties for Income Growth Source: BEA, REIS

Top 310 Counties for Employment Growth Source: BEA, REIS

Top 310 Counties for Population Growth Source: BEA, REIS

Up to.037 Up 0.0 to Down to 0.0 Down to Change in Share of State Income 1994 to 2004 Source: BEA, REIS Change in percentage points

Up to.033 Up 0.0 to Down to 0.0 Down to Change in Share of State Employment 1994 to 2004 Source: BEA, REIS Change in percentage points

Up to.059 Up 0.0 to Down to 0.0 Down to Change in Share of State Population 1994 to 2004 Source: BEA, REIS Change in percentage points

Why are the scores so uneven?  Globalization has made the unit of development…  Globalization has made regions the unit of development… It takes critical mass to muster a team.  Globalization has changed the drivers of success… The era of cheap cost is past, the era of innovation and entrepreneurship has begun.

What must rural GA do to compete better?

Today’s Economic Development Challenge The vigorous pursuit of a region’s competitive edge in rapidly changing global markets. Center for the Study of Rural America, FRBKC

Economic regions matter more than political ones. Business alliances — to build market presence and adopt new technologies.Business alliances — to build market presence and adopt new technologies. Community collaborations — to build critical mass and pool capital for development.Community collaborations — to build critical mass and pool capital for development. Public-private partnerships – to ensure public and philanthropic investment aligns with private investment.Public-private partnerships – to ensure public and philanthropic investment aligns with private investment.

Governance is critical. Governance is about how regions think and actGovernance is about how regions think and act as a region. 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! Center for the Study of Rural America, FRBKC

The New Development Paradigm Assets Markets EntrepreneursInnovationRegionalGrowth Drivers Competitiveness Strategy

What must the rural South do to win? 1. Understand its economic assets. What does your region have going for it? Vision is required…not the rearview mirror!

What must rural GA do to win? 2. Grow more entrepreneurs. Entrepreneurs are the athletes on the economic olympic squad. Who are the athletes in your region, and how can they become world-class?

What must rural GA do to win? Entrepreneurs are the new engines of growth. Need lots of them… But high-growth ones especially.

Why does entrepreneurship matter? Places that grow more entrepreneurs have stronger economic growth. This occurs...

…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

State Non-farm Proprietor Growth ( ) Employment Growth (Wage and Salary: ) …at the state level, State Entrepreneurial Growth and Employment Growth South Dakota Alaska Nevada D.C. Colorado Iowa Arizona Montana ND MS Idaho California Calculations based on BEA, Regional Economic Information System data

County Proprietor Growth ( ) Employment Growth (Wage and Salary: ) …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 Recruitment Retention Entrepreneurship Policy for Regional Competitiveness Recruitment Retention Entrepreneurship Current Policy Source: Dabson This requires a shift in policy...

2 And access to equity capital… Equity capital is the lifeblood of entrepreneursEquity capital is the lifeblood of entrepreneurs …yet the public policy focus remains debt. The South has very limited access to equity capital.The South has very limited access to equity capital. Center for the Study of Rural America, FRBKC

What must rural GA do to win? 3. Fuel more innovation. Innovation is what gives a region’s athletes an edge in the global race… It is the fuel that propels the entrepreneurs.

How to create more of this fuel? One part research—going beyond basic research to link research to regions….”spatial linking.”One part research—going beyond basic research to link research to regions….”spatial linking.” One part innovation capacity—the willingness and skill to be “change nimble.”One part innovation capacity—the willingness and skill to be “change nimble.” Center for the Study of Rural America, FRBKC

What must rural GA do to win? 4.Craft a great strategy. How to exploit assets to seize markets? “Competitiveness strategy” is the game plan that puts the team on the court.

A few suggestions on helping the South compete.  How to create a competitiveness strategy?  What might be the South’s key assets?  What might be the South’s competitive advantage? Center for the Study of Rural America, FRBKC

Crafting a Regional Strategy  Job 1 in the South must be crafting a strong competitiveness strategy for the region.  This means investing in the “competitiveness” skills of the region’s leaders first.  The Italian Mezzogiorno approach is a great model—the 15% rule.  In many cases, that means investing in a region’s leaders first. Center for the Study of Rural America, FRBKC

Crafting a Regional Strategy  Who supplies the round table?  Non-profits & higher education can play especially useful roles.  The case of “NEO.” Center for the Study of Rural America, FRBKC

Getting the Geography Right  How many regions has rural Georgia?  Bottom-up, not top-down.  Who’s in the same economic boat?

What might be “advantage assets?” 1.The Coast — the drive to the ocean. 2.Outdoor recreation—hunting worth more than crops? 3.Heritage — civil war, civil rights. 4.Culture — blues, gospel, story-telling. 5.High-value cost of living — amenities relative to cost. 6.Central location — U.S. population within a day. 7.Climate — Great 3-season living.

What might be competitive advantage strategies? 1. Country music and craft. Strong evidence that native craft is a powerful asset in a world looking for unique experiences.Strong evidence that native craft is a powerful asset in a world looking for unique experiences. Handmade in America (NC) a textbook example.Handmade in America (NC) a textbook example. What to invest in?What to invest in? Regional collaboration and world-class celebration (e.g., Edinburgh Festival).Regional collaboration and world-class celebration (e.g., Edinburgh Festival). Arts and intellectual property educational programs.Arts and intellectual property educational programs. Internet and other marketing skills.Internet and other marketing skills.

What might be competitive advantage strategies? 2. World-class elder care. A huge market as the Greatest Generation and then Baby boomers seek care.A huge market as the Greatest Generation and then Baby boomers seek care. Faith community in the South could provide powerful leadership and add value.Faith community in the South could provide 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 “two-fer.”

What might be competitive advantage strategies? 3. The Wild Card — A World Class Place for Entrepreneurs. Entrepreneurship is the process by which regions discover what they do best (Zoltan Acs). Once and for all, let the region seize its own destiny.Once and for all, let the region seize its own destiny. Tax policy a powerful lever.Tax policy a powerful lever. What to invest in?What to invest in? World class K-12 entrepreneurial curriculum.World class K-12 entrepreneurial 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 win gold? Center for the Study of Rural America, FRBKC 1.Help the region understand its assets. 2.Make the South a world-class home for entrepreneurs. 3.Spur innovation—linking research to regions and boosting innovative capacity. 4.Help the South put together a world- class game plan.

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