Economist notes opportunities for small communities

Northwestern Financial Review, Dec 1-Dec 14, 2002 by Bengtson, Tom

An economist for the Federal Reserve Bank of Kansas City told a group of Iowa bankers that he believes rural communities can thrive through the 21 st Century. Speaking to bankers in Des Moines at a town meeting hosted by the Independent Community Bankers ofAmerica and the Iowa Independent Bankers, Jason Henderson said technology has opened up opportunities for small towns.

Traditionally, small towns relied on manufacturing and agricultural commodities for vitality. Now, Henderson said, manufacturing is less promising and new uses for commodities need to be identified before it will lead to economic development in rural communities.

He said small towns used to appeal to manufacturers because they offered inexpensive land and cheap labor. "Now, they can get even cheaper land and cheaper labor in China or South America," he said.

Technology brings opportunity, not only with respect to telecommuting, but with respect to new uses for commodities, such as the manufacturing of pharmaceuticals,fuel and plastics. "Pharmaceutical corn is a high value product," Henderson said as he explained how niche drugs can be produced from the proteins that grow in corn.

Henderson said that economic gains in the United States have been unevenly distributed across rural areas. Successful communities are those that have managed to capitalize on natural beauty to attract tourists, vacationers and permanent residents.

"Sixty percent of Americans now live in the suburbs," Henderson said, "with 20 percent in the urban core and 20 percent in rural areas. Surveys show people want what rural areas offer."

Henderson said small businesses can succeed in rural towns, citing a survey that showed an equal likelihood of success for a business regardless of whether it is launched in a small town or big city. The difference, he said, is that those starting in large cities tend to grow faster than those in smaller communities.

"Bankers offer rural communities an excellent debt capital market," Henderson said, "but what they really need now is on excellent equity capital market."

Success for many businesses, he said, is dependent upon partnerships and joint ventures. "In the past success was about independence," Henderson said. "In the future it is about inter-dependence."