Social capital, tax modifications, and rural economic progress: Discussion

Journal of Agricultural and Applied Economics, Aug 2002 by Christy, Ralph D

This session addresses important economic development issues of the rural South, a topic of continuing interest to agricultural economists, rural sociologists, and policy analysts. In many respects, the rural South is a region that still warrants our collective efforts in finding solutions to its persistent economic development challenges. Wimberly and Morris document the many rural counties that the economic prosperity of the 1990s left behind. Indeed, economic development of the rural South remains as unfinished business on our professional agenda. I first offer general comments about the overall paper session and then provide specific observations on the Rainey and McNamara (RM) paper, "Tax Incentives: An Effective Development Strategy for Rural Communities?"

The Fuss in Florida: Does Social Capital Matter?

Despite the economic advances that have occurred over several decades and the number of public initiatives implemented, Southern rural communities continue to lag economically behind rural areas of most other regions in the nation. In 1960, for example, a full 60% of all African Americans in the rural South were below the poverty line. By 1990, the number living below the poverty line was reduced to 30%, and in the 1990s our robust economy reduced that number an additional 8-10%. Over the decades, many rural economies have improved with the passage of a number of federal, state, and local public policies including: War on Poverty, Equal Access/Public Accommodations, The Great Society, Affirmative Action, Appalachian Regional Commission, Delta Commission, Welfare Reform, Enterprise/Empowerment Zones, and Global Trade Legislation, to name a few. From this list of initiatives, it is clear that over time public policies have moved away from government-- based solutions toward more market-based strategies. Today, rural development policy is in crisis. With production agriculture playing a smaller role in economic development, no central institution serves as a focal point in the creation and delivery of public responses to the challenges facing rural communities (Bonnen). Within this context, this paper session is both timely and relevant for social scientists and policy makers who are interested in solving the problems of rural communities.

In this session, alternative economic prescriptions concerning the economic development of rural areas are debated. The debate features two contemporary schools of thought among social scientists. The first school advocates, "She who owns the gold makes the rules." I believe that the RM paper best represents this widely held position. The second school of thought suggests that "She who makes the rules owns the gold." Here, the Robinson, Lyson, and Christy (RLC) paper, "Civic Community Approaches to Rural Development in the South: Economic Growth with Prosperity," is partial to this perspective. It supports the notion that embedded social and cultural factors can influence economic activity. An important aspect of contemporary social sciences research and policy analysis is an ongoing effort to determine the impact of cultural embeddedness on development by coming to terms with this central question: Does social capital matter?

When economic development emerged as a new branch of economics about 50 years ago, financial capital was seen as the primary fuel for the engines of economic growth. At that time, economic growth was equated with economic development. By the 1960s, thanks to the work of Nobel Laureates W. Arthur Lewis and T W. Schultz, human capital emerged as an important contributor to the economic growth and development process (Lewis; Schultz). Now on center stage is a new form of capital, social capital, that social scientists are attempting to explain, evaluate, and elevate in private strategy and public policy. Unlike previous forms of capital, social capital does allow for a wider discussion of economic development determinants that span geographies (north/south) and more easily invites discussion beyond our disciplinary boundaries (economics and sociology). Therefore, I naturally had high hopes that this session on contemporary economic development would provide a more definitive answer to the central question (regarding the relative importance of social and financial capital) that has challenged our respective professions.

This session brought this central question closer to our view; however, in my estimation, it did not come close enough. With apologies to the nonsport enthusiasts, if this paper session was to be compared to two heavyweight boxing champions of the world-RM versus RLC-battling to secure their own framework in private and public use, it did not live up to its hype: The Fuss in Florida was not the Thrilla in Manila. The RM paper concludes that tax modifications are necessary, but not sufficient. In other words, it does not defend the purely economic incentives. On the other hand, the RLC paper offers the social capital paradigm as an alternative to neoclassical economics, and as such provided some hope that a decisive blow would have been delivered in its favor. At the end, the paper seems to call for the inclusion of neoclassical variables (human capital and median income) within the civic community framework. The bottom line is that both papers raced for the middle and, consequently, the bout ended in a draw.