Rural Response to the Economic Crisis

14th Academy of Business Disciplines Annual MeetingFort Myers, FL

November 8-10, 2012

Peter HackbertBerea College

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 2

Introduction

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 3

The Appalachian Region

4Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 201204/11/2023

Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 201204/11/2023 5

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 6

Problem Statement

How do rural communities hit hard by the 2008 economic recession approach economic

development?

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 7

Review of the Literature

• Scholars Lambe, 2008; Drabenstott & Moore, 2009; Morgan, Lambe, & Freyer, 2011

• Rural local economic development writers (Shuman, 2012; Cortese, 2011; Moltz & McCray, 2012)

• Both advance strategies for homegrown prosperity

Small Rural Appalachian Community Economic Development (CED)

Traditional ED Strategy / Tool

Alternative ED Strategy / Tool

CD Capacity Building Strategy / Tool

Economic Development Approaches

Economic Outcomes

Other Outcomes

Direct, Short-term

Indirect, Long-term

• Industrial development• Business retention / expansion• Workforce development• Tourism

• Entrepreneurship• Downtown development• Arts / Creative economy• Cluster-based development• Residential development

• Transportation• Broadband / Internet / Social Media • ED finance• Philanthropy• Strategic planning• Leadership development• Organizational development

1. Recruit firms from the outside2. Strengthen/expand existing firms3. Promote development of new firms

• jobs• firms• prosperity• wealth

• social• civic• environmental

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 9

Localization

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 10

Local Ownership Matters1. Higher multipliers2. Great community wealth: Fleming and Goetz

(2011) 3. More dynamic4. Healthier residents: Blanchard, (2012)5. Better community planning6. Greater creativity7. Greater political participation

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 11

How do you “localize”?

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 12

Methods

• County Business patterns from the Census Bureau

• Nonemployer Statistics from the US Census Bureau

• Zip code analysis indicated that all but two of the 392 establishments in Berea have fewer than 500 employees and therefore qualify as small businesses.

• The Census Bureau’s Nonemployer Statistics, revealed an estimated 1,548 individuals have their own businesses in Berea, with sales of $47 million per year.

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 13

Methods (continued)

• The IMPLAN Input-Output model unifies various federal databases and fill in the gaps

• Berea’s economy is to compare its composition to the United States as a whole.

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 14

Berea’s Profile

• 329 Establishments• 1,534 Self employed• 294 Farmers• 2,500 Public employees• $413M in wages• $25M in state and local taxes• $1.9B GDP

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 15

Compared to the USA

• 23% of the workforce is in manufacturing—more than 2 X the national average.

• Berea also has much greater numbers of people in education, health, and social services.

• 1/3 less than the national average of its workforce in the arts, entertainment, and tourism.

• Finance sector is about 1/2 the national average, which suggests how little capital is available for business growth.

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 16

Shuman argues in Going Local (1998); The Small-Mart Revolution (2006)

“ economic development performs best when it is focused, laser-like, on businesses “ that are locally owned and import substituting. Local ownership means that working control of a company is held within a small geographic area. Import-substituting means that the company is focused first and foremost (though not exclusively) on cost effective production for local markets.

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 17

Leakage analysis

• Identifies all those sectors in the economy where a community is unnecessarily importing outside goods and services. Every unnecessary import represents a loss of dollars and a loss of the "multiplier" impacts those dollars could generate locally.

• It also represents a loss of other documented benefits that local businesses bring, like knowledge, skills, tax payments, charitable giving, revitalized downtowns, tourists, stronger civil society, and more political participation.

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 18

BALLE Job Leakage Calculator

5,739 additional jobs

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 19

40 Export Industries

• Manufacturing parts for automobile supplying the assembly plant in Georgetown, KY.

• Role of Berea College, and many nonprofits promoting human rights and environmental protection;

• Presence of a largely retirement population, nursing homes, funeral parlors, and cemeteries

• Major services sector providing residents throughout the region (some of whom may be coming to work in Berea) with child care, taxis, limited restaurants

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 20

40 Local businesses that could meet demand

1. Global companies (no headquarters)2. Professional services (outsourcing pros)3. Intermediaries (outsourcing warehousing)4. Tourism (lacks critical mass)5. Food and retail (not capturing shopper fair

share)6. Finance (no local insurance, securities brokers)7. Health Care (need for full-service mental-health-

care facilities)

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 21

What If 25% of Berea businesses could meet 25% of local demand?

INPLAN MODEL – 1,398 jobs

BALLE Calculator – 1,435 jobs

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 22

Some Not Possible

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 23

3 Largest sectors

Professional services (317)Wholesale trade (198), and

Tourism (168)•

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 24

Five Clusters – 1,300 jobs• Goods distribution, warehousing, and trucking

(232 direct jobs);• Professional services (247)• Finance, insurance, and real estate (167)• Local food (103)• Tourism (60)

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 27

Advisory Board Constructs 6 Working Groups

• Large businesses• Small businesses• Entrepreneurial ventures– Food Sector– Energy sector– Finance

04/11/2023 Hackbert, P.H. “Rural Response to the Economic Crisis” ABDC, Fort Myers, FL. November 8-10, 2012 28

Next Steps