Stanley Johnson

English

Research Papers in Economics

July 2001
Evidence continues to mount that rural America needs a
new policy approach. Many rural areas continue to fall behind
urban areas even after a period of unprecedented growth in
the national economy. Thus, more and more analysts are con-
cluding that current policy—one that focuses on building sec-
tors and not communities—limits the ability to build effective
partnerships among communities and businesses. Such an
approach continues to result in unfulfilled promises. 
Academics, policymakers, rural analysts, and rural citizens
are thinking about new policies to improve the fortunes of
rural America. To my way of thinking, a new framework for
U.S. rural policy is emerging from a synthesis of the many
options discussed at the Center’s recent rural policy conference.
CENTER FOR THE STUDY OF RURAL AMERICA
Federal Reserve Bank of Kansas City
Focusing on Differences:
A New Approach
for Rural Policy?
Stanley Johnson*
Vice Provost for Extension
Iowa State University
Commentary on the rural economy
The Main Street 
Economist
* This article is based on Mr. Johnson’s concluding remarks at the Center’s 2001
conference, Exploring Policy Options for a New Rural America. The article was
edited by Jason R. Henderson, an economist at the Center.
July Newsletter 2001  8/14/01  9:13 AM  Page 2The Main Street Economist July 2001
In this framework, two major shifts in
policy are required. First, policy should
focus on place rather than on sectors. This
would provide opportunities for economic
development in communities that differenti-
ate themselves. Second, policy should focus
on partnerships, not on individual firms.
Local communities must engage in strategic
behavior partnerships to capture the value
associated with place-based policies.
Why Has Policy Failed?
To fully appreciate the new framework,
it is essential to understand why current
policy has failed to live up to its promises.
Rural areas continue to trail urban areas,
even after huge government transfers. Rural
employment growth is slower than in metro
areas. Personal and business service provi-
sion is more difficult. Rural youth continue
to migrate from rural areas, taking with
them possibilities for future growth.
Current policy has failed to address these
problems by emphasizing individual firms
instead of collective action and by focusing
on sectors instead of places. 
Rural policy has always sought to
provide equal opportunities for individuals.
Equal opportunity is the hallmark of the
Jeffersonian tradition, where not only are all
men, but all places, are created equal. And
even if places were not created equal, policy
systems were designed to make them so.
Over time, such an approach has resulted
in communities that essentially look alike,
thus offering the same opportunities for all
individuals. Sameness has been the measure
of success for policy in rural America. But,
this goal has led to duplicated public invest-
ments amid persistent market failures in
sparsely populated areas.
At the same time, rural policy has
focused on the prosperity of individual
sectors, not on community prosperity.
Rural policy has been preoccupied with
agriculture and manufacturing, the tradi-
tional cornerstones of rural communities.
But today’s Main Streets are more diverse.
Challenges face the local grocery store, the
local gas station, the local doctor, and the
local café, among others. 
For these reasons, industry policies
designed to solve past problems may not
suit today’s realities. Agricultural policy, for
example, was conceived to help farmers in
the 1930s. While policymakers have tried
to keep farm policy current, these policies
have done little to enhance the competitive-
ness of the places in which farmers reside. 
Relocation tax-incentive programs are
another example of policies that have not
been able to encourage rural economic
development in their targeted areas. Yet,
these policies remain, largely because long-
standing interest groups maintain enough
political will to perpetuate subsidies that
have been largely ineffective in improving
the opportunities for economic growth and
development in rural America.
A New Emphasis
on Place Competitiveness
More and more policy experts agree
that rural policy in the 21st century must
center on enhancing the competitiveness
of places. In short, rural America needs a
policy focused on geography, supporting
economic development in defined geo-
graphic areas. Place policy supports a com-
munity’s ability to compete in the new
economy by highlighting and accentuating
community attributes that are attractive to
households and firms. The attributes are
sources of strength from which a commu-
nity provides economic opportunity and
value. Put another way, these strengths
define a place’s competitive advantage. 
Economic theory tells us that value is
derived from uniqueness. Consequently, a
community’s value, and in turn its strength,
emerges when it recognizes its differences
with, not its similarities to, other communi-
ties. Fortunately, no community is just like
another. Communities possess different
landscapes, infrastructures, histories, and
people. These unique features provide the
basic opportunities for economic develop-
ment in all rural areas—and the oppor-
tunities are not the same in every rural
community. Thus, to develop rural oppor-
tunities, a place-based approach encourages
partnerships of communities and businesses
so that rural America can become greater
than the sum of its parts.
By focusing on building community
value, place competitive policy counteracts
the industry policies that have been ineffec-
tive in supporting economic growth. Place
competitive policy calls on rural residents to
question policies that subsidize individual
industries at the expense of the whole com-
munity. Current policies are not necessarily
inconsistent with place policy. But policies
for rural America should support, nourish,
and sustain the competitive uniqueness that
generates opportunity and value for the
community in addition to the industry.
Differentiation
Some communities are endowed with
physical assets, such as mountains, oceans,
rivers, and attractive climates. These attrib-
utes are a source of differentiation. Other
unique features can be created—some more
easily than others. Airports, interstates, and
railroads are features that support economic
development, but attributes such as these
take time to develop. Other attributes can
be developed more quickly. Programs that
build a community’s leadership capabilities
support economic development. Initiatives
that improve the landscape’s condition and
capitalize on other natural endowments can
support community growth. Initiatives that
support special facilities or communitywide
activities, such as settler days, can encourage
community development. All of these
attributes can differentiate communities
and generate value.
Across the Atlantic, our European
colleagues have shown that highlighting
cultural heritage can bring value to commu-
nities. Cultural uniqueness can add value by
- 2 -
Rural policy in the
21st century must center
on enhancing the
competitiveness of places. 
July Newsletter 2001  8/14/01  9:13 AM  Page 3providing a differentiated lifestyle for rural
citizens. Besides developing a unique
economy, the goal is to build a unique
lifestyle to attract businesses and households.
Many European communities have success-
fully marketed themselves in this way. 
Building a unique economy or lifestyle
in a rural community can be difficult. At
times the market fails to recognize the value
of such sources of differentiation. Still, com-
munities can differentiate themselves by ini-
tiating policies that counter specific market
failures. These localized initiatives are slowly
beginning to emerge. Policy initiatives sup-
porting venture capital funds for new start-
ups or expansions are beginning to provide
needed capital where the market has failed.
Business incubator and other support-system
programs seek to develop new entrepreneurs
where the market has failed. Initiatives of
this type are another vehicle for communities
to provide opportunity and create unique
differentiated value for residents.
Local Expression
Crafting a new rural policy based on
place competitiveness requires a clear vision.
The focus of that vision needs to shift from
striving to become like the rest of America to
becoming different. The first step in this
shift is self-identification—recognizing what
is unique and valuable about the commu-
nity. The next step is to articulate the vision
through local expression. 
The wisdom for this visioning process
must stem from the knowledge of the local
people and their culture. Put another way,
this visioning is often made possible through
the social capital of the community. All that
a community can and will be is contained in
the wisdom and culture of the local people.
No one is in a better position to identify the
unique attributes of a community than its
own citizens. And no one can better express
or articulate the uniqueness, the value, and
the vision of the community to the rest of
America. The necessity of local expression
solidifies place-based policy as a grass roots
policy emerging from the local community. 
Once a community identifies its vision,
its economic development strategy must be
carefully tailored to fit that vision. This
results in a policy focused on a single region,
a single community, or a single neighbor-
hood. It calls for a groundswell of activity at
the local level, supported more by block
grants to communities than by traditional
one-size-fits-all state and national approaches. 
Collaborative Action
Local communities, however, cannot
initiate place-based policies on their own.
Communities are bound together through
the migration of peoples and exchange of
goods, services, and ideas. Changes in a
single community can initiate a rippling
effect of changes in neighboring communi-
ties. Thus, the opportunities arising in a
community depend, in part, on the decisions
of other communities. Given the diversity of
communities, participation and support at
the regional, statewide, and national levels
are needed to bind local initiatives together
to generate cohesive place-based policies. 
Because communities are bound together,
place-based policies require communities to
think strategically about growth and develop-
ment. We know the diverse set of resources in
rural areas on which differentiation can be
built yields a host of potential opportunities.
The opportunities are multiplied even further
by community interdependence.
Which opportunities should communi-
ties pursue? The answer lies in collaborative
action. Communities must come together in
a strategic framework, analyzing the unique
features of place that generate value through
differentiation, sifting through the opportuni-
ties while weighing the uncertainties at hand.
Recognizing that communities are bound
together also suggests ways that policy can
highlight potential opportunities for coopera-
tion and collaboration. By partnering, com-
munities can undertake development initia-
tives on the basis of mutual gain. As with busi-
nesses, community partnerships must be
governed by a contract that specifies goals,
roles, responsibilities, and rules for future
action. Rural policy is no exception. However,
in this case the contract is a social contract that
outlines the economic and social goals, roles
and responsibilities, and rules of future action
for both rural America and the rest of
America. Strategic thinking is an avenue that
guides contract development and the structure
of how communities will partner to capture
value from the opportunities offered by rural
policy based on place competitiveness.
Conclusion
A good starting point for a new rural
policy framework is place competitiveness.
Place-based policy is effectively a grass roots
policy, where local leaders, local residents,
and local businesses provide the wisdom and
familiarity with the community needed to
identify the unique attributes of the commu-
nity. But to capture the unique value of place
differentiation, communities must also
behave strategically. Through partnerships,
rural communities can acquire additional
value by blending together the diversified
unique attributes of multiple communities
and rural citizens.
Place competitive policy is different
from past policy. It focuses on building com-
munities in addition to building economic
industries. Instead of enticing communities
to become like each other, it praises diversity.
By focusing rural development on the culti-
vation of unique place attributes, communi-
ties build value for new and existing rural
citizens by providing differentiated lifestyles
and business environments. Finally, place-
based policy recognizes that by forming part-
nerships rural communities and businesses
can provide more opportunities for all, even
if those opportunities are different from one
region to the next.
The Main Street Economist July 2001
- 3 -
Communities must
come together in a
strategic framework.
July Newsletter 2001  8/14/01  9:13 AM  Page 4On the Web: www.kc.frb.org
The Main Street Economist July 2001
Survey of Agricultural Credit Conditions
Federal Reserve Bank of Kansas City
March 31, 2001
Highlights from the first quarter survey1
• District farmland values continued to rise in the first quarter of 2001, although gains were less widespread than in previous quar-
ters. District irrigated and nonirrigated cropland values rose 1.7 and 1.1 percent, respectively. Kansas, Missouri, and Nebraska
posted solid gains in cropland values, while cropland values in Oklahoma and the Mountain states edged up. Rising cattle prices
boosted ranchland values in every district state, causing the district average to rise 2.3 percent in the quarter.
• The district farm commodity price index rose in the first quarter. Prices for wheat, cattle, and hogs rose while corn and soybean prices
fell. Since March, prices for feeder cattle, hogs, soybeans, and corn have gained ground, but fed cattle and wheat prices have slipped. 
• Farm credit conditions weakened somewhat in the first quarter of 2001. The demand for farm loans improved, but loan repayment
rates slowed, and loan renewals or extensions moved up. Although district bankers reported an improvement in fund availability,
they showed concern over the industry’s heavy reliance on government support and a sluggish economy overall.
• Farm interest rates fell in the first quarter. At the end of the quarter, interest rates on new farm loans averaged 9.76 percent for
operating loans, 9.60 percent for feeder cattle loans, 9.54 percent for intermediate-term loans, and 8.94 percent for real estate
loans. Since March, farm interest rates have fallen along with national money market rates.
Note: 273 bankers responded to the first quarter survey.
1 Please refer questions to Kendall McDaniel, associate economist, at 816-881-2291 or kendall.l.mcdaniel@kc.frb.org.
Farm Real Estate Values
March 31, 2001
(Average value per acre by reporting banks)
Nonirrigated Irrigated Ranchland
Kansas $654 $1,096 $397
Missouri 949 1,140 627
Nebraska 892 1,456 354
Oklahoma 517 757 359
Mountain states* 382 1,181 243
Tenth District $702 $1,203 $383
Percent change from:
Last quarter+ 1.65 1.11 2.27
Year ago+ 4.28 4.06 5.70
Market high -16.83 -16.48 -6.66
Market low 77.25 76.88 129.37
* Colorado, New Mexico, and Wyoming combined.
+ Percentage changes are calculated using responses only from
those banks reporting in both the past and the current quarter.
Source: Federal Reserve Bank of Kansas City
Selected Measures of Credit Conditions
at Tenth District Agricultural Banks
Loan Loan Average Loan-to- District
Loan Fund repayment renewals or deposit farm commodity
demand availability rates extensions ratio* price index
(index)+ (index)+ (index)+ (index)+ (percent) (1980=100)
1999
Jan.–Mar. 105 113 56 143 65.7 86.0
Apr.–June 107 107 71 127 66.5 87.8
July–Sept. 103 90 74 126 67.7 87.0
Oct.–Dec. 100 99 86 115 67.7 91.2
2000
Jan.–Mar. 107 95 92 108 67.1 97.9
Apr.–June 112 78 86 108 70.4 97.0
July–Sept. 103 85 84 112 70.8 90.3
Oct.–Dec. 106 90 82 120 70.9 99.8
2001
Jan.–Mar. 111 106 78 123 70.5 102.3
* At end of period.
+ Bankers responded to each item by indicating whether conditions during the current quarter
were higher than, lower than, or the same as in the year-earlier period. The index numbers
are computed by subtracting the percent of bankers that responded “lower” from the
percent that responded “higher” and adding 100.
Source: Federal Reserve Bank of Kansas City
July Newsletter 2001  8/14/01  9:13 AM  Page 1

Focusing on differences : a new approach for rural policy?

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Focusing on differences : a new approach for rural policy?

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