Katharine Sheaff

Mark Drabenstott

English

Research Papers in Economics

November 2000
Rural challenges around the world are remarkably similar.
Agriculture and other traditional economic bases are no longer
broad enough to sustain rural growth. Young people are leaving
their rural homes, raising serious doubts about the future of
Main Streets everywhere. And rural communities worldwide
are struggling to provide the infrastructure, services, work
force, and quality of life needed to attract new businesses. 
New approaches to meet these rural challenges are spring-
ing up around the globe. Some policy innovations offer unique
approaches to accomplish a similar goal—to align rural policy
governance with a whole new rural economic landscape. 
In this issue of The Main Street Economist we explore
three case studies of policy innovations in Hungary, England,
and Spain. While these specific rural policy initiatives may not
be the answer for rural America’s challenges, they offer a
glimpse of how rural America in the new century may rethink
the way it designs and implements rural policy.1
CENTER FOR THE STUDY OF RURAL AMERICA
Federal Reserve Bank of Kansas City
Rural Policy Lessons
from Abroad
Mark Drabenstott Katharine Sheaff
Vice President & Director Research Associate
Center for the Study of Rural America
Commentary on the rural economy
The Main Street 
Economist
November Newsletter 2000  12/8/00  11:18 AM  Page 2The Main Street Economist November 2000
Innovations in rural policy governance
around the world fall into two main cate-
gories. Hungary and the United Kingdom
have created new policy regions by literally
realigning policy with a new economic
landscape. Spain, on the other hand, has
assembled new policy teams across existing
regions to create new governing partner-
ships while leaving administrative borders
alone. It is too soon to rigorously evaluate
either of these types of policy innovations.
Yet early indications suggest that most
rural communities in these countries
believe the innovations can boost their
economic outlook.
Hungary’s new policy regions
Hungary continues to make the tran-
sition to a market economy after its emer-
gence from Communist rule. One concern
during this transition period has been
improving economic performance in the
nation’s key rural regions, where more
than a third of the country’s people live.
Some of Hungary’s rural areas suffer from
high unemployment rates and incomes
that lag well behind the nation’s cities—
and the rest of Europe for that matter. 
During the transition period,
Hungary quickly learned that many of its
rural governments were ill-equipped to
address the nation’s rural economic chal-
lenges. Many of the nation’s 19 counties
had weak finances and many of its 3,131
towns and villages were fiscally inefficient.
Many also lacked the power to form new
economic plans, such as funding new
infrastructure through taxes. 
To improve economic performance
throughout the country, in the late 1990s
Hungary implemented a new focus on
regional, or territorial, development by cre-
ating seven new planning regions (Figure
1). The effort was aimed at improving eco-
nomic growth in the regions, not rural
areas per se. Nevertheless, the program has
important effects on rural Hungary. The
new regional focus has also been an impor-
tant part of helping the nation make new
investments and shift its balance of trade
from the former Soviet Union to the West.
As part of the new
program, the govern-
ment committed to col-
lecting and tracking
economic information
on the seven new
regions. It also created
the National Regional
Development Council
(NRDC) and made this
body responsible for
regional development
policy. The council was
charged with comment-
ing on the principles of
the regional policies and
with coordinating sec-
toral aid for regional development.
Reporting to the NRDC are seven Regional
Development Councils, one for each of the
new regions. Each council has a working
executive body and provides a permanent
staff for regional economic development
efforts. In forming united development
plans, the process requires that the views
of small communities are heard.
From a rural perspective, an impor-
tant task of the seven developmental
regions is to administer a set of rural
development programs that accompany
Hungary’s accession to the European
Union. These programs will help develop
infrastructure, diversify employment, and
modernize agriculture. 
Hungary’s seven regions have just
begun over the past year or two to imple-
ment their new policies. While it is too
soon to tell if this new way of governing
territorial development will improve
Hungary’s rural economy, one important
outcome is clear: The new regions are
already represented in Brussels. This repre-
sentation allows them to apply directly for
EU development funds and encourages
new foreign investment in rural Hungary. 
New regions in England
Like Hungary, England has redrawn
its rural policy map, creating several new
regions charged with boosting rural eco-
nomic growth. Historically, the United
Kingdom was regarded as perhaps the
most centralized government in Europe.
In recent years, however, the UK has
undertaken a dramatic process of devolu-
tion. Scotland has been granted a demo-
cratically elected parliament, Wales a
national assembly, and Northern Ireland
an assembly. Within England, devolution
extended still further as Parliament created
regions and regional development agencies
to work for rural and urban regeneration
in their areas. 
In part, the new policy regions were
formed to address deep concerns about rural
economic vitality. While England is densely
populated, 11 percent of its people still live
in rural places. Many of these people are
producers who get most of their income
from off-farm activities. But in much of the
English countryside, there are significant
concerns that the sluggish rural economy
may be based too narrowly on farming to
sustain viable rural towns and villages. 
To address these concerns, in 1999
Parliament created eight Regional Devel-
opment Agencies, or RDAs (Figure 2).2
Each agency serves a region made up of
several counties, both rural and urban, in
an attempt to overcome the ageless power
struggle between political leaders in towns
and the countryside. The hope was that the
regions would bring greater coherence to
national economic programs and help coor-
dinate regional economic development. 
- 2 -
Figure 1
Hungary’s Economic Regions
November Newsletter 2000  12/8/00  11:18 AM  Page 3The charge of the RDAs is multifac-
eted: to further economic development and
regeneration; to promote business efficiency,
investment, and competitiveness; to
promote job formation and boost worker
skills; to encourage new investment; and to
contribute to sustainable development.
While government offices will continue to
have many responsibilities in each region,
the RDAs are responsible for crafting and
implementing economic plans in the region.
Local elected leaders play an important role
in the work of the RDAs. Four of each
board’s 13 members are drawn from local
government, while at least one board
member is one who can contribute a strong
rural perspective. 
Since their creation, the RDAs have
forged new partnerships and strengthened
existing ones to foster economic develop-
ment in their communities. The RDAs focus
on encouraging development close to home,
but they also seek new economic ties with
Europe. For example, the South East
England Development Agency has an office
in Brussels and follows a strategy document
regarding the “European Strategy for South
East England.” Furthermore, the
British regions will begin taking part
in new elections to the European
Parliament in 2001. Thus, while
England is not part of the euro zone,
its regions seem likely to benefit from
future EU economic development
initiatives. 
As in Hungary, it is too soon to
tell whether England’s new policy will
make a significant difference in the
economies of rural areas. But rural
leaders in the country appear enthusi-
astic about the new policy process.
New rural
partnerships in Spain
Over the past decade, Spain has
enjoyed strong economic gains
nationwide while many of its rural
regions have struggled. With rural
areas accounting for nearly a quarter
of Spain’s population, boosting rural
economies has become a major
national priority. 
Spain’s approach to creating new rural
policy is unique. Rather than redrawing its
policy map, Spain encourages a new
“bottom-up” approach to creating economic
partnerships. Perhaps the best example of
this bottom-up approach can be seen along
the border between the provinces of
Valencia and Alicante, a
rural region where manu-
facturing—mostly cloth-
ing and textiles—forms
the economic backbone of
the area. 
Many of the small
rural towns in the
Valencia-Alicante region
have the potential for
stronger economies, but
they lack the infrastruc-
ture to connect their
industries with European
and global markets. To
overcome the twin chal-
lenges of size and dis-
tance, the towns have
launched a consortium of
new governing bodies, which have begun to
create a critical mass of interest and
resources from throughout the region. One
new governing body was created to assem-
ble an economic development plan for the
region, as well as to manage EU grants.
Another governing body was created to
coordinate public services like waste collec-
tion and sewer systems. 
To oversee the new governing bodies,
in 1999 the municipalities of the region
came together to form a new governing dis-
trict, the Comarcas Centrales Valencianas
(CCV). The CCV district was designed
with three goals in mind: to support social
cohesion, encourage balanced and sustain-
able growth, and represent the region’s
interest in national legislation.
While the CCV district is not an offi-
cial “region” in the sense that it does not
correspond to boundaries drawn by the
government of Spain, it does represent
groups of municipalities that have coalesced
around common economic strengths
(Figure 3).
Since its formation, the CCV district
appears to have scored some gains. Still,
challenges remain. The consortium has pro-
vided a welcome source of synergy to bring
the region’s many small rural towns
together around some common economic
development goals. Most efforts have gone
The Main Street Economist November 2000
- 3 -
Figure 2
England’s Areas of
Regional Development
Figure 3
A New Regional Partnership
in Southeastern Spain
CCV provinces
November Newsletter 2000  12/8/00  11:18 AM  Page 4into planning new economic development
projects, and some of these have even
received financial support from the EU.
But questions linger about how best to
improve transportation infrastructure,
enhance access to technology, and preserve
the environmental quality of the region.
And it is unclear how these functional
regions may be able to operate going
forward without any administrative
authority to raise taxes. 
Conclusions
Most rural regions around the world
are looking for new sources of economic
growth—sources beyond agriculture and
other traditional industries. The outmigra-
tion of rural young people raises serious
questions about the future of many rural
places. And rural communities find it dif-
ficult to assemble the critical mass of infra-
structure, services, work force, and quality
of life to attract new businesses.
To meet the triple threat posed by
these trends, new approaches to rural
policy are springing up around the globe.
One central theme in these innovations
represents a fundamental shift in policy
governance: aligning the design and imple-
mentation of rural policy with a new rural
economic landscape. In Hungary and
England, policymakers have literally
redrawn the map. In Spain, the map is the
same but the policy partnerships are new. 
The United States shares many of
these rural economic challenges, but
our governance of rural policy has not
changed. Rural policy innovations in the
rest of the world may not be the answer
for rural America’s challenges, but they do
offer a sneak preview of how rural America
may rethink its approach to rural eco-
nomic policy.
1 The Territorial Reviews Division of the Organization
for Economic Cooperation and Development
(OECD) provides a unique forum for tracking and
analyzing innovations in rural policy around the
world. This group provided the Center with infor-
mation on recent rural policy developments in the
countries discussed in this article.
2 The ninth region, in London, was established in 2000.
The Main Street Economist November 2000
- 4 -
B EYOND A GRICULTURE
New Policies for Rural America
Conference Proceedings
To help improve the economic outlook for rural America, the Center host-
ed is first major conference in April of this year. More than 250 rural leaders
from throughout the nation and beyond gathered in Kansas City to discuss rural
America’s future, its challenges, and policies to meet those challenges.
Conference participants represented all regions of rural America, five foreign
nations, and many walks of life—business, agriculture, banking, universities, and
public officials at the federal, state, and local levels.
For a copy of the conference proceedings, or for a copy of proceedings of
past conferences on rural issues sponsored by the Federal Reserve Bank of Kansas
City, please visit our Web site at www.kc.frb.org or write us at:
Public Affairs Department
Federal Reserve Bank of Kansas City
925 Grand Boulevard
Kansas City, Missouri 64198
November Newsletter 2000  12/8/00  11:17 AM  Page 1

Rural policy lessons from abroad

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Rural policy lessons from abroad

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