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Strategy for Rural DevelopmentH. A WadsworthPublished online: 16 Sep 2014.

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JOURNAL OF COMMUNITYDEVELOPMENT SOCIETYVol. 1 No.2 Fall 1970

Strategy for Rural Development

H. A. Wadsworth

What can we say about rural areas and why should we be in­terested in developing them? What evidence exists that would causeone to think that a change in our present rural-urban scene is war­ranted and in the best interest of our society? Unless developmentof rural areas is "in the public interest," a discussion of strategybecomes a moot point.

GOALSI can find numerous attempts to clearly define the concept of

community development. Being mostly cast within a discipline, theyaren't particularly helpful in resolving problems which transcendsuch artificial boundaries. The ECQ·P Committee in its Task Forcereport referred to Community Resource Development as a process(4), and enumerated particular dimensions that serve as rathernebulous goals.

Clarity is needed, and hopefully I can sharpen the focus. For myown purposes, I find it quite useful to conceive of rural developmentgoals as broadening the range of choice in employment as well asin private and public services so that rural residents have oppor­tunities comparable to those existing in our urban areas.1 Thus Ican examine any desired opportunity and make some judgment asto its comparability, reasons for the situation, need for change, howit might be changed and whether the end result is worth the effort.In community development we simply substitute the group decisionfor the personal one.

SITUATIONIn terms of population, the flow to urban areas from rural areas

appears to have slowed sufficiently to stabilize the total populationresiding in rural areas. 2 Among urbanized areas, those with sizeablerural populations have grown fastest (8). Such evidence seems to

Presented at the Annual Meeting of the Community Development Society,Athens, Ga., August 3, 1970. Dr. Wadsworth is assistant department head forExension and professor of agricultural economics, Purdue University.

1 The word rural as used in this paper includes all that portion of the UnitedStates outside the Standard Metropolitan Statistical Areas (SMSA's). Within therural area the most difficult problems are found in counties that either do notborder an SMSA or do not have a central city with a population of at least 25,000.

2 Gross figures using dicennial census information may be misleading be­cause of reclassification of rural areas as urban areas.

(10)

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support the other studies concluding that urban growth has occurredprimarily in the urban fringe. Yet people have left rural areas andwill continue as long as it is to their advantage to do so. Thus, theopportunities in urban areas and a lack of opportunities in ruralareas may attract and push rural residents into the urban areas.

The most frustrating condition encountered in rural areas byindividuals is the limited choice in employment. Technological in­novation in the typically production-oriented rural industries, i.e.,agriculture, mining, forestry, and fishing, have reduced labor re­quirements. For those owner-operators who adjusted their farm orother business so as to permit expansion and growth, incomes arerelatively good. For other rural residents in the small towns or opencountry, jobs, if they exist, are of limited variety; therefore, occupa­tional, and hence income, improvement is hardly possible.3

The second limiting factor of rural areas is the kind, quantity,and quality of privately-provided goods and services. In some in­stances, needed goods and services are not available. In other in­stances, the stock of goods or the quality of the services may notmeet the needs of the people.

Some owner-operated businesses that provide a specialized serv­ice with repeat demand can compete; i.e., barbershop, druggist, etc.But the grocery, hardware, appliance, and clothing store ownerssimply can't offer the kinds, quantity or quality of product. Lowvolume often leads to prices higher than those in urban areas, al­though some prices are lower, reflecting the income situation ofthe area.

Most professional people, i.e., doctors, dentists, lawyers, etc.,have not been able to derive satisfactory incomes in such areas.While the disparity in goods and services available between urbanand rural areas is extremely wide, the disparity in goods and servicesutilized is equally as wide. Incomes permitting, many rural residentstravel substantial distances to obtain goods and services desired.Those with lower incomes accept whatever is available locally be­cause their incomes fail to cover the additional cost of travel.

The third limiting factor is the kind, quantity and quality ofpublic-owned or directed services. For instance, local governmentsspend most of their revenue on education. Past evidence indicatesthat rural residents have not attained the grade-level accomplish­ments of their urban counterparts. The disparity was made evengreater by recognition that quality for a given grade level was lowerin rural areas. Recognizing the problem, rural areas in some stateshave moved rapidly to consolidate schools. This change has permit-

3 Pending legislation on welfare paylnents between states and guaranteedannual income could reduce pressure to migrate out of rural areas. Familiesmight decide that the supplemented income provided them a better economicand social life than the uncertainties of residing in an urban environment withwhich they are not familiar.

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ted them to use teachers' talents more fully, and to broaden thecurriculum to meet individual students' needs. Other public servicesshould be similarly scrutinized to see how well they meet the needsof the people.

Municipal utilities frequently lack the ability to provide elec­tricity, water, sewage, and gas service to meet needs at particulartimes. Police must respect certain community lines (i.e., county,town, or city), leading to serious overlap and reduction of quantityand quality of service provided. This situation exemplifies conditionsexisting in the provision of such other public services as hospitals,public health, judicial services, roads and streets, and waste disposal.

The final frustrating blow is that the voter in rural areas haslittle to say about the kind, quantity, or quality of public serviceshe receives. A recent Committee for Economic Development report,"Modernizing Local Government," illustrated this problem by notingthat citizens in Fridley, Minn., were expected to exercise informedelectoral control over 11 separate, superimposed governments (3).However, similar examples can be found in urban areas, caused bya lack of uniformity in functional jurisdictions providing publicservices.

These apparent disadvantages of rural areas have been the basisfor many studies. In summarizing the results, the Advisory Com­mission on Inter-governmental Relations noted, "Urban-rural com­parisons of population growth, educational and health facilities,housing and income levels suggest major disparities for every indexwith rural America consistently in the disadvantaged position" (1).Thus, the rural resident has been left with essentially four choices:

1. Reside in the rural area, remain in relatively low paying jobwith little advancement opportunity, and utilize the kind, quan­tity, and quality of goods and services available.

2. Reside in the rural area, remain either as owner-operator ofrelatively good income producing businesses or in relativelylow-paying job, and commute to urban areas for those goodsand services that are not satisfactorily provided in the placeof residence.

3. Reside in the rural area, commute to urban area where jobswith more pay and advancement potential exist, and secure goodsand services either at place of employment or residence, de­pending upon the relative advantage.

4. Move to urban area, choose among available jobs as to incomeand advancement potential, and select the most desirable com­bination of goods and services available.Given these choices, the development of closer ties to urban

areas was inevitable.

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CHOICE OF STRATEGYIs the movement toward concentration in large urban complexes

a definite improvement over patterns where people are more evenlydistributed over the land resource, probably in smaller clusters?Hirsch, in a special analysis prepared for the Joint Economic Com­mitee stated: "To the best of my knowledge, there is no study thatdefinitely indicates that the social costs of huge urban complexesoutweigh the benefits accrueing to society" (6). Similarly, I canfind no comprehensive analysis that definitely indicates a more dis­persed and less concentrated population is in the best interest ofsociety. Thus, I am driven to assembling fragmentary informationfrom which hopefully I can determine the appropriate direction.

The most frequently criticized aspect of urbanization is the"quality of life" existing in these large agglomerations. While thelevels of income, education, housing, and other items are higherin urban areas, such things as crime, illness, and illegitimacy arealso higher (5). Most of these problems are related to over-crowdingand in the view of one critic, modern cities are the least humanephysical environment known to history.4 Social scientists tend toagree that the individual suffers social and psychological damagefrom urban crowding, but conclusive evidence on the extent of suchdamage under various situations is not available. 5

What, then, are the advantages of a highly concentrated met­ropolitan organization of economic and social activity? The individualand the firm appear to have benefitted in income from a massingof labor, consumers, and services. However, there have not beenany particular cost benefits in terms of the provision of publicservices for communities from 25,000-250,000 population. In areasof over 250,000, there appear to be diseconomies from the organiza­tion in such large units. Some of this is the result of the need formore employees per thousand of the population to provide the serv­ices but some is also due to the higher price of the inputs in pro­viding such services (2). In total, public services are not more costlyin smaller communities because high cost per capita of some servicesis offset by a reduced need for other services.

The case for development of rural areas is founded upon avail­ability of space and an opportunity to provide an environmentsocially and psychologically more constructive for members of so­ciety. Thus, I share a judgment that rural areas should be developed.This judgment can be simply stated as: "Why not? It doesn't look

4 This viewpoint was attributed to Ian L. McHarg in the Commission Report,"Urban and Rural America: Policies for Future Growth," Advisory Commissionon Intergovernmental Relations, WaShington, D.C., 1968, pg. 56.

5 Conclusion expressed by Advisory Commission on Intergovernmental Rela­tions in their report, "Urban and Rural America: Policies for Future Growth,"Washington, D.C., April, 1968, pg. 60.

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like society will be any worse off in income and the quality of lifeshould be better."

COMPONENTS OF A STRATEGYThe basic element of any strategy for rural areas must recognize

that we are trying to alter an individual decision so that it is tothe rural dweller's advantage to remain in rural areas. This canonly be done if the range of choice in employment and in privateand public services becomes at least comparable to those now avail­able in urban complexes. Policies for encouraging development ofrural areas can be broadly classified into four groups:1. No change needed, present policies are internally self-correcting.2. Develop the capability of the individual so that his decisions are

in the best interests of both himself and society.3. Provide business with sufficient incentives so that it becomes to

their advantage to locate future expansions in rural areas.4. Adopt a national plan for regulating size and location of urban

complexes.

CURRENT POLICIESThe combined effect of all policies up to now has been an ever

growing population and concentration of economic activity in urbanareas and the increasingly frustrating conditions in rural areas.Continuation of present policies, whether at local, state or nationallevels, is likely to reinforce these trends and produce an even moreurbanized nation (7). A strategy for developing rural areas mustconcentrate on improving the relative advantage of rural areas asa place to work and live. Thus policies dealing with employmentopportunities would be of highest priority, followed by those pol­icies that influence provision of private and public services or in­crease the movement of people between rural and urban areas.

EMPLOYMENT POLICIESRural areas lost their position as major employers of the labor

force with the advent of rapid technological innovation in the main­stays of rural life: farming, forestry, and mining. Other jobs didnot develop in rural areas rapidly enough to employ those releasedfrom such occupations, to say nothing of the natural increase whichthe rural population added to the labor force. One might have ex­pected that the availability of large volumes of labor would haveattracted industrialists to the rural area if the price of labor hadbeen able to find its own level. However, minimum wage laws andunion contracts established a floor for industrial wage rates. Giventhis floor, the firm could not offset with lower wage rates someof the higher costs in rural areas that result from internalizingsome externalities. Therefore, it was to the firm's advantage to re­main in the urban area. This inability of industry to utilize a largesupply of lower-priced labor destroyed the one competitive advan-

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tage possessed by rural areas that could have induced employmentgrowth.

If private industry is to provide the employment opportunitiesthat will eliminate the necessity of outmigration to attain occupa­tional and income advancement, then a very broad group of in­dustries need to be attracted to the rural areas. There are manypolicy tools that might be applied: direct subsidy, income taxthrough change in rate structure, accelerated capital depreciation,training allowances, and increased deductibility of certain expenses,to name a few.

The direct subsidy might be either the easiest or the most dif­ficult policy tool depending upon what was established as the base.Certainly, employment is the key and if the subsidy were relatedto the number of new jobs created for residents of the area it mightbe relatively simple. However, the level of subsidy should probablybe variable, reflecting the severity of the employment situation asdetermined by appropriate criteria. The subsidy could be grantedto both new industries and existing employers who created new jobsin designated areas.

The subsidy could be applied as the difference between an actualand a target rate of return in investment. Administratively, thismight be more complex than an employment subsidy in terms ofaccounting and inventory procedures necessary to produce the de­sired information. The incentive for efficient management and oper­ation would not be as great. Many multi-plant companies might ex­perience real difficulty in preparing a satisfactory rate of returnstatement for each of their locations.

The income tax structure is another possibility, in that specialprivileges could be given to firms at particular locations. This isnot an untried alternative since special concessions have been givenin order to encourage industry to adopt certain practices (i.e. waterand air pollution) or to increase investment (i.e. accelerated depre­ciation) .

One of the simplest arrangements might be to establish a vari­able rate to be applied against taxable income in proportion toseverity of the employment problem at particular locations. For largecompanies, some distinction would have to be made between loca­tions inside or outside the target area. Consideration would alsohave to be given to extending tax benefits to current employers inthe area.

Essentially the same result might be achieved by altering deduct­ibility of certain expenses.6 Accelerated capital depreciation allow­ances for both plant and equipment could reduce taxable income

6 Most of these features were included in S 2134, "The Rural Job Develop­ment Act of 1967" as introduced by Senator Pearson (Kansas) on July 21, 1967.

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and risk involved in recovering the investment. Increasing the de­ductibility of labor expenses might encourage development of morejobs. Ideally, this should compensate for the added cost of produc­tion due to the lower productivity of the labor. Since this wouldbe extremely difficult to establish, applying a certain multiple tolabor costs, either in total or for a particular portion of the laborforce is probably more workable. This could be coupled with train­ing allowances permitted in instances where employees either didnot possess skills readily transferable to new jobs, or were un­employed and training was necessary to insllre employment.

If altering present population patterns is in the public interest,then efforts to create employment in rural areas must come -fromthe federal government. Selectivity and sensitivity to rural condi­tions must be built into such a program and only a national pro­gram can do this. State and local communities who have pursuedindustrialization vigorollsly have done so in their own self interest. 7

In addition, some of the incentives used created tax burdens whichmany communities found difficult to carry.

The federal government could affect rural development by direct­ing their purchases or contracts to¥lard companies in rural areas orby location of governmental offices or laboratories in such areas.However, the history of such "company towns" has not really beenone that most would like to duplicate.

Much of the technology that would reduce locational advan­tages of particular places is already in existence. Time and placeare important considerations but transportation and communicationdevelopments mean that operations can be managed as expedientlyand efficiently ,vhen scattered over a large area as those located onopposite sides of a large metropolis. The extension of such technologyto rural areas could become a major policy for the federal gov­ernment.

POLICIES FOR PRIVATE GoODS AND SERVICESMuch of the problem with respect to kinds and qualities of pri­

vate goods and services would be resolved if policies relating to em­ployment were successful. Much of the difficulty in obtaining goodsand services in rural areas is essentially the result of a lack of suf­ficient demand to permit business to operate at a scale that pro­duces a satisfactory return on investment while maintaining a com­petitive price to the cOnstlmer. Generating employment could addnew jobs, increasing both the number of people working and gross

7 Incentives were offered through statewide development credit corporations,local development credit corporations, state Industrial Finance Authority, localindustrial bond financing and tax concessions. "Industrial Incentive Programs,"Department of Resource Development, State of Wisconsin, Madison, 1965.

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income, thus leading to an increase in effective demand for goodsand services needed by both business and consumers.

The prospects for any substantial improvement in goods andservices available to rural people without increases in local demandare not particularly good. In most instances access to these serviceswould be improved only through closer ties with an urban area viatransportation and communication improvement. The transportationand communication technologies which reduce the disadvantages forbusiness also could reduce the effective price of private goods andservices. This would permit those with lower incomes more oppor­tunity to secure goods and services of comparable quality.

There is also one other means for improving services in a ruralarea. This requires developing a regional concept of a business andsocial community. Consumers thus have expanded choices and busi­nesses can compete for the business of an enlarged group of con­sumers. While there are many subscribers to the regional approach,actual implementation becomes difficult with the realization of whatis involved; i.e., increased investment in highways, expanding tollfree telephone area, loss of local identity, closure of businesses thatcannot compete once their local monopoly is destroyed, etc. Fre­quently, local governments must pave the way through mergingwith other governments or establishing area-wide services on afunctional basis.

POLICIES FOR PUBLIC SERVICESIn some respects, a discussion of public services might be in­

cluded under industrialization. One of the frequent criticisms madeagainst rural areas is the kind, amount, and quality of public serv­ices available. In general, provision of services by a public bodyhas been a means to meet the needs of people collectively more satis­factorily than such needs could be met individually. However, localcontrol value is a sufficiently strong value to impede institutionalcharges necessary for provision of the desired services. The resultis that local units cannot provide desired service at an acceptablecost; therefore, the acceptable cost dictates some lesser kind, amount,and quality of local service.

The choice here is somewhat different than for private services.Most public functions are provided in very specific areas. If the serv­ice is not satisfactory, you do not have the choice of commutingto some nearby urban area to obtain the service. However, youmay privately provide it at your own cost and still share in the pub­lic costs. Thus, the approach to public services seems to be regional­ization so that governmental units or functions are combined forthe area.

Earlier references to the costs of providing public servicesseemed to indicate that there were few, if any, economies to be

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realized for urban areas of 25,000 to 250,000. However, there wasno reference to quality of service provided. Can we assume thesame quality of service across this range? I doubt it, for I franklysuspect a consensus could be established that would indicate a directrelationship between quality and size of community. I would alsoexpect a similar situation in rural areas. With the exception ofutilities, I would expect the combining of functions over large areaswith relatively low densities to improve the quality of the servicewith little or no change in costs. Increases in cost of some serviceswould be offset by reduction in need for other services. If this werenot the case, then there would be no point in combining either gov­ernmental units or specific functions.

In most instances, however, rural areas lack the financial re­sources to reestablish the services on a basis comparable to urbanareas. Federal and state aid to local governments has been distrib­uted on a per capita basis. Use of this cost per capita or personaffected criteria has discriminated against funding of needed publicfacilities in rural areas due to higher per capita costs in areas oflow population density. As a result, the stock of public resourceshas declined to such a point that local areas, even if they combinedforces, would lack the financial ability to replace public facilitiesand make provisions for future growth. Without this ability, it willbe extremely difficult to make communities sufficiently attractiveto encourage industrialization and residence.

Therefore, capital must be made available for development ofneeded public facilities. Fund availability must not be based uponpresent population, but upon the desired direction of future growth.These funds might be allocated federally on a project-by-project basisas either grants or loans. Another alternative would be to providethese funds to the states, giving them the authority to select themost appropriate uses for such funds within the state.

The most important point is that the magnitude of the fund­ing needs be recognized. If present allocation for projects, other thaninterstate highways, follow their present course, it will probablybe impossible to create a rural environment sufficiently attractivefor business to desire such locations in the future.

DIRECTED POLICYThe policies I have discussed up to now assume that we prefer

that individuals and businesses retain the ability to choose theirdesired location. The object, then, of policy is to so construct thechoices that the decisions made are those determined to be insociety's interest.

However, a more centrally directed policy might include develop­ment of a national plan for growth in the United States. This planwould indicate the approximate sizes of population centers and pro-

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vide lImitation for growth beyond these centers' thr<:high the ~s'ta~-,'lishment of green belts and appropriate ordinances. It' would indi­cate new areas in which growth would be permitted in order to \relieve population pressures, once areas had reached maximum sizepermitted in the plan. This might include the development of newtowns or of new communities.

New towns are essentially a European experience. These havebeen planned communities, established in somewhat remote areasand developed from the ground up. The planning has attempted tomake these communities rather self sufficient, anticipating that 90per cent of all the residents would find employment within the par­ticular community. As a component part of the comprehensive plan,industry has been encouraged to move to such areas with an at­tempt at diversity that would encourage balanced growth.

New communities are found mostly in the United States. Essen­tially, these are communities, developed on the urban fringe, thathave sought to provide the amenities of a well-planned communityto their residents. However, most new communities have dependedupon a nearby urban area as the major source of employment. Thesehave not been particularly heterogeneous communities in the sensethat a wide diversity of life styles were found or encouraged.

It seems that there might be some possibility for these twoideas to merge in rural areas of the United States. Many existingrural communities C011ld form the nucleus of a new town. Whilein most cases rennovation of most public facilities and utilities wouldbe required, there is a substantial amount of usable private andpublic capital that would provide a base for future growth.

SUMMARYSlightly over 100 years ago, Congress passed legislation to en­

courage settling of the land. In order for the country to control itsvast land base, it was determined that private ownership and resi­dence upon these lands was in the public interest. Thus, programswere instituted and the goal was reached many years ago. No newpolicy has been forthcoming which would indicate national goalsas to how the land should be settled.

Currently, uncertainty characterizes our domestic policy onpopulation growth and distribution. This makes program formula­tion extremely difficult, because the goal is unspecified and nomeans-end relationship is apparent. If one were to assume that pres­ent national trends in population and income distribution are theappropriate goals, then emphasis on solving urban problems shouldprobably be intensified. If these are not the national goals, thenpresent programs would seem to be stop-gap measures whose onlyintent is to ameliorate the most distressing conditions.

Establishment of a policy on settlement would have to indicatethe degree of concentration or dispersion of the population that

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would be compatible with income distribution and quality of lifegoals. It would require development of economic and social criteriawhich could establish the sizes of communities most conducive toachievement of these goals.

The elements included in my analysis lead me to believe that amore dispersed population is in the public interest. Thus, influencingthe location of employment opportunities becolnes the basic policyfor development of rural areas. Unless the bulk of new employmentopportunities are located in rural areas, it will be virtually impos­sible to stem rural out-migration or encourage residency of a majorportion of the population increase attributable to urban areas.

If we use national policies that encourage deployment of popula­tion and income, then we will be able to capitalize on the quality oflife potential that rural areas possess.

REFERENCES1. Advisory Commission on Intergovernmental Relations, "Urban and Rural

America, Policies for Future Growth," A Commission Report, Washington,D.C., April, 1968.

2. Advisory Commission of Intergovernmental Relations, "Urban and RuralAmerica: Policies for Future Growth," pp. 47-49, Ope cit.

3. Committee for Economic Development, "Modernizing Local Government," astatement on National Policy by the Research and Policy Committee, NewYork, July, 1966.

4. Extension Committee on Policy, "Community Resource Development, A Reportprepared by a Special Task Force for the Subcommittee on Comlnunity andResource Development and Public Affairs," U. S. Department of Agriculture,Washington, D.C., 1968.

5. Hall, Edward T., "The Hidden Dimension in Urban America: Goal and Prob­lems," Subcommittee on Urban Affairs of the Joint Economic Committee,90th Congress, 1st Session, Washington, D.C., August, 1967.

6. Hirsch, Werner Z., "Community Size: Forces, Implications and Solutions,"Urban America: Goals and Problems, Ope cit.

7. National Goals Research Staff, "Toward Balanced Growth: Quantity withQuality," a report to the President, July, 1970.

8. U.S. Department of Agriculture, "U.S. Population Mobility and Distribution,Charts on Recent Trends," ERS-436, Economic Research Service, December,1969.

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