PLANNING DOES NOT always start with a master plan for land use or resource conservation. Once community concerns are identified, the first step may be to deal with economic decline or crisis by planning for development. Because the Rural Environmental Planning process encompasses the entire ecosystem, it emphasizes economic development in balance with sustainable use of the land, the water, and the natural resource base and that enhances the human and cultural resources of a community. REP advocates adding economic value to natural resources where possible and creating a flourishing local economy where benefits flow equitably to the residents.
Many years ago this description of economic development would have been considered romantic or impractical. By the end of the 1980s, however, deterioration and underdevelopment of rural communities caused a reevaluation of development strategies that waste environments and do not equitably benefit rural residents.
In the 1980s some older resort communities began to assess the hidden costs of tourism. A Denver Post article of March 19, 1988, described the mounting problems of Vail and Aspen, Colorado. These communities suffered “increased crime, transient labor and fracturing ... into haves and have nots. Workers paid low wages for changing beds and washing dishes can’t afford to live in towns transformed from sleepy mountain villages into condo-and-commercial centers with inflated prices.” While recreational resorts may have increased jobs in some rural areas, the jobs were often seasonal and low paying and usually did not provide career development for workers. Many better-paying jobs were filled by newcomers such as management personnel transferred in by the corporate owner. Some newcomers had sources of investment that enabled them to start new businesses and cash in on the growing economy. Long-term residents without access to resources often got stuck at the bottom of the economic ladder. Ironically, as these economics grew, the gap between the haves and the have-nots also grew.
This chapter looks more fully at one of the economic development models discussed in chapter 12, self-reliance, and extends it to incorporate certain changes that took place in the 1980s—changes in economic conditions, in federal and state agency budgets and staffing, and in opportunities and tactics for rural communities. Here we propose an alternative strategy: a holistic approach to economic development in which culture, ecology, and the inanimate components of an environment are regarded as mutually interdependent. This chapter describes the strategy to achieve this objective by identifying four elements that can guide the process and by presenting case examples that show the application of one or more of these elements in dif ferent geographic and cultural settings.
A sustainable local economy is one that maintains mutually beneficial and equitable relationships internally, that is, within the community, and externally, with the larger society and economy. A healthy rural economy is able to change and renew itself through expansion and through spinoff activities based on existing resources and production. As the economy becomes more sustainable, investment funds increase along with local control of technology.
Communities weighing alternatives for economic development can learn from the experiences of other rural areas and regions that have experimented with traditional development approaches. Experience over the last four decades has led to a distinction between economic growth strategies and economic development strategies.
Economic growth is not the same as economic development. Economic growth may increase income while increasing the dependence of the economy on outside capital and technology; it may increase jobs without raising the level of income; it may utilize resources more efficiently while depleting or degrading them to the point where the local economy eventually begins to decline. Economic growth does not ensure a developing economy. A developing economy, on the other hand, is characterized by increased productivity and the creation and expansion of a more diverse mix of businesses and economic activities for both internal and external markets.
Paul Pryde describes the characteristics of a developed economy:
The building blocks for sustainable economic development in any community are its natural, human, and cultural resources. Careful management of these resources helps to increase local production of goods and services, replenish renewable resources, strengthen unique cultures, and broaden economic opportunity. The value of existing resources rises and goods and services expand. As the capacity to serve diversified local, regional, and export markets expands, so does the circulation of money.
There is no single blueprint for sustainable economic development. Strategies allow wide choices, including the recruitment of manufacturing and service firms, the extraction or harvesting of resources, and tourism. A given strategy is selected for its potential to conserve, enhance, or replenish resources (including cultural resources), increase self-reliance, and achieve economic equity. Many rural communities and regions that have suffered economic crisis or dislocation are becoming increasingly proactive in deciding their economic future. In 1988 the Wall Street Journal reported the following:
A radical change in thinking is beginning to ripple across much of rural America. Towns and counties that once based their hopes for prosperity—or survival—on roping in outside industries are beginning to see that the party’s over.
Now, instead of looking outward, they are undertaking a long, painful struggle to develop their own industries, job by job.... If this effort is successful, the countryside eventually will have a more diverse economic landscape.2
Because each rural region is unique, development strategies differ. The distinctive attributes and comparative advantages of rural communities provide starting points for people to gain fresh perspective on the kinds of goods and services that could be produced to create unique economic roles for their own communities.
Rural communities have what most people value—a cleaner environment, scenic vistas, distinctive ethnic cultures and life-styles, folk arts and folkways—and herein lies the opportunity for rural residents to improve their economies. Exploiting the differences between rural and urban communities means applying rural standards to growth, land use, commercial zoning, and conservation. It also means applying rural standards to the selection of economic development strategies. For example, when a community adopts a plan advocating more beds for tourists, the plan may recommend the development of a network of bed and breakfasts rather than supporting the recruitment of a national motel chain. If recreational tourism is part of an adopted plan, one strategy could be to implement low-impact recreational development, leaving scenic and wild areas undisturbed rather than encouraging large-scale resorts and condominiums with their accompanying commercial centers.
Many rural communities and regions are the cultural wellsprings for various ethnic groups in the United States. Sustaining these cultures and their values is important to descendants who have moved elsewhere yet want to stay connected to their roots. Distinctive cultures are a rich national resource that can be preserved with development strategies blending the rest of traditional practices with modern production and marketing methods. Cultural diversity presents new economic opportunities in rural areas through the production and exporting of regional or ethnic foods, arts and crafts, and cultural events.
Creating an economic development strategy with the potential to conserve resources, increase local productivity, and equitably distribute the benefits is an art as well as a science. The science lies in inventorying basic building materials and designing the appropriate strategy. The art involves creatively incorporating the elements of sustainable economic development in the design. These elements are as follows:
These four elements are not only key components in a development strategy, they are also an evaluation tool—a way to measure a proposed strategy or to assess an economy moving toward sustainability.
For a community to direct its own economy and manage that economy’s relationship to the larger economy, residents must acquire the skills not only of business management and marketing but also of collaborative planning and program development.
Acquiring collaborative planning and program development skills is not a short-term process. To begin with, economic development seminars, business creation workshops, university studio projects, and leadership training programs can be starting points to get the community’s attention and attract local leaders. Sustaining and expanding community leadership requires following up these programs with practical, results-oriented projects. As projects demonstrate successes involving smaller problems, leadership and participation will grow to tackle larger problems that require more long-term solutions. Sustainable economic development depends on residents empowering themselves with the skills to control the development process. Similarly, developing people to generate increased and new economic activities is an equally long-term proposition.
Acquiring the skills of entrepreneurship, product design, marketing, and production technologies requires that employee training programs be redesigned and management and worker relationships restructured. Whether a business manufactures jewelry or packages tours, collaboration between managers and workers on product design, quality control, and marketing often results in new ideas that diversify the business or can be spun off to create a new business. According to Al Shapero, “more companies are generated out of small businesses than out of large ones.... Small companies beget more companies, and company formations trigger more company formations. There is often an epidemic quality about the process.”3
New approaches to developing entrepreneurial skills go beyond traditional programs that teach the mechanics of a business plan. Some business development programs are experimenting with expanding such skills by getting new business owners in touch with more experienced entrepreneurs or by identifying mentors who can work one on one with an owner during the critical start-up and expansion stages. This results in fewer bankruptcies and better equips entrepreneurs to survive economic challenge and change.
Implementing sustainable development also involves local educational systems. While schools in some rural regions offer technical and vocational courses, students often leave the region for urban centers where job opportunities requiring their skills are available. Precisely because of the limited resources of many rural school systems, the opportunity exists for enriching educational programs with work-based experience or in-school enterprises. In some rural communities high schools are developing small businesses as part of the curriculum so that students graduate with practical experience in management and marketing. This helps to prepare students for real business opportunities in their communities. If training includes entrepreneurial skills, young people are prepared to advance in local businesses and to create new or spin-off companies.
The challenge of including less skilled or disadvantaged residents in an economic development strategy can sometimes be met with existing job training programs. However, to develop workers’ capabilities beyond simple tasks, follow-up programs with incentives to acquire general-education degrees or to pursue postsecondary degrees will have to be put in place. Pay incentives, awards, and other forms of recognition are a part of such programs. Some businesses encourage workers to go on to technical school or community college by assisting with tuition.
Universities and government agencies may have experienced staff who can help to design innovative educational and training programs. As the following case shows, however, communities should also look to successful small business owners, cooperatives, worker-owned enterprises, and community development corporations for assistance in meeting human development needs and transferring skills.
South Street Square opened in December 1985 as a festival marketplace designed to accommodate twenty-four small businesses in retailing and services. 4 Located in a renovated YMCA facility, the incubator project offers space, security, and building maintenance for all tenant businesses. It also provides management assistance and training services in marketing, inventory control, publicity, and public information, and gives referrals to specialized professional services.
Greenville is located in the impoverished delta region of Mississippi, where public assistance payments serve as the major source of family income in fourteen of the surrounding fifteen counties. In 1967 residents of the area formed a multipurpose community development corporation, the Mississippi Action for Community Education (MACE). The corporation eventually attracted some twenty-six thousand members in the fifteen counties.
In 1983 the membership initiated planning for the incubator space in Greenville, which was to assist businesses owned by minority women willing to hire and train other low-income women. To identify potential owners and tenants, MACE sponsored a training and technical assistance program in the spring of 1985 for thirty-five enrollees, covering topics in business planning, accounting, and legal services. More than half of the initial trainees went on to receive individualized assistance when preparing loan applications and business packages.
A few months later MACE opened the South Street Square facility and, aided by private foundations, established a $150,000 loan fund for use as venture capital by the new tenants at the facility. Initial loans ranged from $7,500 to $20,000. The building itself had been renovated with grant funds from the Economic Development Administration of the U.S. Department of Commerce. Two years later businesses successfully operating at South Street Square included a clothing alteration shop, beauty salon, insurance company, collection service, fashion apparel store, and T-shirt shop, all of which had relocated from homes or other locations with limited space, services, or both. Nine new businesses operating at the square include a jewelry store, a formal-wear rental shop, a florist, two food stores, a bakery, an import shop, a hosiery store, and a specialty items shop.
While the incubator space and the loan fund were important to the formation of these businesses, ongoing education and training were critical to the success of the project. South Street demonstrates that the development of human capital is an essential component of successful enterprise creation and expansion.
Some indigenous rural communities resist development of their scenic and natural resources unless traditional ceremonial, hunting, timbering, grazing, and fishing grounds can be maintained. By contrast, many newer rural communities were established for the sole purpose of mining, harvesting, or the recreational use of local resources. These communities resist conservation efforts if the result is a loss of jobs. In other communities where timbering, mining, or manufacturing has ravaged the environment, the challenge is to diversify the economy while working to contain environmental damage. The creation of new jobs through more environmentally sound businesses can defuse arguments that pit economic progress against conservation.
Strategies to expand local control of resources do not assume that such control automatically results in sustainable and conservation-minded usage. What is assumed, however, is that the local community has a vested interest in the environmentally sound development of existing resources. Planning must ensure that whoever wants to develop and whoever wants to conserve resources adopt shared goals recognizing constraints and opportunities in the environment.
Sound, objective knowledge of such constraints and opportunities must inform the process. If rural communities are to be the trustees of their resources, residents need to learn about environmental issues that can be complex. Sustainable development, which requires identification of the most sound and long-term productive use of available resources, should guarantee that this trusteeship is grounded in practical economics.
A sustainable economy is not likely to be achieved if decisions about resources are made outside the community without thought to their impact on its human or physical environment. Neither is a sustainable economy achievable if the community itself is unwilling to consider potential impacts, both on its own economic future and on that of the region, of activities harmful to the environment. A well-informed coalition of residents, public agencies, and private groups can often find enough in common with regard to resources to balance the objectives of conservation and development. Cooperation ensures effective stewardship of scenic, natural, and cultural resources.
Increased local control over the long term also means creating opportunities to add economic value to natural resources and agricultural products. An example is represented by the following sequence: logging, milling, furniture making, wood carving, sculpting. Each activity multiplies the value of the basic resource before it leaves the host community.
Some 1,200 corn farmers in southwest Minnesota process more than 11 million bushels of corn yearly at their cooperative wet-milling plant, producing corn syrup, corn starch, corn oil, gluten feed for cattle and poultry, and ethanol fuel.5 Even steep water (water in which the corn is soaked) is marketed as a growth medium for antibiotics. The wet-milling plant, opened in 1983, employs 100 workers, grosses up to $60 million annually in sales, and guarantees a market for southwest Minnesota corn growers far more profitable than the market that existed prior to the construction of the plant.
The idea for a wet-milling plant surfaced in spring 1980, when growers in the region decided they would respond to the plummeting price of corn by diversifying their range of locally produced corn products. They determined to increase the value of their corn by processing it right at home. Although initial interest was in the processing of corn for ethanol, a fuel additive, a core group of farmers took the advice of a staff person at the Minnesota Department of Economic Development and commissioned a feasibility study for the establishment of a more comprehensive wet-milling operation. The idea was to design and build a plant that would take corn soaked in water, then grind and separate it into its components for purifying and processing into starch, protein, fiber, corn oil, and ultimately ethanol as well. After a series of exploratory meetings in nine counties, the enthusiastic response convinced organizers to form a cooperative venture called the Minnesota Corn Processors (MCP).
Early in 1981 a temporary board of directors began recruiting other corn farmers from eighteen counties, asking each one to invest directly in the wet-milling project by contributing 5 cents per bushel on a minimum contract of 5,000 bushels. Through this effort some 2,100 farmers raised $900,000 in front-end money to fund the feasibility study and other co-op expenses. Armed with positive recommendations generated by the study, MCP obtained bank approval for a $38.5 million construction loan, 40 percent of which co-op members would have to raise as part of their equity share. A final campaign in June 1982 resulted in the raising of the equity pool. This, coupled with a tax financing package of $1.8 million, which the city of Marshall, Minnesota, provided as a business development incentive, made the project feasible. Funds from Marshall were ultimately used to prepare the site, build roads, and construct water and sewer lines. Ground was broken in July 1982.
For the next six years the wet-milling plant diversified its corn products and byproducts, which were processed locally and sold to major paper and feed companies across North America. In May 1988, with the market for their home-grown corn sufficiently diversified, MCP members expanded operations to produce ethanol fuel, capturing one more segment of an emerging market. The wet-milling plant enabled them to significantly increase their control over an agricultural resource by developing a range of value-added corn products. This reduced their dependence on and vulnerability to changes in the corn market.
Capital to underwrite business start-ups and expansions is the third element in a sustainable development strategy. Acquiring or creating an internal pool of investment and credit funds for this purpose expands self-reliance and the ability to take appropriate risks with new technologies and ventures.
Few rural communities have enough capital to underwrite development. Rural banks may be available to the business owner with sufficient assets and experience, but many local banks lack the deposit base to make larger loans and are reluctant to take risks. However, banks are an economic resource in a community; if they are worked with they can gain experience in new fields of economic activity. One risk-sharing device is to attract large deposits from a public or private source to guarantee development loans or to lower the loan interest rate. The federal Community Reinvestment Act (CRA) requires all banks to make investments in their community without discrimination. Examining the CRA report of local banks can provide information on the degree to which they do invest in the rural community.
Banks, however, are not the only source for start-up or development monies. In the beginning stages business owners need “patient money.” This is the kind of financing that the majority of small businesses are started with, for example, the personal assets and savings of entrepreneurs, their families, and friends. Patient money tailors investment payback to the growth of a business. If there are no financial resources allowing flexible terms, the prognosis for survival of a business is not good. Lack of patient money for less advantaged members of the community means business ownership is closed to them.
Since the demise of the War on Poverty programs of the 1960s and the systematic reduction of federal financial aid programs in the 1970s and 1980s, two new kinds of investment resources for economic development have emerged: alternative capital sources and development capital sources. These two resources represent different goals and require different support systems. Alternative capital sources, usually funded by public monies, make loans to businesses in the start-up phase and/or ventures considered risky because of innovative production and marketing technologies. Alternative capital sources often require the same collateral and terms as commercial capital sources and may require bank participation.
Technically innovative businesses are important to rural economies because such businesses diversify and expand the economic base. By 1989 twenty states had established alternative capital funds. The Iowa, Pennsylvania, and Texas funds combine bank participation with lowered interest rates and subsidized research. Alternative capital funds can be found in state economic development agencies, community development departments, economic development districts, or business development corporations.
For communities where low-income residents lack opportunity, capital or “patient money” is necessary to spur development. Development capital funds, usually from philanthropic sources, provide a flexible range of investment from small signature loans to long-term loans with low interest rates that may or may not be secured with collateral. Such creative lending practices as fitting terms to the cash flow of a start-up business and tailoring interest rates to its potential profit margin give low-income entrepreneurs the time to build their companies. Development lending does not usually succeed unless technical assistance and training are available through the start-up and expansion phases of a venture.
By 1989 over thirty community development loan funds in the United States had collectively lent millions of dollars and were experiencing relatively low default rates. While loan funds originally addressed housing needs in low-income and rural areas, since the early 1980s more funds have capitalized enterprise development in these areas.
Alternative and development investment funds do not replace commercial credit sources. Banks will usually lend to businesses with a good track record, adequate cash flow, and sufficient collateral. The purpose of both alternative and development investment funds is to help firms to establish a credit rating and track record, enabling them to approach banks for loans as they mature. These funds resemble the family savings account or pension fund. They act as a cushion during times of crisis. They can also leverage businesses that want to grow in new directions, and they can be sustained over the long term when earned interest expands the funds. Increasing a community’s investment capabilities insures developing an equitable economy which fits local economic needs and conditions.
For the community that wants to develop a sustainable, self-reliant economy, an important step is to identify alternative and development lending sources and/or to create its own sources, either on a local or a regional basis. A rural area of Massachusetts gives us an example of a community working with an existing bank to expand internal investment capacity and create greater self-sufficiency.
Located in Great Burrington, Massachusetts, the Self-Help Association for a Regional Economy (SHARE) was established in 1983 by community residents as a not-for-profit membership organization to recycle local dollars by earmarking 75 percent of local savings account deposits as collateral for business and community development loans.6 In cooperation with a local bank, the SHARE credit fund supports loans to regionally based businesses in the southern Berkshire area. To obtain lower-interest loans from SHARE goods and services must be locally produced, using local materials, employing local people, and sold to a local market. Production methods and technologies must be environmentally sound, incorporating measures for energy conservation. One loan criterion is that SHARE gives priority to businesses that aim to fill an unmet local need and that foster self-sufficiency by producing basic necessities (food, shelter, energy) or providing essential social services (transportation, health care, job training, legal services).
The SHARE project is funded by ordinary citizens who open savings accounts designated for the SHARE credit fund. Members make up the loan committee, which can loan up to 75 percent of the deposit balances, an amount agreed to by the depositors, at interest rates of 10 to 13.5 percent to cover interest earnings (6 percent) and bank service fees. Borrowers must be SHARE members. The committee can make loans of up to $3,000 for two years or less. The bank in turn administers all loans at reduced overhead. As of 1989, the fund had seventy members with $25,000 on deposit and had issued fifteen loans to a variety of local projects, for example, a goat farm producing specialty cheese, a timber- and firewood-hauling business using draft horses, a knitting shop, a washer and dryer repair and reconditioning shop, and an enterprise that creates high-quality kites using low-cost fabrics. Together, these businesses had created forty-five new jobs by 1989.
Depositors are motivated to become SHARE members because they know their money will be directly invested in the community, making capital available to local entrepreneurs who might not qualify for start-up loans from the bank. This unique setup in turn enables the bank to service loans it could not issue without the normal requirements for collateral. On opening their accounts, depositors sign pledges authorizing SHARE to use their passbooks as collateral against loans that meet SHARE criteria. Depositors thus come to view their accounts as long-term investments in the community and the regional economy. As of the end of 1989, no loan backed by collateral from the SHARE credit fund had defaulted.
After conducting a survey of literature on economic development, the Kentucky Highlands Investment Corporation concluded the following:
Economic development is growth in material productivity which involves change in the economic and social structure of a community. Economic growth and economic development are distinct. While neither is independent of social, political and cultural structures, economic growth can occur within existing structures and economic development requires changes in those structures .7
As sustainable development strategies reorient rural economies toward self-reliance, the structures of underdevelopment change. Dependence on outside capital, technology, and markets lessens with the expansion of interdependent ties with the larger economy, local entrepreneurial and technological skills, and local investment capital. Among the conclusions noted in the Kentucky Highlands Investment Corporation’s report were these:
The essential component of economic development is not production but the capacity to produce.... 8Growth means more output and economic development implies both more output and changes in the technical and institutional arrangement by which produced.9
Under this view of development, no matter how great its output, a community or region where production facilities and technology are externally controlled is less developed than one in which production know-how is local in character.10
As an economy grows more self-reliant, conservation and the sustainable use of resources require shared decision-making among owners, users, and the local community. A developed economy distributes benefits more equitably because development strategies are designed to include the less advantaged. As those who have been left out of the economic mainstream become economically empowered, political relationships change. Because sustainable development strategies involve a community’s educational, health care, and human services systems, the process of development creates closer ties among these systems and revitalizes the community as a whole. The following example demonstrates how a Navajo community brought about structural changes to improve local income and maintain cultural traditions.
The Ramah Navajo band, population 2,500 in 1980, resides in west-central New Mexico. For many generations this community relied on a traditional economy of livestock, dry land farming, weaving, and silversmith work.11 The introduction of federally funded services and programs and the cash-based larger economy, however, eventually created a dependency on wage employment whenever jobs could be obtained. It also created chronic reliance on non-Indian traders on the reservation and pawn shops in surrounding towns. As a result, the community is afflicted with an 80 percent unemployment rate and an annual per capita income of $2,000 or less, with more than 70 percent of households receiving some form of public assistance.
Located in one of the most isolated areas of the Navajo Nation, Ramah’s prospects for attracting outside industry is limited. In 1984 seventeen Navajo weavers, all women, founded the Ramah Navajo Weavers Association (RNWA) as a vehicle for improving family incomes and maintaining cultural traditions consistent with their land-based economy.
Unlike tribal enterprises or corporate-tribal joint ventures, RNWA utilized “bottom-up” development methods, that is, rebuilding the area economy through individuals. Using upright looms and drop spindles in the traditional manner, each weaver creates her own designs, spins her own yarn from the wool of locally raised sheep, and hand-dyes the yarn using dyes from sagebrush and other native plants. The woven textiles vary in size and shape from miniature placemats to full-size floor rugs. An RNWA standards committee approves the quality of all woven goods before they are offered for sale at Ramah or other outlets.
A major accomplishment of the RNWA has been the re-establishment of the Churro breed of Navajo sheep into weavers’ flocks. Within the Navajo culture this breed is considered a sacred gift enabling good livelihoods. This and other agricultural projects have improved the quality of local wool and increased economic return to local growers and weavers. For example, members initiated a drip irrigation project to grow feed for an improved breed of sheep, a range management program to cut sheep losses from coyotes and other predators, a mechanized method of sheep shearing, and new procedures for wool grading and packaging to target the market.
By spring of 1991 the RNWA had forty-five members. They were trained not only in spinning and weaving but also in sheep and wool management and in cooperative business, product marketing, and leadership. Further plans called for the diversification of sheep and wool products: organic lamb, sheepskins, tanned hides, knitting yarn for outside sales, and other value-added byproducts. The Association has designed and is raising funds for a Hogan Center Home where spiritual, educational, and marketing activities can be housed. No longer dependent on trading posts, pawn shops, and other intermediaries, the Ramah Navajo weavers utilize community resources—sheep, land, and skills—to increase opportunity and ameliorate poverty.
Planning for sustainable economic development entails enhancing the environment, developing human and cultural resources, and nurturing self-reliant economic activity. These are steps toward an economy that will renew itself over time.
Four elements guide the path toward sustainable development: emphasizing human development, expanding local control of the use of resources, increasing internal investment, and changing economic and social structures to increase opportunity and reduce dependency. These four elements can be used to measure a proposed strategy or to assess the progress of an economy moving toward sustainability.
The case examples discussed in this chapter represent community-based development strategies in a variety of rural settings and among diverse cultural groups. Each strategy involved some type of participatory design and planning. A top priority was to create new economic activity to revitalize ailing rural economies. The next chapter presents a more complete case study of sustainable economic development. This detailed account of the Ganados del Valle organization in northern New Mexico presented in chapter 14 illustrates the full impact of the four fundamental elements that comprise sustainable economic development.12