SEPTEMBER 2012 VOLUME 10, ISSUE 3 FEATURE ARTICLECreating Rural Wealth:A New Lens for Rural Development EffortsJohn Penderjpender@ers.usda.govRichard Reederrreeder@ers.usda.govAlexander Marréamarre@ers.usda.gov Creating and maintaining a broad portfolio of wealthmay be central to sustainable rural prosperity.However, the impacts that rural developmentstrategies have on wealth and the impacts of existingwealth on those strategies are generally not wellunderstood. The success of rural wealth creation strategies isaffected by several factors, including the temporaland spatial context, interrelationships among differenttypes of wealth, the value of maintaining a portfolio ofdifferent types of wealth, and the benefits and risks oflocal ownership of assets used for rural development. Further research to identify “what works where” instrategies for creating and maintaining rural wealth,to measure the interactions and dynamics of differentforms of wealth, and to assess the impacts of wealthportfolios and local ownership may contribute to abetter understanding of how to attain sustainable andbroadly shared rural prosperity.ShutterstockIn the aftermath of the Great Recession, economic policy is understandably focused on jobs and income. Asimportant as these indicators are, investment that strengthens the Nation’s public and private capital base is key tolong-term prosperity. Rural economic development efforts build on previous investments made in a broad range ofassets, such as transportation and communication infrastructure, agricultural technologies, education and training,and preservation and development of natural resources.Recognizing the connection between rural wealth and economic prosperity, rural development practitioners havebegun to focus more attention on investing in a broad set of assets and building upon linkages among different typesof assets. For example, the Appalachian Regional Commission has embraced an “asset-based development” approach,emphasizing investment strategies that build upon the cultural, natural, physical, and leadership assets of Appalachiancommunities. The Ford Foundation has launched a program to promote wealth creation in poor rural communities that1Creating Rural Wealth: A New Lens for Rural Development Efforts / Amber Waves / September 2012www.ers.usda.gov/amber-waves Economic Research Service/USDA
emphasizes a demand-driven approach linked to particular value chains and focuses on creating seven formsof wealth, including the value of physical and naturalassets, but also less tangible assets.Despite this increased focus on wealth creation,knowledge about wealth in rural areas--whether in anarrow or in a more comprehensive sense--and howit can be created and measured, is still limited. To begin addressing this information gap, ERS researchersrecently completed an extensive review of researchrelated to rural wealth creation, developed a framework for explaining the wealth creation process, andprovided examples of indicators that could be used inthe design, implementation, and evaluation of ruraldevelopment strategies.This article highlights lessons from the reviewconcerning how a wealth creation perspective caninform and improve the efforts of rural communitiesand others seeking to promote sustainable rural prosperity. Five key lessons for rural economic development strategies emerged from the report. First, wealthcreation is context dependent. Second, it is criticalto understand the interrelationships among multipleforms of wealth. Third, degrading some types of assets may undermine the benefits of investing in others.Fourth, diversifying assets may reduce risk. Finally,local ownership has benefits but may also entail risk.Wealth Creation Strategies Are Often HighlyContext DependentBoth temporal and spatial factors can influenceopportunities for rural wealth creation. For example,the ethanol production boom that began in the early tomid-2000s was stimulated by rising prices of oil andgasoline relative to the price of corn, improvements inthe efficiency of ethanol processing technology, andFederal and State government policies that providedEthanol production has boomed mainly in areas with high levels ofcorn production, 2011Corn Production(Bushels)Not estimated 1,000,0001,000,000 - 4,999,9995,000,000 - 9,999,99910,000,000 - 14,999,99915,000,000 - 19,999,99920,000,000 Ethanol plantsProducingUnder constructionSource: USDA, Economic Research Service.2Creating Rural Wealth: A New Lens for Rural Development Efforts / Amber Waves / September 2012www.ers.usda.gov/amber-waves Economic Research Service/USDA
incentives for ethanol production, all of which contributed to increased profitability of ethanol production. These factors, together with comparative advantages of particular locations for ethanol processingdue to favorable access to corn production, transportation infrastructure, and other requirements for ethanol refining and distribution, led to rapid expansion ofethanol plants in many rural communities, especiallyin the Corn Belt.In rural places lacking these advantages, ethanolproduction is less likely to be profitable, and effortsto promote it could retard rather than promote wealthcreation. Even where such advantages exist, changesin the temporal context, such as changes in the relativeprice of ethanol and corn (the major feedstock usedto produce ethanol), have reduced profits and causedsome plants to go out of business.Other emerging energy industries in rural areasare also highly context dependent. For example, windpower development has mostly occurred in areas ofthe Great Plains, Mountain, and Midwest regions withstrong wind potential and favorable access to the electric grid. This development was promoted by risingelectricity rates, improved technology, and government policies. The boom in natural gas productionin recent years resulted from improvements in drilling technologies, including horizontal drilling andhydraulic fracturing; the availability of large naturalgas deposits in particular regions; favorable gas pricesfor much of the 2000s; and policies in some Statesallowing or encouraging drilling. As with ethanolproduction, these factors vary across rural areas andover time. For example, a recent decline in natural gasprices following a rapid increase in production slowedthe pace of expansion.Context is critical for many other rural development opportunities as well. For example, many rural communities close to metropolitan centers andwith adequate transportation infrastructure developas bedroom communities, with commuters providing a major share of the local population and incomebase. Rural towns located in central places with linksto transportation networks may develop as regionalhubs, emphasizing provision of retail and publicgoods and services. Some rural areas develop as partof a knowledge and innovation cluster, particularly inareas with favorable access to a university or other research center (e.g., Montana’s biotechnology cluster).Such opportunities are not available for many ruralareas in more remote locations, however.Among the most rapidly growing rural countiesduring the 1990s were those that had favorable naturalamenities and entrepreneurial talent. Such places appear to be better able to attract and retain the “creativeclass,” whose relatively high levels of education, income, and entrepreneurial capacity can contribute tomore rapid rural economic growth. These advantages,of course, do not occur everywhere in rural Americaand can change over time due to broader changes inthe economy, demographic shifts, or changes in thelocal context. For example, the ability of people tomove to high natural amenity areas may have beenlimited by the recent fall in housing prices and theGreat Recession. Over the next few decades, however,the number of people moving to such areas is likely toswell as the baby boom generation retires.Rural places with less favorable natural resourceendowments may need to consider other wealth creation strategies more suited to their context. Someareas have sought to attract tourists through the development of casinos. Since the late 1980s, a boomin casino development has occurred in many NativeAmerican communities and in locations along theMississippi River and its major tributaries, facilitatedby changes in Federal and State laws and the lucrativereturns possible in locations with favorable access tomajor urban centers. In more isolated rural places, thescale of casino development and the local economicimpacts have been much smaller.Other endowments and investments may also attract people to rural areas. Some regions have culturalor historical endowments that have been the focusof tourism development efforts, such as investmentsalong the Blues Highway in Mississippi or along theCrooked Road--the heritage music trail in southwestern Virginia. Retirees may be attracted to places thathave manmade amenities and services such as golfcourses, adult education opportunities, and health3Creating Rural Wealth: A New Lens for Rural Development Efforts / Amber Waves / September 2012www.ers.usda.gov/amber-waves Economic Research Service/USDA
Retirees are attracted to locations with natural and manmade -2000OtherSource: USDA, Economic Research Service.care facilities, even where natural amenities are limited. The attraction of a low crime rate, low housingcosts, social cohesion, and a simpler lifestyle canbring migrants to even remote rural areas--especiallypeople who grew up in such areas--if efforts are madeto recruit and welcome them. With the expansion ofbroadband service into rural areas, opportunities areincreasing to attract telecommuters and Internetbased businesses and services.Interrelationships Among Multiple Forms ofWealth Are Often a Key to SuccessSuccessful wealth creation efforts often rely onsynergies among multiple forms of capital and investments. For example, the ability to attract the creativeclass--representing a form of human capital--to ruralareas appears to depend on natural amenities in ruralareas, as noted above. More generally, strategies to attract and retain businesses, residents, and visitors torural areas depend on a range of public and privateassets and investments affecting the quality of life andthe ability to conduct business. These include roads,communications, water and sewer systems, schools,health care services, and recreational facilities.Cluster-based development strategies, which seekto exploit the advantages of developing clusters oflinked competitive activities in a region--the semiconductor industry and the wine industry in California are prototypical examples--inherently buildon multiple forms of capital. These include physicalinfrastructure, such as access to transportation andcommunications infrastructure; human capital, embodied in the people working and interacting in theseactivities; the knowledge or intellectual capital thatis developed and shared among these people; socialcapital, reflected in formal and informal networksamong firms and professionals that facilitate knowledge flows and innovation; and the financial capacity to finance new investments provided by banks andventure capital firms.4Creating Rural Wealth: A New Lens for Rural Development Efforts / Amber Waves / September 2012www.ers.usda.gov/amber-waves Economic Research Service/USDA
Synergies among different types of wealth mayoccur simultaneously or sequentially. In many cases,multiple types of investments are needed at the sametime for an area-wide wealth creation effort to be effective, such as the need to recruit and train schoolstaff (human capital investment) when a new schoolis constructed (physical capital investment). In othercases, the synergies may occur over time, as investments in one type of capital increase the feasibility orreturns to subsequent investments in other types. Forexample, increases in local income and tax revenuesresulting from an investment in a new manufacturingplant or casino may enable subsequent investments inschools, health care facilities, or other assets. As theseother investments take place, the community may findit easier to attract and retain businesses and residents,leading to further improvements in physical, human,and other forms of capital.Interactions among different forms of wealth mayalso involve substitutions rather than synergies. Forexample, there may be greater area-wide sustainablewealth effects if flooding risks in a river delta aremanaged by restoring and preserving wetlands ratherthan by building higher levees.Regardless of whether interactions among different assets are simultaneous or sequential, or involvesynergies or substitutions, investment efforts are lesslikely to be effective in promoting rural prosperity ifsuch interactions are not taken into account. This, together with the context dependence of effective strategies, highlights the potential benefit of developingregional and local capacities to plan and implementinvestment strategies that consider multiple assets.One current effort to help develop such capacities isUSDA’s Stronger Economies Together (SET) program, which involves university extension expertsassisting local entities in more than 40 multicountyregions to plan and implement investment programs.nity or region. For example, resource extraction activities such as mining or logging can generate jobsand income in these and related sectors but may reduce the natural amenities of a location if the environmental consequences of these activities are not wellmanaged. Such impacts could inhibit local economicdevelopment if they discourage people from living inor visiting these locations. Debate about the adverseenvironmental effects of mountaintop removal in coalmining or hydraulic fracturing in shale gas development reflects this concern, although evidence is limited on how economic development has been affec
Creating and maintaining a broad portfolio of wealth may be central to sustainable rural prosperity. However, the impacts that rural development strategies have on wealth and the impacts of existing wealth on those strategies are generally not well understood. The success of rural wealth creation strategies is
In this overview, we briefly define the concepts of "wealth" and "wealth creation", explain why a focus on wealth creation is important, discuss recent efforts to promote rural wealth creation, discuss what is known from past research about rural wealth creation, and introduce a conceptual framework for rural wealth creation and the theme
1.2 The Scope of our Wealth Management Services 1.3 Components of Wealth Management 1.4 Process of Wealth Management 1.5 Need for Wealth Management 1.6 Expectation of Clients 1.7 Challenges to Wealth Management in India 1.8 Code of Ethics for Wealth Managers 1.9 Review Questions 1.1 Introduction to Wealth Management What is 'Wealth Management'?
Wealth Creation in Rural America This report is part of the Wealth Creation in Rural America initiative, funded by the Ford Foundation. The aim of the initiative is to help low-wealth rural areas over-come their isolation and integrate into regional economies in ways that increase their ownership and influence over various kinds of wealth. The .
Wealth is created and "sticks" in low wealth rural areas. Wealth is tied to place by value chains developed within sectors. Wealth-based development is demand driven. Measurement is integrated into the entire process. Investment fuels wealth creation. Strategically flexible while doing no harm.
This research was supported by The Ford Foundation's Wealth Creation in Rural Communities - Building Sustainable Livelihoods initiative. The grant for the project came through the Center for Rural Entrepreneurship. To download a copy of this report: Visit the Wealth Creation in Rural Communities -
the top, and, thus, lower wealth mobility. Conversely, higher wealth mobility where self-made wealth replaces inherited wealth would result in more men at the top of the wealth distribution. Judged by this proxy, and corroborated by various data sources, wealth mobility decreased in the period 1925– 1969 and increased thereafter.
A focus on creating and maintaining wealth offers the potential to achieve more lasting rural prosperity. Scholars have studied wealth creation at least since the time of Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations (1776), and
Wei-Chau Xie is a Professor in the Department of Civil and Environmental Engineering and the Department of Applied Mathematics at the University of Waterloo. He is the author of Dynamic Stability of Structures and has published numerous journal articles on dynamic stability, structural dynamics and random vibration, nonlinear dynamics and stochastic mechanics, reliability and safety analysis .