Secrets to success #3: Re-imagine space

Thus far in this series, we’ve introduced four characteristics of rural regions that can create economic problems – but which can be ‘flipped’ or viewed differently to generate solutions. To date, we’ve explored rural economies’ embeddedness in natural environments and their structural positioning as primary producers in global value chains. Today, we explore the tendency for rural regions to have a small population base, with services and markets thin on the ground.

Rural areas by definition have a comparatively small population base. A small population is not, in itself, inherently good or bad. Humans have always lived in a range of settlement sizes – cities, towns, and small localities – and this is highly adaptive. Different settlement sizes serve different functions in the economy, and they attract residents who value different things. Each settlement type inevitably has its issues; the large end of the spectrum grapples with pollution and congestion, while the small end of the spectrum may struggle to keep its businesses and services viable.

Where populations are very small, the most common economic issues are a simple matter of numbers: there are fewer people, and thus smaller markets for labour, products and services. A small population base can lead to problems such as:

  • Skill shortages – caused by a smaller absolute numbers of workers, exacerbated by limited access to education and training services;
  • Service gaps – because there are often not enough people to keep local services and organisations viable (think closures of local schools, shops, banks…); and
  • Lack of economic diversification – as the combination of skill shortages, service gaps and small markets creates a difficult environment for businesses to start and grow.

Typical policy responses to these challenges are to propose population growth strategies and/ or service subsidies. The former seek to grow the absolute size of the population or attract particular types of people e.g skilled workers; the latter seek to subsidize services to keep them open. Both approaches can possibly help, depending on a range of other factors (e.g. the region’s livability, industry base, and its available resources or political leverage). But neither strategy changes the basic fact that most rural regions will always have a relatively low population base (even if the occasional lifestyle region grows fast). This will not change, but it doesn’t mean that rural regions need to suffer.

The secret to solving low-population problems is to think differently about space. In sparsely populated rural regions, the local skill base is, indeed, small, as are the markets to support local services and businesses. But – as the last post reminded us – rural regions are not economic islands. Local space is situated in global space, and rural economies don’t stop at the region’s borders. Rural economies are globally connected, and in the right hands, this can be a real strength.

Digital technologies are increasingly putting these global connections into the hands of rural people and organisations. These technologies have the capacity to span space, enabling many types of resources to be accessed from across the world as if they were next door. Space-spanning technologies open up opportunities for rural communities to access skills, services and markets across physical space. For instance:

  • In response to skill shortages, businesses and other local organisations can look to crowdsourcing platforms, global professional networks and online resources for flexible ways to access skills at a distance. Further, with emerging digital workplaces and live-anywhere-work-anywhere models, rural regions are well placed to explore how their low-population advantages (clean air, minimal commutes) can offer a base for skilled workers who can ply their skills both within and beyond the local region.
  • Services can also be delivered in digital space. Temporary suspension of face-to-face services is stimulating a quantum leap forward in e-education, e-health, and other services now being delivered via electronic platforms. While not without issues, this rapid digital turn has demonstrated that activities that used to require a critical mass of people in a local space, can now be conducted on-line effectively and relatively cheaply in digital space. Broadband speeds and technical skills permitting, well-designed online services can be an effective strategy to help fill service gaps.
  • Economic diversification opportunities are much more abundant when regional entrepreneurs are able to vault physical space and tap into global pools of skills, services, and markets via digital platforms. Online platforms, cleverly employed, can give rural businesses global reach and the opportunity to engage directly with customers around the world. Moreover, in these virtual spaces, the very concrete place-based characteristics of rural regions can give rural businesses a unique competitive edge.

Technologies already exist that have the potential to enable rural communities to overcome many of their low-population challenges. But these are relatively new technologies, and our thinking is largely mired in old understandings of regional skills, regional services, and regional markets. To open up the possibilities, it is necessary to re-imagine space and its relationship to rural regions. Space is not the barrier that separates rural regions from resource-rich population centres and puts rural places at a disadvantage – the so-called ‘tyranny of distance’. Rather, space is, for the most part, easily traversed. What matters is place.

In global space, people seek to connect with real places, real people and stories. Rural regions are well situated to engage as distinctive places on a global stage, and bring their stories, products, and knowledge to the world. Rural places can offer all the advantages of a low population base, while equipping themselves to avoid many of the disadvantages. Through digital space-spanning, rural people and organisations can link directly with resources in large population centres. Also, importantly, they can connect and exchange with other rural regions.

Re-imagine space. There’s never been a better time to be rural.

Next: Secrets to success #4: Bring knowledges together

Secrets to success #2: Add all kinds of value

In this series of posts, I am exploring four common characteristics of rural economies to show how they can be used as a lens to understand rural problems and spark rural solutions. Today’s post addresses the characteristic I have called Structural positioning at the tail of global value chains.

This statement is shorthand for the way that rural economies are often positioned within global economies – a positioning that is, with few exceptions, highly disadvantageous. In this post, I’ll briefly review how a seat at the tail often leads to a whole raft of more familiar-sounding rural economic problems, such as unemployment. I’ll also show how some rural communities are bucking the trend.

First, What is a value chain? Basically, it’s a way of describing how goods and services are produced – through a process of transformation that adds value. A potato may be harvested, washed, sorted, transported, chopped, cooked, salted, packaged, shipped, and ultimately sold from a retail display as a bag of chips. The process starts with raw materials, and each activity in the chain adds value. Each business in the chain reaps some of that value in return.

The problem with rural economies in the context of global economies is that rural economic activities are often concentrated in the far end of the chain – the metaphorical ‘tail’ – back where potatoes are dug out of the ground, cows milked, or timber harvested. These activities are called primary production, and they sit at the heart of many rural economies.

Producing primary products and sending them elsewhere to be processed has been a standard recipe for economic disadvantage from the days of colonisation to the reign of contemporary corporations. This is because, while primary products are intrinsically valuable, they don’t capture a lot of this value when they are sold. At each step in the value chain, as products are processed, transported, and on-sold, other businesses earn their share. And when those other businesses are large and powerful, they have a lot of control over what that share looks like, and how big it is.

The practical fallout is that primary producers in rural regions often have little control over the terms under which they sell their products and capture only a small proportion of the value that they generate. Of a $2 bottle of milk, for instance, the dairy farmer might receive about 50 cents. This pattern is repeated across industries. Because profit margins are low, even a small price drop can render production unviable. The effects in rural economies can be dramatic: businesses forced to cut labour or close, farms forced to amalgamate. The flow-ons follow: unemployment and population loss in rural regions.

None of this is new – these are longstanding problems. The good news is, rural communities find solutions. One popular solution is called Value Adding. Value adding aims to capture more value from products by adding value locally, for instance by producing potato chips instead of selling potatoes. Value Adding has been part of the rural economic development landscape for at least 20 years. It makes sense, though it only works sometimes. The secret to success is in how we think about value.

If value adding were simply about re-establishing local manufacturing or processing operations (butter factories, textile factories, paper mills), then why do we see these same types of ventures regularly closing or moving offshore to somewhere cheaper. In practice, some rural value-adding ventures succeed, and some fail. What’s the difference?

When I think about successful rural economic ventures, they tend to do something more than just move their product a bit further down the chain. Rather, they generate value in a way that makes their product or service special, so that it can’t be easily duplicated somewhere else. For instance:

  • They add value through quality
  • They add value through distinctiveness
  • They add value through community connection
  • They explicitly add social, cultural and/or environmental value

One example is provenance: that is, the reputation attached to where a product is from. A potato is not necessarily just a potato; in the US, for instance, Idaho potatoes command a premium. Where a product is from can communicate high quality and distinctive attributes: such as taste, history, and symbolic value. In Australia, think of the Barossa wine region or King Island cheese. Provenance can add a lot of value; for this reason many regions protect their label fiercely. And while provenance typically refers to food and drink, the same principle can be applied to any venture that leverages a distinctive local attribute into a desirable good or service: from Bendigo pottery to Byron Bay tourism.

Another example is community connection. The value of community connection is what powers Buy Local campaigns. Customers choose to Buy Local because the product or service is located in the local community. This adds extra value. In some cases, rural towns may embrace their local businesses to the extent that they become an iconic community presence, such as the Beechworth Bakery. For their part, businesses may build community connection into their business models: for instance, Bendigo Bank. Leveraging value through community connection is also increasingly possible via digital platforms; some rural businesses mobilise online communities to excellent effect.

Many rural economic activities create social, cultural, and/or environmental value. These important sources of value creation are often overlooked in discussions of rural economies. For example, rural organisations have always generated enormous amounts of valuable products and services for their communities through mobilising volunteers. When rural communities are seeking to develop economic options, they would do well to consider the types of social, cultural and environmental value that they are well-placed to generate. A range of ideas, from social enterprise, to traditional cultural industries, to community-based renewable energy, suggests strategies that rural communities can use to play to their social, cultural and environmental strengths.

In the end, rural economies are not trapped at the tail. By playing to their strengths, rural communities can – and do – create viable and distinctive products and services that enable them to thrive.

Next: Secrets to success #3: Re-imagine space

Secrets to success #1: Embed sustainability

In the last post, I listed four common characteristics of rural economies and suggested that they could be used to “flip” common problem narratives to suggest solutions. Today’s post explores the first of the four: rural economies’ deep dependence on natural environments.

The key industries at the heart of rural economies – agriculture, horticulture, forestry, fishing, mining, tourism and so forth – are heavily reliant on natural environments. This in turn means rural economies are vulnerable to a range of risks and shocks that create rural economic problems: drought, bushfires, floods, storms, disease, weather variations, climate change and environmental degradation – just to name a few. While policy, research and local action may work in various ways to mitigate the frequency and impacts of these hazards, the fact remains that these are natural hazards. Most of the time, they are outside human control.

Rural industries rely on natural environments to survive. Recognising this pattern enables us to ‘flip’ the narrative: from problem to opportunity. Dependence on natural environments can create losses and shocks, yes. But this dependence also reveals a deeper truth about economic activity – and human activity. No matter how much we may disguise the fact with pavement and boardrooms, websites and streetlights, our economies and societies are deeply interconnected with our environment.

In rural places, in rural economies, these nature – people connections are most clearly visible. Locals directly experience the flow-on effects of damage to primary industries in their businesses and shops. They directly see and experience environmental ipact and damage. This direct visibility is a strength. Daily, those who work in rural industries must grapple with practical questions of how to embed sustainability into their livelihoods and landscapes.

While urban dwellers often paint simplified caricatures of “environment” versus “economy”, rural communities live and work at the coalface of the economic – environment interface. They are well placed to see sustainability in three dimensions: with attention to people, economy and environment.

Successful rural regions are ones that take these grounded insights and transform them into sustainability-focused products, processes and initiatives. Examples of “green economy” and “eco-innovation” are abundant from Australia and from around the world: smart agricultural innovations to maximise water and fertiliser efficiency; community-owned wind farms; ecotourism initiatives; Indigenous traditional food industries; the list goes on. What these economic activities have in common is that they are made possible through embeddedness in local environments.

The deeper the embeddedness, the more sustainable the economy. For instance, while our Western worldview sees “natural resources”, an Indigenous Australian worldview sees Country. The difference is enormous. Resources are inanimate; they can be extracted and used up. Country is animate, relational, sustaining. It is therefore unsurprising that Indigenous land management practices demonstrate effective understanding of how to “manage” natural environments and protect against hazards.

Rural communities work at the “eco-interface”, the meeting-point of ecology and economy. As the global community begins to recognise the need for economic activity to harmonise with ecological limits, and to count the real costs of environmental damage, rural communities are in a surprisingly powerful position. Beyond slogans and political posturing, rural industries and communities are perfectly placed to grapple with sustainability in three dimensions, and use this knowledge to lead real change.

Next: Secrets to success #2: Add all kinds of value

Secrets to success, from problems to solutions

In my last post, I reflected that there are four characteristics of rural regions that make them particularly vulnerable to economic shocks. While every rural region is different – arguably, unique – they also share some common characteristics. Naming these up, noticing the patterns, can help us to understand the dynamics of rural economies.

Rural regions and their economies, with few exceptions, all share these four characteristics:

  1. Deep dependence on natural environments;
  2. Structural positioning at the tail of global value chains;
  3. Small population base, with services and markets thin on the ground; and
  4. Distance from the centres of economic and political decision making.

There is nothing inherently negative in any of these characteristics, yet they explain all of the key “problems” faced by rural economies.

  1. Deep dependence on natural environments means that our rural industries are vulnerable to drought, bushfires, floods, storms, disease, climate change, weather variations, environmental degradation….
  2. Structural positioning at the tail of global value chains means that rural primary producers are price takers; they capture only a small amount of the value they generate, so price drops can quickly render businesses unviable….
  3. A small population base, with services and markets thin on the ground means that there are often not enough people to keep services running and create the skills and markets to enable new industries to emerge…. and,
  4. Distance from the centres of economic and political decision making means that rural communities have, and have historically had, little influence over the decisions that affect them, even when they have good ideas for solutions.

These four characteristics can be used to explain common problems faced by rural economies. Seen from a different angle, they can become the starting-point for new ideas to inspire rural futures.

Each of these characteristics can be “flipped” to become strengths and sources of advantage for rural economies. In the next few posts, we’ll “flip” these problem narratives, one at a time, to discover some solutions.

Next: Secrets to Success #1: Embed Sustainability

Rural economies – Secrets to success

Economies in rural regions are a bit like muddy hill slopes – there is a precariousness to them, a constant threat of losing your footing. And in rural regions, the tumbles seem to come with discouraging regularity. The market falls – or the rain doesn’t. The processor closes its doors, or a key local employer moves offshore.

For rural communities, the consequences of these shocks are very real: jobs and incomes are lost, house values fall, businesses close, families move away. Community viability, from the bank to the footy club, may suddenly be at risk. The language of crisis is once again on the front pages, fueling a negative view of the rural economies that are central to our national prosperity.

As someone who studies rural regions, it’s my job to understand why this happens; and more importantly: What can be done about it? Economic shocks happen everywhere; but rural economies and communities tend to be particularly vulnerable. Why is this, and what can communities, businesses and governments do to equip rural places for the future?

Over the next few posts, I’ll suggest some secrets of success for rural economies. Rural economies have four characteristics that can make them precarious and vulnerable to shocks – but these same characteristics can be “flipped” to become strengths and sources of advantage. Let’s explore how rural communities can recognise and mobilise these strengths – proactively, rather than waiting for the next tumble to come.

Next: Secrets of Success, from Problems to Solutions

So what is a “rural” region?

One of the fun things about being an academic is not taking anything for granted. If you use a word, you need to really look at it: unpack it like a box of supplies. What does it really mean? How have different people used it? Is everybody using it the same way – or does it get pressed into service for all sorts of different things?

“Rural” is one of those words that can be used in lots of ways. Some people use it interchangeably with “agriculture”: what is “rural” is agricultural; what is “agricultural” is rural. To me that is a bit like using a spade when you want a hoe: it’s not quite the same thing. A rural region may rely on agriculture, but that doesn’t mean that agriculture is the only thing happening there. And what about regions with forestry, or fishing, or tourism? Are they not rural?

“Rural” is also often used to mean Not Urban. Cities are “urban”; places outside the cities are “rural”. This is a case of defining something as what it is not; a practice that doesn’t tell you a great deal about what it actually is. Further, this definition reinforces a worldview with cities at the centre, where rural places are, by definition, secondary or peripheral. It is worth considering how much of the urban bias in our economy and society is framed by this definition of rural as Not Urban.

To find a more useful definition of “rural”, I recommend the geographers. Geography is a field specialised in the study of physical places and people’s interaction with them. A geographical definition of “rural” looks to population density, or how many people are living in a certain amount of physical space. Rural areas are by definition less densely populated than urban areas. Geographers also consider other aspects of rurality, such as the importance of primary production; dependence on the natural environment; and the tendency for communities to self-organise to create what they need.

For me, the heart of what is “rural” is the closeness of people and the natural environment. Whether chocolate fields, ancient forests, dry plains or wild coastline, rural places define rural communities. The sense of belonging goes beyond streetscapes and town names. Seeing rural people and rural places in dialogue begins to suggest what sustainable Regional Development could look like.

Writing from the ground up

I have lived nearly all of my life in rural communities, on four continents. Every place is different, but what all these places have in common is a certain groundedness, a meeting of words with trees, a reflection of ideas in water, a practical question to be asked of every theory: what is this for? What will it do?

In Australia, where there are trees, we call it the bush. This is where I live, a long way from concrete and streetlights. I live here by choice and by passion, in a stone house on fifteen acres, on the North West Coast of Tasmania.

This blog is for people who care about rural communities and their futures. I’ll share some of my experiences over the last twenty years studying ‘regional and rural development’ as a university researcher and professor, and living and working in rural communities. I’m happy to field topics, respond to questions, and put you in touch with resources where I can.