Localizing the Rural Economy from

the Inside Out

36th Appalachian Studies ConferenceAppalachian State University

Boone North Carolina

March 22, 2013

Peter Hackbert and Jalissa Hunter

Berea College

Introduction

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Resilience

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“at the heart of resilience is a very

simple notion – things change – and

to ignore or resist this change is to

increase our vulnerability and forego

emerging opportunities, in so doing,

we limit our options.”

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The Appalachian Region

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EPG searches for “real-world”

solutions

• Mission statement -

educating and inspiring

students from Appalachia to

become service-oriented

leaders

• 1,600 liberal arts students

• 150 years

What better way to encourage young Appalachians to start their own businesses than to reach out to them while they’re still trying to figure

out what they should be doing with their lives?

The EPG Program defines

“Entrepreneurial Leadership” as:

"A process when one person or a group of

people in a community originate an idea or

innovation for a needed change and influence

others in that community to commit to

realizing that change, despite the presence of

risk, ambiguity, or uncertainty".

Hackbert, P.H. “Localizing the Rural Economy from the Inside Out.” ASBE Conference, October 5, 20123/23/2013 8

Hackbert, P.H. and J. Hunter. Localizing the Appalachian Economy from the Inside Out, ASA Conference3/23/2013 9

Small Rural Appalachian Community Economic

Development (CED)

Traditional ED Strategy / Tool

Alternative ED Strategy / Tool

CD Capacity Building Strategy /

Tool

Economic Development

Approaches

Economic

Outcomes

Other

Outcomes

Direct, Short-term

Indirect, Long-term

• Industrial development

• Business retention / expansion

• Workforce development

• Tourism

• Entrepreneurship

• Downtown development

• Arts / Creative economy

• Cluster-based development

• Residential development

• Transportation

• Broadband / Internet / Social Media

• ED finance

• Philanthropy

• Strategic planning

• Leadership development

• Organizational development

1. Recruit firms from the outside

2. Strengthen/expand existing firms

3. Promote development of new firms

• jobs

• firms

• prosperity

• wealth

• social

• civic

• environmental

“Would you tell me, please, which way

I ought to go from here.” asked Alice.

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“That depends a great deal on where

you want to go,” said the Cheshire Cat.

Lewis Carroll, Alice in Wonderland

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Begin with a vision statement

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Possible Community Goals

• Economic Goals

• Social Goals

• Environment Goals

• Political Goals

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Problem Statement

How do rural communities hit hard by the 2008

economic recession approach economic

development?

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Review of the Literature

• Scholars Lambe, 2008; Drabenstott & Moore, 2009; Morgan, Lambe, & Freyer, 2011

• Rural local economic development writers (Shuman, 2012; Cortese, 2011; Moltz & McCray, 2012)

• Both advance strategies for homegrown prosperity

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Localization

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Local Ownership Matters

1. Higher multipliers

2. Great community wealth: Fleming and Goetz (2011)

3. More dynamic

4. Healthier residents: Blanchard, (2012)

5. Better community planning

6. Greater creativity

7. Greater political participation

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Producing better, truer, ways of

measuring economic, environmental

an social performance, is a critical step

in making progress towards building a

better world.

- Joseph Stiglitz, Nobel Laureate in

Economics

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How can this be accomplished?

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Develop Census Indicators

Go to:

quickfacts.census.gov

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Develop Small Business Indicators

Go to:

www.census.gov/eos/www/naics

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To learn about NAICS

explore this site

Develop Small Business Indicators

Go to:

www.census.gov/eos/www/naics

www.census/gov/econ/cbp/index.html

Self-Employed

www.censtats.census.gov/cgi-

bin/nonemployer/nonsect.pl3/23/2013 Hackbert, P.H. and J. Hunter. Localizing the Appalachian Economy from the Inside Out, ASA Conference 26

Develop County Business Patterns

Go to:

www.census/gov/econ/cbp/index.html

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Develop Small Business Indicators

Pick two or three NAICS categories

• How many small businesses?

• Does the data appear accurate?

• Is the number growing or contracting?

• How to you compare against similar communities?

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Develop Self-Employed Indicators

Go to:

Self-Employed

www.censtats.census.gov/cgi-

bin/nonemployer/nonsect.pl

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Develop Small Business Indicators

Pick two or three NAICS categories

• How many categories have small business

growth?

• If the number of categories are growing this is

an indicators of diversification.

• What categories are shrinking?

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Environmental indicators

Go To:

www.epa.gov/ncea/roe

www.epa.gov/myenvironment

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Other Building Block Indicators

• Local Foods

• Renewable Energy

• Green Building

• Community Capital

• Local Arts

• Independent Retail

• Green Manufacturing

• Human Capacity

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City of Berea Case Study

Methods

• County Business patterns from the Census Bureau

• Nonemployer Statistics from the US Census Bureau

• Zip code analysis indicated that all but two of the 392establishments in Berea have fewer than 500 employees and therefore qualify as small businesses.

• The Census Bureau’s Nonemployer Statistics, revealed an estimated 1,548 individuals have their own businesses in Berea, with sales of $47 million per year.

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City of Berea Case Study

Methods (continued)

• The IMPLAN Input-Output model unifies

various federal databases and fill in the gaps

• Compare Berea’s economy to composition

sister cities, State of Kentucky, and the United

States as a whole.

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Berea’s Profile

• 329 Establishments

• 1,534 Self employed

• 294 Farmers

• 2,500 Public employees

• $413M in wages

• $25M in state and local taxes

• $1.9B GDP

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Compared to the USA

• 23% of the workforce is in manufacturing—more than 2 X the national average.

• Berea also has much greater numbers of people in education, health, and social services.

• 1/3 less than the national average of its workforce in the arts, entertainment, and tourism.

• Finance sector is about 1/2 the national average, which suggests how little capital is available for business growth.

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Shuman argues in Going Local (1998);

The Small-Mart Revolution (2006)

“ economic development performs best when it

is focused, laser-like, on businesses “ that are

locally owned and import substituting. Local

ownership means that working control of a

company is held within a small geographic area.

Import-substituting means that the company is

focused first and foremost (though not

exclusively) on cost effective production for local

markets.

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Leakage analysis

Identifies all those sectors in the economy where a community is unnecessarily importing outside goods and services. Every unnecessary import represents a loss of dollars and a loss of the "multiplier" impacts those dollars locally.

Represents a loss of other documented benefits that local businesses bring: knowledge, skills, tax payments, charitable giving, revitalized downtowns, tourists, stronger civil society, and more political participation.

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BALLE Job Leakage Calculator

5,739 additional jobs

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40 Export Industries

• Manufacturing parts for automobile supplying the assembly plant in Georgetown, KY.

• Role of Berea College, and many nonprofits promoting human rights and environmental protection;

• Presence of a largely retirement population, nursing homes, funeral parlors, and cemeteries

• Major services sector providing residents throughout the region (some of whom may be coming to work in Berea) with child care, taxis, limited restaurants

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40 Local businesses that could meet

demand

1. Global companies (no headquarters)

2. Professional services (outsourcing pros)

3. Intermediaries (outsourcing warehousing)

4. Tourism (lacks critical mass)

5. Food and retail (not capturing shopper fair share)

6. Finance (no local insurance, securities brokers)

7. Health Care (need for full-service mental-health-care facilities)

Hackbert, P.H. and J. Hunter. Localizing the Appalachian Economy from the Inside Out, ASA Conference3/23/2013 46

What If 25% of Berea businesses could

meet 25% of local demand?

IMPLAN MODEL – forecasts 1,398 new jobs

BALLE Calculator – forecasts new 1,435 jobs

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Some New Jobs Not Possible

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3 Largest Sectors

Professional services (317)

Wholesale trade (198), and

Tourism (168)

•

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Five Clusters – 1,300 jobs

• Goods distribution, warehousing, and trucking

(232 direct jobs);

• Professional services (247)

• Finance, insurance, and real estate (167)

• Local food (103)

• Tourism (60)

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Findings

STRENGTHS

• Location

• Manufacturing

• Education

• Public Sector

• Infrastructure

• Civic Culture

• Tourism

• Local businesses

• Quality of life

WEAKNESSES

• Limits to manufacturing

• Finance gaps

• Empty storefronts

• No fun

• Youth out migration

• Tourism deficits

• Workforce shortcomings

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Findings

STRENGTHS

• Location

• Manufacturing

• Education

• Public Sector

• Infrastructure

• Civic Culture

• Tourism

• Local businesses

• Quality of life

WEAKNESSES

• Limits to manufacturing

• Finance gaps

• Empty storefronts

• No fun

• Youth out migration

• Tourism deficits

• Workforce shortcomings

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Findings

OPPORTUNITIES

• Regional growth

• Industrial park

• Entrepreneurship innovation

• Arts and Crafts

• Broader approach to tourism

• Integrate the college more

thoroughly into the city’s

economic growth

• Partners

THREATS

• Aging population

• Over-focus on corporate

attractions

• Unplanned growth

• Divisions

Hackbert, P.H. and J. Hunter. Localizing the Appalachian Economy from the Inside Out, ASA Conference3/23/2013 53

Findings

OPPORTUNITIES

• Regional growth

• Industrial park

• Entrepreneurship innovation

• Arts and Crafts

• Broader approach to tourism

• Integrate the college more

thoroughly into the city’s

economic growth

• Partners

THREATS

• Aging population

• Over-focus on corporate

attractions

• Unplanned growth

• Divisions

Hackbert, P.H. and J. Hunter. Localizing the Appalachian Economy from the Inside Out, ASA Conference3/23/2013 54

Conclusion and Action Steps

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Alcohol beverage sale[City-County]

4th Class cities with permits

1. Corbin – Whitley/ Knox

2. Central City – Muhlenberg

3. Cumberland – Harlan

4. Eminence – Henry

5. Falmouth - Pendleton

6. Madisonville-Hopkins

7. Mt. Sterling – Montgomery

8. Morehead – Rowan

9. Russellville – Logan

10. Shelbyville - Washington

11. Springfield – Washington

12. Vanceburg – Lewis

13. Elizabethtown – Hardin

14. Lancaster – Garrard

15. Vine Grove – Hardin

16. London – Laurel

17. Jenkins - Letcher

18. Whitesburg- Letcher

19. Vanceburg- Lewis

20. Somerset- Pulaski

21. Manchester- Clay

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