Natural Resources

Rural Development in the United States: Connecting Theory, Practice and Possibilities

By William A. Galston and Karen J. Baehler

Chapter 5 pg 83-116

The following are the main points of natural resources’ role in rural development.

Natural Resources

1. Although more than half of all natural resources related employment is located in the urban areas, rural America depends heavily on income from this sector

 

Employment

6% Agriculture

<2% Forestry and Wood Products

.6% Energy Industries

.2% Mining (non-energy)

 

Natural Resource County

1 in 9 US Counties have >20% of their annual income from natural resource related enterprises

25% of all rural counties specialize in Agriculture

 

1990 Study on Farming and Food processing states

Farm production concentrated in 10 states of upper Midwest and Great Planes

Food Processing concentrated in Sunbelt, Great Lakes, and Northwest Region

Only state that is in both categories is Wisconsin

Natural Resources

2. Natural Resources is a shrinking sector in the US and many other industrialized nations in both employment and contribution to GNP. Much of the value once added by the primary goods industries is now captured in downstream activities such as processing and manufacturing, packaging, marketing and advertising, and retailing.

 

Gross National Product

1950 12% raw materials and energy

1984 Dropped to 9%

*Note: The quadrupling of oil and gas prices in 1973 mask true extent of the structural shift of the GNP.  

Forestry and Wood Products Timeline

1979-1985 Pacific Northwest income fell by 25% and production went down by 13%

1976-1985 Unemployment in Pacific Northwest was above Nat’l average

1985 Produces 90% of 1979 output with 80% of 1979 employment

Natural Resources

Agriculture Timeline 1970’s Low interest rates lead to high debt for farmers1880-1982 Worldwide recession lowered demand for everything1987 Bounce back with record high net income levels and fewer farms1991 Livestock profits created greater earningsNow Relatively stable

 Things that Changed

Large Farms (sales of $500,000 or more)Proportion doubledOutput rose from 25% to 40%

Small-to-Medium Farms (sales $10,000 to 99,000)Dropped from 43% to 37% of all farms

Very Small Farms (sales less than $10,000)Remained Steady

1950 19875.6 million farms 2.1 million farmsAverage size of 213 acres Average size of 462 acres15% of all Americans Less than 2% of all

Americans 40% of all Rural Americans

Natural Resources

Energy Timeline1973 Price hike after Arab oil embargo1980’s Price drop due to lower demand and instable OPEC cartel1976-1985 Unemployment rates higher than Nat’l average

 1970’s Coal benefited from higher energy prices1980’s Patters shifted toward electricity (coal fired plants)1972-1985 Coal use increased 8%Since 1985 Demand for coal increased 30%By 2000 Predict 26% rise in coal output

 Copper (Mining) Timeline

1969-1985 Decline in employment by 1.5% per year & unemployment rates above Nat’l average1973 Prices went down 40-50%1981-1983 42% of work force was laid off & industry lost over $1 billion1986-1988 Prices doubled

Natural Resources

3. Rural areas find themselves at a disadvantage in attracting the downstream activities; particularly those that require close proximity to large markets, access to sophisticated communications systems, or pools of specially skilled workers.  

Three main reasons for failure:

It costs the winners of the bidding war who often have promised generous tax breaks and public expenditures for infrastructure improvements, free job training, and other inducements that cancel out at least some of the economic benefits of the newly created jobs.

This strategy trades long-term instability for a big employment payoff up front, because recruitable companies and plants are notoriously footloose: What’s to keep the new plant in town from moving elsewhere in five years when a better incentive package comes up?

There simply are not enough mobile jobs to make this approach pay off for more than a handful of communities each year.

Natural Resources

4. Still, strategies are available for rural communities interested in natural resources based development. These include creating entirely new agricultural, timber or other commodity based products; developing new uses for old products; upgrading production techniques to increase efficiency and quality; and applying emerging technology to production.

5. Traditional value added strategies that focused on recruiting food processing, timber processing and other natural resources related firms have brought mostly disappointment. New, more refined definitions of the value added approach focus on improving the competitive position of existing secondary industries through technical and financial assistance, access to information, worker training and other means. Although these activities have not been evaluated rigorously, they hold some promise for long-term benefits.  

Natural Resources

 6. Institutions can play and important roll in increasing the value added by existing primary and secondary producers in rural areas. Industry associations and cooperatives in agriculture or timber, for example, can serve as networks for exchange of information, provision of services such as technical assistance, and better coordination among growers, processors, shippers, marketers, and distributors.  

Washington is developing a network of lumber and wood products agents who visit small lumber mills and other producers to provide needed technical assistance and information about national and international market trends.

 

Oregon is studying the feasibility of setting up flexible manufacturing systems in wood processing plants.

Natural Resources

7. Traditional natural resources industries have a reputation for creating dangerous, low paying jobs. Some of the newer, values added, competitiveness approaches to agriculture and timber development are expected to increase wages and skill levels for local workers, even though some loss of jobs due to higher productivity.  

 

Food production is still one of America’s most dangerous industries, with the second highest rate of occupational injuries and illnesses per full-time worker.

 

September 3,1991 fire in a poultry plant in Hamlet, North Carolina killed 25 people. It was later discovered that the plant had not been inspected in 11 years.

Natural Resources

8. Even where communities face the dismal choice between low wage jobs on the one hand and high unemployment and depopulation on the other, efforts can be made to compensate for and increase wages and to pressure employers for improvements in job quality.

9. Natural resources development also involves difficult trade-offs between environmental conservation and economic growth. Examples of compromises struck during the past several years in the areas of farming practices and clean air illustrate how consensus can be developed and implemented at the policy level.  

Problem: Missoula Valley, Montana had a problem with air pollution due to residential wood burning stoves and several struggling small sawmills.

 

Solution: Create a revolving loan fund to help homeowners buy clean burning wood pellet stoves and local mills could increase productivity and profitability by using sawdust to locally make wood pellets for the wood stoves.

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10. Decisions about tensions inherent in some natural resources development strategies should be passed on public deliberation and choice.