FEDERAL BANK LAUNCHES PROGRAM TO ENHANCE RURAL ECONOMY

Editor's note: This is the first in a occasional continuing series of articles on the Center for the Study of Rural America.

KANSAS CITY, Mo. -- Increasingly concerned about the economic future of rural Missouri and other Midwestern states in its service area, Federal Reserve Bank officials here have launched a new project called the Center for the Study of Rural America. It is an effort to find new ways to ensure the region's continued prosperity.

The new Federal Reserve program, which will be under the direction of a vice president, Mark Drabenstott, has already begun preliminary research on existing rural Missouri conditions. It has sought the help of economic and policy leaders from a wide area -- including foreign nations -- representing business, agriculture, universities, banking and public officials at the federal, state and local levels.

The new center has already reached several conclusions regarding its emerging outstate economic-enhancement project. Drabenstott says these include agreement that the current pattern of uneven rural growth is likely to persist, leaving many non-urban communities searching for new sources of growth. Another point of agreement is that agriculture will remain a key sector in the rural economy, but this is not big enough to assure strong growth in many parts of the Federal Reserve Bank's service region.

Drabenstott says a strong consensus has been formed around the need to connect rural America to the digital economy and to raise the skills of workers and leaders to compete more effectively. While there is still no consensus on which new policy approach holds the greatest promise for the study area, there is general agreement that a new path is essential if rural areas are to realize their full economic potential.

Broader rural challenges

The new center's director notes that while currently there are pockets of strength in the rural economy, there are many areas of weakness, pointing to a series of policy challenges in helping the region join the nation's overall prosperity.

"While rural policy is still largely focused on agriculture," Drabenstott said, "there is left considerable scope for new policy initiatives aimed at broader rural economic challenges."

Confirming the need for a major comprehensive program envisioned by the Federal Reserve is Dr. Thomas G. Johnson, professor of agriculture economics at the University of Missouri at Columbia. He suggests Missouri's rural economy is likely to remain a mix of weakness and strength for the foreseeable future. A third of all rural counties in the state captured three-fourths of all rural economic gains in the 1990s, the UMC professor notes.

Footloose population

"This concentration of economic activity is the result of powerful shifts in demographics, technology and business practices," Johnson said.

He attributes the development in growth areas as being the result of an increase in "amenities that attract more footloose people and businesses," and also the growth of infrastructure to support businesses more dependent on knowledge than natural resources.

The UMC economist argues that rural areas still tied to traditional rural industries, such as agriculture and forestry, face huge challenges. "While rural Missouri has often based it development on relatively low labor costs, future opportunity will be based more on skilled workers and capital investment," Johnson said.

Based on these and other preliminary data, Drabenstott was economic pressures will encourage continued structural change and hurt some existing businesses on Main Street.

Bank officials have announced that in the weeks and months ahead, the Federal Reserve program will release other information, much of it now currently being gathered, as well as new policy proposals from the Center for the Study of Rural America.