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Rural Development: A Scan
of Field Practice and Trends
August 2021
Brian Dabson and Chitra Kumar economic development, IEDC asserts, creates high-
quality jobs, develops vibrant communities, and
improves the quality of life in the regions economic
Introduction developers serve.1
Thrive Rural is an ambitious effort to create a shared Economic development through this lens is
framework and understanding about what it will take essentially a set of programs and policies. But as
for communities and Native nations across the rural IEDC’s president, Jeffrey Finkle noted, “The economic
United States to be healthy places where everyone developer has been facing a quandary whereby the
belongs, lives with dignity, and thrives. This field old methods may not be working, but new schemes
scan is a contribution to Thrive Rural, specifically to have yet to be cohesively established…we are
provide an understanding of the current state of rural finding ourselves with a huge gap between economic
economic development practice in the United States, development theory and practice…We have anxiously
and to address the question: What must happen for awaited the advent of a theoretic framework outlining
economic development to foster a more prosperous, economic development practice and remedies on how
healthier, equitable and environmentally sustainable to solve practical issues of this century.2
rural America?
It is not the case that economic development lacks a
We begin with an overview of the main economic theoretical base; in fact, there are many theories and
theories and policy frameworks that guide and paradigms drawn from different schools of economic
influence the practice of economic development, thought, and increasingly from other disciplines. But
particularly in a rural context. This leads to a no single theory explains the economic development
presentation of the results of qualitative research process adequately or helps the economic developer
on economic development practice and how it is understand every development situation or solve
evolving, based on a series of interviews with over every development problem. However, several theories
40 experts representing a range of perspectives taken together can offer useful insights for practice.3
on economic development. We conclude with a
commentary on how economic development can
foster a more prosperous, healthier, equitable and
Theories of Economic Development
environmentally sustainable rural America. Understanding the distinctions between economic
growth and economic development is a good starting
What Guides and Influences the Practice of point for a discussion of the relevant theories. At
its most basic, growth can be defined as simple,
Economic Development? An Overview of
quantitative increase, while development is qualitative
Theories and Frameworks
and involves structural change. Over the long term,
The International Economic Development Council growth provides the resources needed for development;
(IEDC) is the professional organization that represents development generates new technical, organizational,
most economic developers in the United States. IEDC behavioral or legal structures that facilitate growth.4
sees the role of economic developers as promoting Put more directly, growth means more jobs, more
economic well-being and quality of life in their buildings, and more equipment. Development means
communities through the creation, retention and a change in the capacity to act and innovate; it also
expansion of jobs that facilitate growth, enhance means a reduced vulnerability to external forces, to
wealth, and provide a stable tax base. Successful changes in technology, and to patterns and mixes
THRIVE RURAL | RURAL DEVELOPMENT: FIELD SCAN OF PRACTICE AND TRENDS 1of ownership, occupations, products, industries and • The three development theories represent
institutions.5 Both growth and development can have a significant shift towards spatial and firm
positive and negative impacts in terms of resource connections and relationships, recasting economic
allocation and regional disparities. development in more sophisticated roles as
information-providers, facilitators, targeted
Theories associated with economic growth and the
investors, and members of entrepreneurial and
near-term expansion of local economies include
innovation ecosystems. They also elevate the
economic base theory, neoclassical growth theory,
notion of regional economies and the importance
and inter-regional trade theory. Theories that address
of relationships between urban centers and
development as a long-term process include growth
their hinterlands, and set the stage for what has
pole theory, entrepreneurship, agglomeration and
become known as “place-based economics.”
innovation theories. To describe each of these in detail
is beyond the scope of this paper, but Tables 1A and One of the more important concepts that undergirds
1B provide summaries of the contributions that each these development theories and sets the stage
has made to economic development practice. for considering the rural dimensions of economic
development is agglomeration. Agglomeration
The main points to note from these summaries are:
describes the forces that bring firms, workers,
• The descriptions convey neither the complexity economic activities, and institutions to locate close to
of many of the theories nor the critiques and one another. The costs and benefits of agglomeration
debates to be found in the academic literature. are variously described as externalities, spillovers
Their purpose is to show how definitions of and interdependencies, and they generally affirm the
economic development vary with each theoretical primacy of large metropolitan regions as drivers of
perspective and to provide some indication of how economic progress.
the theories have been absorbed into economic
Agglomeration economies have a long history.
development practice.
Central place theories, first proposed in the early 19th
• Trade theories and neoclassical growth theory century and elaborated in the 1930s, describe urban
assume that market forces and price mechanisms hierarchies across regions where the largest city
will govern the pace and distribution of economic attracts people and businesses seeking high-value
activity, with government intervention limited goods and services from a wide geographic area.
to short-term fiscal and monetary measures. At Within that area are nested small cities, and then
the local level, this translates into proscribing beneath them smaller towns, each with its own
state and local governments’ role in economic economic sphere providing more localized goods and
development to streamlining and reducing services.6 The establishment of industrial districts, in
regulations that constrain economic activities, which the spatial concentration of firms and related
and to providing basic infrastructure and services activities fall within a specialized economic niche,
that indirectly support economic development. were first observed in the late 19th century.7 More
recently, the comparative advantage of industrial
• Attracting basic, export-oriented businesses clusters based on Michael Porter’s “diamond model”
with their potential multiplier benefits to the of competitiveness has become “an attractive and
economy remains the key argument for generous accessible framework for economic development
tax incentives, infrastructure investments, and professionals and policymakers seeking to cultivate
marketing campaigns. Multipliers are in common or strengthen regional competitive advantages.”8 This
use to estimate the economic impact of major model attaches importance to factor conditions (the
economic development projects. Their direct, availability and costs of materials, labor, knowledge,
indirect and induced impacts are presented as and resources), to demand conditions (the nature,
how much a dollar of public investment will yield composition, and size of the customer base), to
in private investment, jobs, business activity, and related and supporting industries (the potential for
tax revenues to justify sports stadia, industrial localized supply chains), and to firm- and regional-
parks, retail and entertainment developments, level structure (competition and collaboration
and the like. between companies that stimulates innovation).
2 ASPEN INSTITUTE | COMMUNITY STRATEGIES GROUPTable 1A: Influential Growth Theories, Economic Development Definitions,
and Contributions to Economic Development Practice9
DEFINITION OF ECONOMIC CONTRIBUTION TO ECONOMIC
GROWTH THEORY
DEVELOPMENT DEVELOPMENT PRACTICE
Economic Base Theory Increasing the level of local economic One of the most widely used theories which
growth as measured by levels of underpins recruitment and place-marketing
Extensions include staple theory output, income, or employment. approaches. It asserts that the external demand
(concerned with historic evolution of for a region’s products is the primary driver of
the local economic structure), sector regional prosperity. It uses a distinction between
theory (focuses on internal economic basic (exporting) and non-basic (service, local)
relationships), and dynamic economic economic activities and the linkages between
base theory (changes in economic them, known as the multiplier effect. This is used
structure over time). for projecting or assessing the economic impacts
of large projects.
Trade Theory Increasing economic growth that leads This focuses attention on tradable goods and
to greater consumer welfare – the services and the extent to which a region has a
benefits of individual consumption of comparative advantage. It promotes opposition
goods and services. to trade barriers and efforts to weaken regional
specialization. It supports local infrastructure
development, improvements in government
efficiency (less regulation), and other actions to
increase local productivity and low costs.
Neoclassical Growth Theory Increasing economic growth as Promotes the free market and the efficient
measured by output or income per allocation of resources, with freer international
capita. trade, competitive markets, and minimal
governmental intervention except for local
infrastructure development, improved government
efficiency, and lower business costs. This
provides the basis for opposition to government
engagement in economic development.
Table 1B: Influential Development Theories: Economic Development Definitions,
and Contributions to Economic Development Practice10
DEFINITION OF ECONOMIC CONTRIBUTION TO ECONOMIC
DEVELOPMENT THEORY
DEVELOPMENT DEVELOPMENT PRACTICE
Spatial Concentration and Reducing regional disparities by Focuses on strategies to tackle regional disparities,
Diffusion Theories diffusing industrial growth to and introduction of concepts such as spread
struggling regions by concentrating (positive) and backwash (negative) effects from
Variants include central places, growth
infrastructure and business prospering regions to struggling regions, and
poles, growth centers/unbalanced
investments in selected locations that growth centers into which investments are
growth, cumulative causation theories,
possess growth potential. channeled to mid-sized cities, large enough
core-periphery model
to attract capital yet dispersed enough to be
accessible to more remote areas.
Entrepreneurship Theories Creating more resilient and diverse Recognizes entrepreneurship as a basic category
local economies through conditions of economic development and as the driver of
favorable to entrepreneurs innovation in local economies. Part of broader
efforts to stimulate new, small businesses to
achieve greater diversity and stability with
financing, technical assistance, infrastructure and
networking.
Regional Innovation Theories Creating the conditions that foster Highly influential theories encouraging focus
innovation, product differentiation, on reducing factors that limit innovation,
and competitiveness. strengthening interfirm networks and institutions,
modernizing manufacturing, and supporting
cluster-based development.
THRIVE RURAL | RURAL DEVELOPMENT: FIELD SCAN OF PRACTICE AND TRENDS 3The implications of these theories for economic and transfer; and investments in K-12 education,
development practice in a rural context are sobering. community colleges, and universities to upgrade the
Attention focuses on the inevitability and benefits skills of the regional workforce. The importance of an
of agglomeration and on the concentration of environment conducive to attracting and retaining
wealth and economic activity in a limited number of skilled and innovative entrepreneurs and workers is
metropolitan economies. Rural regions rarely feature at the heart of creative class concept, popularized
except in core-periphery models which emphasize by Richard Florida.12 This supports the value of
the dependency of rural hinterlands on core urban investments in workforce development and in place-
areas for jobs and income. One consequence is the based quality of life improvements.
adoption of models and approaches often ill-suited
Entrepreneurship Theories and Strategies have
to the realities of rural regions, such as recruitment
long been the focus of management and psychology
strategies and industrial parks.
literature but outside the scope of economic
theories. However, since the 1990s, interest has been
Newer Frameworks for Economic growing in entrepreneurship and entrepreneurs
Development as vectors of innovation, as agents for place-based
economic development, as a way of strengthening
More recently, several new frameworks have been
economic and community resilience in the face of
advanced either as elaborations or combinations
external economic disruptions, and as contributors
of established growth and development theories
to the intellectual, individual and social capital of
– or as incorporations of ideas from disciplines
communities.13 Entrepreneurship has been posited
beyond economics. They include collections of good
as an important rural economic development
practices that have been translated into principles
strategy,14 and has been the focus of pioneering work
to guide economic development. The frameworks
in building entrepreneurial ecosystems15 – that is,
are responses to increasing societal concerns over
the combination of entrepreneurs, policies, practices,
globalization; technological change; sustainability and
institutions and culture that support entrepreneurial
climate change; livability; and inequities in wealth,
growth. Providing access to capital, technical
income, and opportunity associated with race, gender,
assistance, training, networking and workspace are
class and geography. Some of these frameworks
common program tools economic developers use as
offer more encouragement and tools for economic
collaborators in these ecosystems.
development in rural communities.
Economic Gardening is about building a nurturing
Technology-Based Economic Development is an
environment for local entrepreneurs, especially
assemblage of theories and approaches intended
second-stage, emerging growth companies that export
to address ways in which regional economies
innovation.16 In its generic form, it is an approach
can respond to globalization and technological
to business retention that focuses on businesses
advances. Its roots are in endogenous growth theory,
with growth potential, providing them with market
which, among other things, says that a region’s
research tools and intelligence on competitors,
rate of technological progress is determined by
markets and trends. It was developed in the 1980s as
the production of knowledge and by investments
a reaction against industrial recruitment in favor of
in human capital.11 It recognizes the contribution
“grow your own” approaches and is now a national
of concepts such as clusters and agglomeration
program with training and certification.
economies, mentioned earlier; and path dependence
and lock-in, in which the future of a regional economy WealthWorks is a framework and a toolbox for a
is determined by the historic path taken to date, with wealth creation approach to economic development.17
future options constrained by previous investment It aspires to be a transformational way of connecting
decisions and institutional arrangements and by marginalized people and places to the larger economy.
regional institutional capacity. The latter refers to Its focus is on local ownership, control and influence
the importance of regional innovation systems; the over community assets and linking these assets to
collaboration between higher education, business market opportunities through the strengthening or
and government to promote technology development building of value chains.
4 ASPEN INSTITUTE | COMMUNITY STRATEGIES GROUPThese community assets are not just financial, by the U.S. Environmental Protection Agency,
important as those are, but intellectual, individual, whose mission is to protect human health and the
social, and political capital – the ideas, skills, environment.
relationships and connections that are at the heart
One report on the application of smart growth in rural
of community vitality – as well as the unique assets
communities20 presents a focused framework around
of a place – its natural, built and cultural assets.
three goals:
WealthWorks encourages communities to measure all
eight forms of capital and monitor how they change • Creating an economic climate that enhances the
over time. As far as is possible, WealthWorks also viability of working lands and conserves natural
seeks to ensure that any development actions taken lands.
to improve any of these assets do not result in the
depletion of other assets. The approach highlights the • Taking care of assets and investments such as
importance of ownership and control over these assets. downtowns, Main Streets, existing infrastructure,
Its value chains include the normal set of business and places that the community values.
activities required to link producers and growers to • Building vibrant, enduring neighborhoods and
markets – research and development, production, communities that people, especially young people,
procurement, logistics, operations, customer service, do not want to leave.
sales, and marketing – but constructed in ways
that emphasize market demand, fill gaps with One of members of the Smart Growth Network is
local enterprise, support and not undermine the the National Trust for Historic Preservation. One of
community’s assets, and intentionally engage and the Trust’s programs, the National Main Street Center,
benefit economically marginalized people and places. coordinates a national network of organizations, rural
and urban, pursuing preservation-based economic
WealthWorks comes out of the same origins as development. Its approach focuses on transformation
“community wealth building,” another related emerging strategies organized around economic vitality, design,
approach. According to the Democracy Collaborative, promotion and organization. The economic vitality
community wealth building is “an approach rooted in component centers on “capital, incentives, and other
place-based economics with democratic participation economic and financial tools to assist new and existing
and ownership, and mobilizing the largely untapped businesses, catalyze property development, and create
power of the local public sector and other anchor a supportive environment for entrepreneurs and
institutions.”18 The primary difference between the innovators that drive local economies.”21
two is that WealthWorks was tailored for rural areas
and community wealth building for metropolitan Comprehensive Community Economic Development
areas with a special emphasis on community and is an approach that combines considerations of
cooperative ownership. space, resources, markets, society, rules and decision-
making. In it, community economic development
Smart Growth is a framework of ten principles is defined as “sustained progressive change to
intended to encourage development that serves attain individual and group interests through
the economy, community, public health and the expanding, intensifying, and adjusting the use of
environment.19 Many of these principles appear resources, identifying new or expanding markets,
at first sight to be directed to urban and suburban altering the rules of economic activities to facilitate
neighborhoods, such as mixed land uses, compact adjustment to changing conditions or altering the
building design, walkable neighborhoods, and distribution of rewards, and improving insight into
transportation choices. However, they do have the choices available.”22 The approach uses theory
relevance to rural main streets both in terms of and analytics to support the notion that community
placemaking and in promoting more open and economic development is bottom-up, integrative,
collaborative development decision-making. The strategically driven, collaborative, interactive, multi-
preservation of open space, farmland, natural dimensional, reflective and asset-based. Proponents
beauty, and critical environmental areas is one of describe community economic development as
the principles. Notably, it is one of the few areas of interdisciplinary, offering different perspectives to
economic development given concerted attention practice, whether economic growth, natural resource
THRIVE RURAL | RURAL DEVELOPMENT: FIELD SCAN OF PRACTICE AND TRENDS 5management, human services, infrastructure, public A New Synthesis: Rural Well-Being
administration or community activism.
The Organization for Economic Cooperation and
New Regionalism is not a theory but a process Development (OECD) is an international organization
of regional development, based on extensive that works with governments, policymakers and
research, and a set of policies aimed at increasing others in 37 developed countries (including the United
economic and environmental viability.23 As currently States) to establish evidence-based international
formulated, it focuses on development processes standards and find solutions to a range of social,
in Canadian rural regions in response to the economic and environmental challenges.25 In 2006,
growing regional disparities that are not adequately the OECD published a highly influential report on
addressed by current regional economic theories. It rural development26 that signaled a shift away from
encompasses five themes of: a singular focus on agriculture and farm subsidies
• Multi-level collaborative governance, across to the idea of rural competitiveness based on local
sectors and jurisdictions. assets, multi-sectoral approaches, investments rather
than subsidies, and multi-stakeholder collaboration.
• Place-based development, including assets and Recently, the OECD released its updated policy
capacities, competitive advantage, and local framework for rural development.27
control.
This is an important and timely synthesis of
• Integrated development approaches across theoretical perspectives and the realities, threats and
economic, political, social, cultural, natural, opportunities brought about by globalization, new
environment and health realms. technologies, demographic shifts and climate change,
as well as the shocks of the Great Recession and the
• Rural-urban interdependence in terms of trade
pandemic. The framework’s focus on rural well-being
and exchanges, institutions, environment and
that embraces economic, social and environmental
identity.
dimensions – and its advocacy for an integrated
• Innovation and knowledge flows between firms, rural development approach across public and
educational institutions, and government. private sectors, civil society, and all policy areas – is
consistent with the Thrive Rural perspective on rural
Rural Development Hubs, recently identified in
development.
research by the Aspen Institute Community Strategies
Group (CSG), weave many of these strands together. The OECD framework defines economic well-being as:
That research explored the role and accumulated
“…the material living conditions that determine
experience of more than 40 intermediary organizations
people’s consumption possibilities and their command
that are doing development differently in rural
over resources. This includes the ability of individuals
America. What makes these intermediaries stand out
to be able to consistently meet basic needs, such as
is that they take on the role of the main player in their
food, housing, healthcare, transportation, education as
multi-jurisdiction regions advancing an asset-based,
well as the ability to make choices that contribute to
wealth-building approach to rural community and
security, satisfaction and personal fulfilment. Income
economic development. They focus on the critical
and wealth enable individuals to meet their basic needs
ingredients of a rural region that either advance
and thus help achieve overall economic well-being.”
or impede prosperity, seeking to integrate social,
economic and environmental goals so that people According to this approach, rural places are
and places can thrive. Though they can take many constrained from enjoying the productivity-boosting
organizational forms – community development benefits that flow from agglomeration economies
financial institutions, community or place-rooted more present in urban areas – particularly greater
foundations, community development corporations, competition, deeper labor markets, the faster
economic development districts, community colleges spread of ideas, and a more diverse intellectual and
and other regional and rural organizations – Aspen entrepreneurial environment. Consequently, rural
CSG calls these intermediaries, where they exist and economies must consider two strategies.
adopt that focus, Rural Development Hubs.24
6 ASPEN INSTITUTE | COMMUNITY STRATEGIES GROUPThe first is to enhance connections with urban • Smart specialization strategies that include
areas to access, albeit from a distance, some of the measures to improve skills, market intelligence
advantages associated with agglomeration. Better links and innovation, often as part of economic
with metropolitan areas can lead to higher rates of diversification efforts. Examples include
productivity and population growth as rural economies entrepreneurship and innovation ecosystems
take advantage of proximity to markets, innovation and networks, technology platforms, rural-urban
spillovers, and movements of workers and ideas. linkages, skills enhancements, and arts-based
creativity.
The second strategy is to increase added value from
tradeable activities. These offer the opportunity • Export strategies that help small- and medium-
for rural areas to overcome small market size sized enterprises expand by improving networks
through exporting high-value natural resource- and connections with urban, national and
based products and services from agriculture, international markets.
manufacturing and extractive industries. The more
• Value retention in rural communities through policies
rural economies are able to participate in national
and regulations that support and favor local rural
and global value chains, especially at the front end
economies and protect them from asset-stripping
with research and development, and at the back end
by external corporations, and that provide
with marketing and sales, the greater the economic
incentives to encourage collaboration among
benefits that will flow back.
public, private and nonprofit sectors to create
What distinguishes rural economies is their close stronger, more resilient local economies.
connection to the land and to natural resources. These
• Upgrading rural education and workforce systems to
are the key assets upon which to boost economic
ensure that local skills and competencies are in
development. The proper management of natural
line with the current and future needs of rural
resource endowments, using local know-how and
firms.
adapting technologies, can yield benefits for rural
people and businesses. Forestry, mining, oil, gas, Taken together, these define a clear vision of and
electricity and other energy production, fishing, and approach to rural economic development: one focused
agriculture are almost exclusively rural industries, and on economic well-being through enhanced productivity
are all subject to extractive and disruptive practices. and rural competitiveness. But as the OECD framework
But, with care, they can create natural capital that both makes clear, productivity improvements alone do not
raises incomes and helps rural communities invest guarantee increases in income and quality of life across
in other productive assets that will sustain wealth all sections of the population. Indeed, over the past
over generations and mitigate the impacts of global two decades, such improvements have been largely
economic shocks and boom and bust cycles. Better concentrated in urban regions, leaving rural places
resource management can also lead to innovations lagging. Thus, rural well-being requires attention not
in, for instance, food production and processing with only to the economic dimension as described but also
traceable and territorially differentiated food and to the social dimension, specifically adaptation to aging
beverages, or in ecotourism or the creative industries. and declining populations, and the environmental
dimension of supporting rural economies in the shift
Boosting productivity in rural economies also
to a low-carbon economy. This takes us back to the
requires a special focus on small- and medium-
OECD’s notion of integrated rural development across
sized businesses and entrepreneurship. Most large
policy areas and sectors as the way forward to achieve
firms in rural economies, observes the OECD report,
rural well-being.
are focused on first-stage processing of a natural
resource, making it essential that there are smaller The OECD well-being framework knits together ideas
businesses that can add value and create greater from several of the newer approaches described
diversification. The report recommends four ways above. It stresses the importance of multiple, diverse
such a focus can lead to enhanced productivity and actors coordinating vertically (across different levels
competitiveness. of government) and horizontally (among the same
levels of government) to effectively carry out rural
development with well-being at its core.
THRIVE RURAL | RURAL DEVELOPMENT: FIELD SCAN OF PRACTICE AND TRENDS 7Perspectives from the Field: other parts of community life. Here, concepts of
The Evolution of Economic Development well-being, opportunity, widespread or widely-
shared benefits, equity, quality of life, and
Understanding the practice of economic development community resilience are highlighted.
in the United States, both generally and specifically in
the rural context, is essential for considering policy or For many, these two groups are combined – for
programmatic changes that will propel communities example, “…grow the economy in terms of jobs,
and Native nations across the rural United States to income, and productivity, and ensure that benefits are
be healthy places where everyone belongs, lives with widely and equitably shared.”
dignity, and thrives. To ground our understanding, we Our interviews highlighted that the public’s
conducted a series of interviews with over 40 experts. perception of “economic development” as solely
Interviewees were selected by assembling lists from “business recruitment” stubbornly persists – that
several members of the Thrive Rural leadership team is, the use of tax and other financial incentives for
based on their knowledge of the stakeholders active individual businesses often coupled with customized
and influential in driving change on rural economic services such as job training and manufacturing
development. The lists were then curated to represent extension services, and investments in infrastructure
a broad array of experience and perspectives, including and land development. Recruitment strategies,
national membership organizations, university and often referred to as “smokestack chasing” or “buffalo
independent research institutions, regional and local hunting,” are viewed as “conventional” or “old school”
consulting and technical assistance organizations, and economic development that contrast unfavorably
regional and statewide agencies. They also included with more enlightened approaches that are more
topical diversity such as health, Native American attuned to the needs of regional and local economy.
rights, housing and community development, finance, There are different guesstimates – ranging from 50
and environmental sustainability. to 80 percent of economic development activities
While these interviews revealed general agreement and expenditures – as to how prevalent recruitment
that economic development in the United States is strategies remain, but most suggest that this is
evolving, there was a range of opinions as to how steadily decreasing and being replaced by other
fast, how far, and how effectively. This is reflected in approaches.
the variety of definitions of economic development Recent research by Timothy Bartik28 provides a
offered, some of which are based on past realities, reality check. He calculates that resources devoted
some on what it perhaps should be, and others to recruitment efforts amount to over $50 billion per
on practical experiences in specific places. Some year by state and local governments, with a further
definitions are narrowly focused, others are broad and $10 billion in federal spending and tax expenditures.
comprehensive; some refer to the why of economic The lion’s share is devoted to state and business tax
development, others to the what or the how. They also and cash incentives at $47 billion. Bartik notes that
are influenced to differing degrees by the range of this figure is about the same as the amount raised
theories and ideas upon which economic development through corporate income taxes, or about three
is founded and by the shifting forces that are shaping percent of state and local own-source tax revenue.
societal views about what is important. Of particular concern is that firms with fewer than
So, what is economic development? What is its 100 employees receive less than 10 percent of these
purpose? Two main groups of definitions emerged incentives, even though they provide over one-third of
from our interviews: private sector jobs. Moreover, most of the incentives
go to the very largest firms.
• Those that rely on concepts drawn primarily from
economics, with aspirations to grow or enhance Other research shows that, in the past five years,
the local or regional economy in terms of jobs, 80 percent of all counties in the United States have
employment, standards of living, income, wealth, failed to attract a single business, suggesting that
prosperity, competitiveness and productivity. recruitment expenditures are concentrated in just
20 percent of counties, most likely in the major
• Those that are focused on the distributional metropolitan areas.
aspects of the economy and the intersection with
8 ASPEN INSTITUTE | COMMUNITY STRATEGIES GROUPThe current state of economic development was existing businesses, particularly smaller ones, is now
described by one of the interviewees as becoming recognized as critical to anchoring local economies
more sophisticated in terms of tools, focus and through recessions, including the current pandemic.
accountability, and more fragmented in the forms Economic growth may be achievable, particularly in
it takes. This is to be expected, given the variation in marginalized communities, only through creating
financial and technical capacities from metropolitan entrepreneurial ecosystems and programs.
agencies and large regional development organizations
Ways to measure the impact of economic development
to small towns and rural regions. Another reason is
is also evolving. There is a shift from simple tallies
the growing recognition that recruitment strategies
of job creation to the adoption of more complex
are no longer working in most parts of the country,
indicators, relating to quality of life, community
despite the tendency for voters to favor efforts to
vitality, the triple-bottom-line, and assets/community-
lure businesses to their communities and to reward
wealth dashboards.
governors and legislators accordingly.
What is driving this evolution? Part of the answer
There are several realignments underway that both
is that times are changing. As noted by the OECD
expand the reach of economic development efforts
and by many of those interviewed, the impacts
and recognize its inter-relationships with other facets
of globalization, new technologies, demographic
of community and regional well-being.
shifts, and recessions are changing the dynamics
• Workforce development – the attraction, retention and distribution of economic development, and the
and upskilling of the workforce is a primary old approaches, especially recruitment, are largely
consideration for employers everywhere. irrelevant to most communities. Another intriguing
Although there has been a history of separating answer, provided by many of the interviewees, is the
the functions of economic development and dramatic generational shift that is underway with
workforce development via separate agencies, new intakes of younger, more diverse (in terms of
funding streams and geographic focus, there are gender, race and background) economic development
examples of closer integration as businesses, leadership and staff, who appear to be open to more
health services, and public agencies wrestle with innovative and comprehensive approaches.
skill shortages and mismatches of skills that
hinder economic development.
Perspectives from the Field:
• Community development – for some, economic What is Different about Rural
development is a means to achieving community Economic Development?
development goals; for others community
The interviews provided both a clear-eyed assessment
development – embracing affordable housing,
of the distinct challenges for economic development
transportation, infrastructure, education, health
in a rural context and a set of requirements for
care and community-building – is a pre-condition
effective rural economic development. In summary,
for economic development.
the challenges are:
• Resilience – the ability of communities to withstand
• Rural economies are less diversified, more
natural disasters and economic shocks, to recover,
vulnerable to external forces, such as federal
and to become stronger and more resilient,
policies, global market shifts, and the effects
initially was only the concern of emergency
of climate change, and operate on limited
management agencies. However, recognition
fiscal resources. They have a narrower range of
that business continuity and adaptability and
economic options and opportunities.
economic resilience are key determinants of
community resilience has expanded the role of • Rural economies and communities vary in their
economic development. assets and their prospects. A “sorting” is underway,
determined by their ability to find competitive
Business retention and support for entrepreneurship
niches, develop a clear vision, and foster strong
are part of the mix of economic development strategies
and inclusive leadership. The implication is that
in many parts of the country, with or without
not every community will find a path forward.
recruitment efforts. Paying attention to the needs of
THRIVE RURAL | RURAL DEVELOPMENT: FIELD SCAN OF PRACTICE AND TRENDS 9• Rural communities are hampered both by unequal What it means to apply an equity lens to economic
power relations with their larger urban neighbors development is still a work-in-progress. However,
in terms of access to resources and technical phrases such as “widespread and widely shared
capacity, and by government legal authorities and opportunity” as an economic development goal
fiscal structures that proscribe the range of actions open the door to intentional efforts to address
that can be taken at the local level. The prohibition equity issues. The pursuit of diversity, equity and
of local government efforts in some states to inclusion is gaining in importance, not least because
support, invest in, or operate broadband services in it matters to businesses, their employees, their
their communities is an often-cited example. shareholders, and their customers. It also makes no
sense to leave entrepreneurial populations, especially
There were many recommended approaches or
women, youth and immigrants, on the sidelines.
requirements for effective rural development. These
Culturally appropriate programming to support
four capture their scope:
Black, Indigenous and other minority businesses,
• Rural economic development must be asset-based, and to engage with “invisible” Hispanic populations,
community-centered and entrepreneurial. There in economic and community life is essential to
must be an emphasis, particularly in more remote economic success in many rural places.
regions, on quality of life through scale-appropriate
The pandemic has exposed several fault lines in most
investments in health, education and housing.
rural economies. The impact on small businesses has
• Regional collaboration is central to effective been severe and the fear of seeing many of these close
rural development, taking a whole-community for good has spurred state and local governments
approach across functions, geography and sectors, to provide financial and other supports. These
and recognizing that rural communities are parts interventions became more critical when the initial
of regional economies and labor markets. emergency federal aid channeled through traditional
banks often failed to reach rural businesses – a signal,
• Rural economies are often closely tied to natural if one is needed, of the systemic inequities facing
resources, and effective stewardship holds rural economies and their diverse communities.
the greatest promise for the future. Extractive
policies and external ownership and control have The benefits of and challenges to increasing Black
impoverished rural communities, so a new model business ownership have come to the fore both because
that rewards stewardship and promotes local of the pandemic and of the calls for racial justice and
control must be found. equity. Black business ownership creates wealth faster
than wage employment, and Black business owners are
• Connectivity is key for rural prosperity, through wealthier than their peers and tend to hire from the
universal and affordable broadband, through community, thus creating local jobs. However, three
strengthening bridging capital to access regional major persistent barriers face Black entrepreneurs – the
and national expertise and networks, and wealth gap (low median net worth compared with white
through regional collaboration and pursuit of households), the credit gap (lack of access to capital
interdependence strategies with urban centers. and vulnerability to predatory lending), and the trust
gap (the continuing experience of discrimination and
Perspectives from the Field: low expectations).29 These barriers have been reinforced
Through the Lens of Equity by long-standing discriminatory practices against Black
small-business farmers, recognized in class action
Often, geographic equity is the primary lens used lawsuits30 against the U.S. Department of Agriculture.
to view the way resources are allocated (or not) to Black farmers were denied access to farm loans and
rural regions. Contrary to conventional wisdom, other farm benefits over decades, thus preventing
racial diversity has been and is a growing feature of household and community wealth accumulation in
rural America. The intersection of geography, class, poorer rural communities.
economic status, education and gender with race
make the equity context complicated and challenging, Additionally, basic infrastructure is critical to
but nonetheless essential. economic growth potential. Many low-income rural
10 ASPEN INSTITUTE | COMMUNITY STRATEGIES GROUPareas, tribal communities and communities of color The Indian Self-Determination and Educational
still lack access to safe drinking water and sanitation. Assistance Act of 1975 transferred management
A recent report by Dig Deep and US Water Alliance responsibility for a broad array of community
showed that more than 2 million Americans do not development and health programs from federal
have complete indoor plumbing. Further, Native agencies to the tribes, further increasing local
American households are 19 times more likely – and employment on the reservations. More recently, tribes
Black and Latinx households are twice as likely – as have been leveraging their comparative advantage
white households to lack these basic necessities. in support of economic development and increasing
The report points out that these disparities often tribal government revenues. For some reservations, this
cluster in certain areas and are in part due to historic has meant real increases in median household income
discriminatory infrastructure investment decisions or through mining and gaming, along with associated
geographic remoteness leading to cost constraints.31 tourism activities, such as golf courses and hotels. But
regaining the control of land and natural resources
Perhaps the most-mentioned source of inequity
over which tribal communities have sovereign rights
is the lack of high-speed, reliable and affordable
remains a central issue. There are multiple forms of
broadband services in most of rural America. This
land tenure, including communal, allotted lands, in
has been an issue for many years, not least because
trust, and land with fee. Some tribes have significant
of the constraints it places on economic activity.
reserves of coal, natural gas and uranium, but they are
But the pandemic has shone a harsh light on how
controlled by federal agencies and private corporations.
essential broadband is for remote learning, health
care, governance, commerce and social connection; Overall, however, the public sector remains the
and it has underscored the racial and ethnic economic engine for Indian country, with lagging
dimensions of this geographic inequity. The future of income and employment impeding efforts to rise out
rural economies and communities is in no small way of poverty. Miriam Jorgensen of the Native Nations
dependent on policies and investments to deploy and Institute argues that there is a need for a strong and
adopt broadband; the continuing shift to a reliance on thriving private sector made up of Native enterprises
the internet is unlikely to reverse when the pandemic and tribal-owned enterprises to make the economies
is over. Decision-makers eager to find solutions to more resilient and productive: “Given Native nations’
drivers of inequity need to be cautious about turning various preferences, traditions, geographies, and
to broadband as a technological panacea, however. belief systems, reservation-based private sector
For some health care, education and human services, development might result in a richer mix of social
there is no replacement for physical interaction. enterprises, culturally connected businesses,
sustainable practices, and relationship-based trade
arrangements than is present in the mainstream.”
Perspectives from the Field:
She asserts that entrepreneurship and business
The Native American Experience
development outside the tribal public sector have the
All the challenges and considerations that face rural potential to create distinctive quality of life benefits
communities generally apply to Indian Country – for Native communities.33
but often with greater intensity. An understanding
Private, entrepreneurial economic activities, according
of the evolving policy context over the past 60
to Indian law expert Robert J. Miller, far from being
years is essential for considering the opportunities
antithetical to Indian or Native culture, are part of
for economic development going forward.32 The
Indian cultures, histories, and institutions: “Indian
introduction of the Great Society programs and the
nations and communities developed and possessed
War on Poverty in the 1960s marked a shift in federal
cultural and government institutions that promoted
policy from seeking to terminate tribal governments
and supported private economic activities over many
and relocate Native people away from reservations
centuries …we are calling for Indian nations and
toward making tribal communities the focus of
people to revive their historical and traditional values,
poverty alleviation programs. The Community Action
behaviors, structures, and mechanisms to engage in
Program initiated in 1964 began to engage tribes in
economic activities and to restore their institutions
community empowerment and led to the creation of
federal and federally funded jobs on reservations.
THRIVE RURAL | RURAL DEVELOPMENT: FIELD SCAN OF PRACTICE AND TRENDS 11and local regimes that promoted and supported activity for every dollar spent by a hospital.37 For many
individual and family economic activities.”34 rural counties, health services are the largest employer
and economic generator, so they should be a primary
Recent research comparing reservation and nearby
business-retention target for economic developers.
economies35 provides arguments for diversifying tribal
economies beyond the government sector and the In addition, even the loss of part of a hospital or
hospitality industry, and it offers the outline for a health service can have severe consequences for rural
diversification strategy that: economies. For instance, the loss of an emergency
room will drive seniors away; the loss of an OB-
• Embraces a strong role for privately-owned
GYN will deter young families, contributing to the
businesses without forgoing the option to use
downward spiral of affected rural communities.
tribally-owned entities to fill critical gaps.
Another factor that affects small businesses directly
• Maintains a fair, efficient and trusted system for is the fact that workers’ compensation rates are
resolving business disputes – commercial law related to the distance from an emergency room, so
codes, access to trusted courts, etc. a closure could be another reason a business moves
away or decides not to expand.
• Minimizes direct political or tribal government
intervention in the affairs of privately owned However, the loss of hospitals is not just about
businesses and tribal enterprises. economies of scale and market forces. It is also about
business decisions determined remotely by an outside
• Ensures reservation land can be readily acquired owner with a lack of local community engagement,
or leased for business purposes. ignoring or under-appreciating the significance
• Arranges the funding and administrative capacity of hospitals and clinics as economic anchor
to provide the physical and digital infrastructure institutions. This is a clear and pressing argument
that businesses need to compete. for more integrated approaches between economic
development and health care.
• Builds a skilled workforce through education from
pre-school to higher and vocational levels. If there is a silver lining to the pandemic, it is the
evidence of innovation in integrated rural healthcare,
Miller adds to this list by arguing for efforts to based on telehealth, distributed care networks, and
improve financial literacy and foster entrepreneurship flexible funding streams, especially for services
through education, training, technical assistance, that are conducive to telemedicine. But these are
and microlending.36 He calls attention to the ground- dependent upon the availability of reliable, high-
breaking efforts of the Lakota Funds and the Four speed broadband for providers, patients and families;
Bands Community Fund in South Dakota, and robust workforce programs; and supportive regional,
ONABEN in Oregon, as well as the growing network of public-private-nonprofit governance.
Native CDFIs across the country.
Perspectives from the Field:
Perspectives from the Field: Economic Development and Environment
Economic Development and Health
As we consider global megatrends that are top-
Hospitals and clinics are vital community anchor of-mind in 2021, many acknowledge ecological
institutions. From 2010-2020, 138 rural hospitals sustainability, and especially climate change, as a
(about seven percent of the total) closed or reduced major threat to rural well-being.38 However, climate
services, with another 453 vulnerable to closure -- change remains a politically charged subject, partly
mostly in states in the Southeast and lower Great because appropriate responses will demand major
Plains that have not expanded Medicaid. Setting aside changes in the way natural resources are managed.
the significant health implications for rural residents, Transitioning from fossil fuels will mean economic
these closures have an economic impact in terms disruption to regions that are dependent upon coal,
of employment, revenue flows, and business supply oil and gas, complicated by the strong cultural and
chains equivalent to $2.30 of additional economic
12 ASPEN INSTITUTE | COMMUNITY STRATEGIES GROUPcommunity associations with mining and drilling. efforts into statewide plans. The top ten most
The way forward is through developing alternative pressing issues cited are broadband deficiency,
renewable energy sources and through economic workforce skills gaps, poor infrastructure, the “brain
diversification strategies. Also, considering how and drain,” lack of community investment, population
where communities grow and develop can mitigate decline, over-reliance on one or a few industries, poor
or exacerbate climate impacts. Smart growth housing stock, lack of entrepreneurship, and lack of
strategies can be applied in rural settings to reduce community leadership and training.
contributions to greenhouse gases as well.
The survey highlighted four emerging trends in state
Despite the resistance to engage in meaningful rural development strategies:
responses to climate change and environmental
• Leveraging community assets. Some places are
issues generally (often characterized as jobs vs.
thriving through leveraging existing assets, such
environment, or short-term economic certainty
as their scenic amenities and natural resources,
vs. long-term economic disruption), the growing
or their proximity to oil and gas reserves,
incidence of wildfires, water shortages, high
while others are capitalizing on their links to
temperatures, sea-level rise, and storms is forcing
metropolitan areas.
change. Resilience, initially rooted in emergency
management and environmental mitigation, is now • Exploring collaboration and innovation for
a mainstream concept, with innovations advancing diversification. These strategies are wide-ranging
in carbon sequestration, renewable energy and and include partnering with their universities and
recyclable materials, community-owned forests, and research institutions, engaging with community
green infrastructure and development. Additionally, colleges for workforce development, supporting
the pandemic has given impetus to finding new ways entrepreneurial awareness, accessing early-stage
to expand economic opportunity, such as through risk capital, finding ways to support the growth of
the support of local and regional food systems, manufacturing and logistics/supply chains, and
sustainable and organic farming, new agricultural looking for opportunities to grow technology and
technologies, food waste reduction strategies, and improve the quality of place.
renewable energy.
• Integrating with community development. Some
states are shifting to more organic community
State Approaches to Rural Economic development strategies, with a focus on
Development collaborative community development and
community building. This may entail building
State governments and their agencies are central
a good quality of life in the community with
players in economic development and particularly
systematic input from the residents.
in rural economic development. A recent report
prepared for the State Economic Development • Targeting niche markets. This features a more
Executives Network provides the results from a survey refined industry focus, with deliberate building
on state approaches to developing rural economies. of networks and contacts, and planning for
An overarching principle is: supportive state and community ecosystems,
together with more inclusive strategies for
“Addressing the challenges facing rural communities
supporting entrepreneurship and embracing the
requires a comprehensive strategy that takes stock
gig economy.
of the existing assets and needs in rural America.
The work of states on economic and workforce Finally, the metrics for success are evolving along
development, infrastructure, education, and place- with the shifts in rural economic development
making must tailor approaches to meet the unique strategies. The State Network report identified three
challenges facing rural communities.”39 groups of metrics that are being used or developed,
which suggest an increasingly sophisticated approach
Sixty percent of state economic development offices
to rural economic development.
report having specific rural economic development
plans, while others incorporate rural development
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