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The Future in Rural America
Remarks by
Lawrence B. Lindsey
to
The Renaissance of Rural America Conference
Memphis, Tennessee
March 7, 1995

Thank you.

It's my pleasure to be here today at this

conference on the Renaissance of Rural America, sponsored by the
Federal Reserve Banks of Richmond, Atlanta, St.Louis, and Dallas.
The active involvement of those institutions in this conference
speaks to the diversity of our economy and of the Federal Reserve
system.
Today's typical American is of the urban or suburban
variety.

Ties to, and therefore exposure to, rural America has

declined substantially.

Whereas in 1880, a quarter of Americans

lived in cities, by 1990 the percentage had reversed itself so
that only a quarter of Americans now live in rural areas.

When I

was a child, it was not atypical for a city or suburban dweller
to have grandparents or others in the extended family living in
rural America.

The songs my children listen to on Barney —

"Down on Grandpa's Farm" and "Over the River and Through the
Woods" —
them.

have a direct meaning to me which probably escapes

Today, for most of us, exposure to rural America involves

recreation and escape: driving down country roads, enjoyment of
the wide open spaces, hunting in the forest, fishing the
beautiful lakes and rivers, trekking through the peaceful and
quiet wilderness.
But sooner or later, the comment will come, mixed more often
than not with a tinge of both curiosity and wistfulness —
these folks make a living out here?

how do

The direct personal

experience of life in rural America that comes from family ties
is gone for most urbanites.

But, that loss of personal exposure
l

has left many Americans with a longing that goes beyond any
distaste for urban living.

The revolution in telecommunications

has actually allowed Americans to contemplate life and work in
rural America and to pose the question to themselves: Could I do
it too?
Further, can the reality of life in the less populated
regions of our nation ever square with the lore and the lure?
The lore involves stories handed down from one generation to the
next, many rooted in a cultural view of America which involves
the pioneer spirit, living off the land, the fruits of hard work,
and respect for the power of nature.

The lure is, of course, the

peace and scenic wonder of a region less developed and the desire
it creates in most of us to pursue that quintessential American
tradition - reinventing ourselves.

Together, the lore and the

lure have created some myths about rural America which I would
like to address.
The first myth is that agriculture and farming is the
dominant way of life in rural America.

Although it is widely

known that technological advances have fundamentally changed the
business of farming, replacing labor with machinery to an
enormous degree, the perception still remains among many that
farming and its attendant industries comprise a large portion of
the economic base in rural America.

However, even in those

counties with a substantial agricultural base, less than 35
percent of total employment is in farming and closely related
industries while more than 65 percent of employment is in n o n 2

agricultural industries.

As of 1991, there were 1.6 million farm

households, but 23 million rural households which were not farm
households. Thus, some 9 3 percent of rural American households do
not live on farms.

In fact, not only is agriculture no longer

the major source of employment in rural America, it is no longer
the major source of income for the majority of farmers.

So, if

only 7 percent of residents in non-metropolitan areas are
employed in farming, what is everyone else doing?

Well, they

work for government, they work in manufacturing, construction and
mining, in financial, trade and other services.
The myth about the dominance of farming feeds into a second,
related, myth about what constitutes a "rural" life style.
Historically, of course, most Americans did live on farms.

In

1890, nearly 40 percent of all Americans and more than 60 percent
of rural Americans lived on farms.

By 1990, there were 20

million fewer people living on farms than a century before, but
27 million more people living in rural areas.

In fact, this

four-fold increase in the non-farm rural population mirrors the
four-fold increase in the overall population of the United
States.

While farmers clearly have declined as a fraction of the

American population, rural residents of small towns and others
have maintained their share of the U.S. population.

Indeed, as

Leo Meyer pointed out in a recent study, "Agricultural Change and
Rural America", it is a net migration from farm to town that

3

tends to categorize rural population trends. 1
surprise us.

That should not

Rural Americans, like the rest of us, increasingly

work in and rely on the type of services that
some degree of population concentration —

naturally entail

such as retailing and

health care.
In one important respect the rural economy is leading the
national economy —

exposure to world markets.

We all know that

a substantial share of American agricultural production is
exported.

But, this sensitivity to international developments

also reflects the composition of the rural economy.

Exporting

and import-completing industries like the manufacture of textiles
for instance, are especially important to rural economies.
Moreover, industries that produce goods for export, which account
for about two thirds of total U.S. exports, currently account for
a much larger share of employment in rural areas than in urban
areas.

As America's exposure to international competitive

pressures grows in the years ahead, one can expect that the
importance of the international sector to rural America will
increase.
One of the attractions of rural America to the urban and
suburban prospective immigrant is the lower level of housing
costs.

Indeed, housing costs represent only 19 percent of the

income of the typical rural resident compared with 2 3 percent of

1

Leo V. Meyer, "Agricultural Change and Rural America," The
Annals of the American Academy of Political and Social Science.
September 199 3, pp. 81.
4

the typical urban resident.

But it would be a mistake to assume

that all of this savings is necessarily translatable into lower
overall costs of living.

The distances that exist between remote

rural areas and more densely populated ones can only be overcome
at a cost.

Technology can overcome space but only at a price.

This often translates into lower levels of both nominal and real
income in rural areas.

The nominal median income of families in

non-metropolitan rural areas is one-sixth lower than in urban
areas.

It is not clear that cost-of-living differences can

overcome this discrepancy.
Remoteness can lead to concentrations of economic distress.
Nearly 2 3% of all nonmetropolitan counties had high levels of
poverty at the beginning of the 1990s compared with 4% of
metropolitan counties.

Rural poverty tends to be less event

specific, that is related to death or poor health of the primary
earner, and more related to long established factors such as the
limited employment opportunities in the local economy. 2
Of course, one of our concerns today in considering the
renaissance of rural America is the access to credit as a part of
the economic development process.

Some of the challenges faced

in accessing credit stem from the nature of rural areas.

Julia

Parzen noted in Credit Where It's Due, that "Operating costs are
especially high for development lenders that operate... in rural
areas because the deals they do are more distant from each other

2

Calvin Beale, "Poverty is Persistent in Some Rural Areas,"
Agricultural Outlook, September 199 3, pp. 22.
5

and take more effort to monitor." 3

Complicating this is the

desire for risk diversification, which often encourages rural
banks to invest in government securities or in other
opportunities outside the local market, rather than reinvesting
more of their funds in the local economy.
Overcoming rural financing challenges requires the same type
of entrepreneurial skill that is needed in depressed centers of
America's urban areas and that CRA is intended to help.

Typical

of this creativity is Ron Johnson of the Neighborhood Housing
Services of Dimmit County, Texas.

The Dimmit County Neighborhood

Housing Service (NHS)has brought access to low income housing to
local residents.

This includes a single family construction

program providing home ownership opportunities to 3 5 very low
income families in the county.

But, the NHS was also

instrumental in recruiting a pecan shelling business that
attracted a substantial investment to an area where local
government had been the primary employer.

The key was networking

and partnership with both the public and private sector.
Another CRA success in rural areas involves the Southern
Development Bancorporation.

This Arkansas based institution

invests in a 32 county region and uses both for-profit and nonprofit approaches to projects.
and technical assistance.

The firm offers both financial

The latter can be a key adjunct to

success for many rural enterprises since access to expertise may

3

Julia Ann Parzen, Credit Where It's Due. Temple University
Press, Philadelphia, 1992, pp. 175.
6

be among the most difficult challenges faced by the firm.
Southern Development Bancorporation is a rural analogue to the
urban success story with which much of the country is familiar —
the South Shore Bank of Chicago.
In this regard, I believe that our recent efforts at
reforming the Community Reinvestment Act should prove useful.
As you know, back on July 15, 199 3, the President asked the four
banking regulatory agencies to revise the CRA regulations to make
them more objective and focussed on performance.

After receiving

public comment from more than 2000 individuals and organizations
on the first proposal, we released our second proposal last
September.
One key concern was to preserve, to a maximum extent, the
strength of the current system by allowing examiners flexibility
in assessing bank performance in light of local conditions as
well as the capacity and constraints of the individuals involved.
Flexibility is the key both to past CRA successes as well as
future ones.

As a rule, local solutions to local challenges are

more efficient than one-size-fits-all solutions from Washington.
In fact, rural areas may be the last bastion of the socalled character loan.

One such loan I heard about involves a

Florida bank and a local church.

The church was in desperate

need of funds and had always had trouble getting loans.

The bank

president became familiar with the situation through his contacts
with the local Neighborhood Housing Services organization.

He

made the loan the church needed to fix the roof and otherwise

7

renovate the sanctuary.

The loan was made because the bank

president had personal knowledge of the particular situation and
felt that a character loan was appropriate.

He received high

marks from CRA examiners, but low ones from safety and soundness
examiners who were not as flexible as perhaps they should have
been.
This discussion of CRA brings to mind a third myth —
urban areas have nothing in common with rural ones.

that

For while it

is true that there are many profound differences between urban
and rural areas, there do exist important similarities.

Within

distressed areas, both rural and urban America may suffer from
disinvestment.

Capital can be scarce in both places.

In both,

the need to find ways to combine resources and to collaborate
across program lines and across county lines, for that matter,
has never been more important.

This is true not only for

financial capital but for human capital as well.

It has been

apparent to me in my travels around the nation, that it is the
skills and entrepreneurial drive of individuals committed to
their neighborhoods, towns, and regions that ensures successful
and economically healthy communities.

These folks can't do the

job without capital, but capital alone is not enough without the
commitment of talented people.
So, how does our society spread successful programs and
share the energies of talented people with all of the areas that
need them? Twenty years ago, the facts indictated the answer was,
"Slowly -- if at all".

But today, we can be much more
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optimistic.

And one word says it all —

technology.

The fundamental challenge that exists in rural areas
involves distance, and the costs associated with overcoming that
distance.

In fact, those regions of rural America located away

from metropolitan areas that have performed the best,
economically speaking, were those areas that benefitted from what
Emery Castle calls the three R's —

recreation, retirement and

residences. 4
While the three R's will undoubtedly continue to be an
important means of economic development in rural areas, there
exist other ways to alleviate the distance problem.

Certainly

the advent of the telephone and the television were instrumental
in helping us move toward a solution.

But it may be the arrival

of interactive technologies that will overcome the distance
problem for good,

while all of the U.S., and the world for that

matter, will benefit from the rapid advances in
telecommunications technology, I believe that the impact of
technology on rural communities will provide positive, powerful
and long-reaching opportunities.
A glimpse of the future today is provided by satellite downlink dishes.

This technology already provides opportunities for

teleconferences between students in a small rural community and
instructors located in the next county or the next state.

4

And

Emery N. Castle, "Rural Diversity: An American Asset," The
Annals of the American Academy of Political and Social Sciences,
September 199 3, pp. 19.
9

just as this technology can link a student with a needed teacher,
it can bring community development specialists from a community
far away to the local planning board meeting.

Computers can be

linked to national networks, allowing rural residents, perhaps at
their local community college or library, or at their own kitchen
table, access to knowledge and expertise that will enhance the
quality of their education, their personal productivity, the
profitability of their business and the overall quality of their
lives.
Increasingly, we find that technology has the capacity to
overcome space.

But just as distance increases costs, so too can

technology. This cost hurdle will undoubtedly be overcome by two
forces.

One, technological: innovation tends to drive total

costs down over time.

Two, regional partnerships can produce

substantial economies of scale.

Just as Wal-Mart locates its

stores so as to be accessible to a number of communities, so too
will communities discover the cost benefits of regional
coalitions.
Ted Bradshaw noted in his 199 3 article on multicommunity
networks that coalitions of small communities can overcome some
of the challenges inherent in rural life.

For example, "housing

rehabilitation programs can take advantage of bulk purchases of
materials or negotiate more advantageous contracts with
specialized providers.

In many community projects the largest

single real cost is the administrative one of setting up and
managing the work that is being done.

10

In joint projects this

cost is shared and the tasks often done better." 5
The transition of rural communities can be aided by "better
telecommunications and transportation [allowing] many types of
businesses and firms to locate quite specialized functions in
rural communities ranging from back office data processing or
telephone customer service operations to specialized high
technology manufacturing plants [such as] computer software,
publishing and printing, agricultural machinery, sporting goods
equipment, and mail-order sales." 6

My credit card bills and my

catalogue sales receipts from my Christmas shopping tell me that
the rush of businesses to relocate to rural areas of the country
is already in full force.
I believe that the future of rural America will be a bright
one.

But the transition that rural regions will undergo in the

telecommunications age will entail choices.

As more city

dwellers and suburbanites consider the possibility of building
their lives in rural areas, the challenges created by development
and economic and population growth will have to be faced.

There

will be increased pressure on the original residents by
newcomers.

Some areas attract retirees and aging baby boomers

who want amenities that don't exist and clamor for rules and
structure where none had existed before.

5

The challenge of

Ted K. Bradshaw, "Multicommunity Networks -- A Rural
Transition," Th6 Annals of the American Academy of Political and
Social Science, September 199 3, pp. 17 5.
6

Ibid., pp. 166.
11

preserving the rural landscape and the ambiance of small town
life in this new age will be difficult.

We will all need to be

flexible about our expectations.
However, by building coalitions and exploring the use of
technology to gain access to specialized knowledge and
information that may not be readily available locally, rural
residents will be able to create strong communities, linked not
necessarily by geography but perhaps by fiber optic cable.

As

America increasingly moves toward a service oriented economy,
rural America in the telecommunications age is poised to take a
seat up front.

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