===================================================================== Center for Community Economic Development University of Wisconsin-Extension Community Economics Newsletter No. 293 March 2001 ===================================================================== A Newsletter from the Center for Community Economic Development; Community,Natural Resource and Economic Development Programs, and University of Wisconsin-Extension, Cooperative Extension Service ===================================================================== Information Technologies and Rural Competitiveness /1 by John Leatherman /2 In just the past decade, we’ve witnessed a true phenomenon with the growth of the World Wide Web. Advances in the Internet and other telecommunications technologies have opened new frontiers in communication, commerce, medicine, politics, and almost every other aspect of private and public life. In recent years, concerns have been expressed about the “digital divide” that has emerged between groups of people who have the access and ability to take advantage of these technologies and those who do not. The divide spans ethnic, socioeconomic, and geographic boundaries. It becomes appropriate to ask whether rural areas are likely to prosper as we move forward into a technology-intensive economic future. What quickly becomes apparent is that Internet-Based commerce is only part of a much larger phenomenon affecting rural community viability. The broader perspective of how rural communities will fare in an economic environment increasingly dominated by advanced information technology is the real issue that needs consideration. How information technologies (IT), including Internet-Based commerce, will create or constrain opportunities for rural people is where we must focus attention. Economic Activity and Rural Industry Competitiveness There are several ways to address the question of rural competitiveness in this new business environment. Unfortunately, much of the assessment is largely speculative given the paucity of research data. We can consider a number of related issues relevant to the question of competitiveness: (a) the general characteristics of rural places and the extent to which they are conducive to fostering economic growth in a technically-driven economy; (b) the extent to which the telecommunications infrastructure for accessing Internet-Based services exists in rural areas; and (c) the capacity of rural leadership and institutional structures that may affect the adaptation to a new economic reality. Rural Characteristics Rural America is a large and diverse area. Some rural places, particularly those with high amenity values and those not too distant from metropolitan communities, are doing quite well. Other rural places suffer from what is sometimes called the “rural penalty.” Actually, there seem to be three general characteristics of rural places that would affect their access to or use of IT. First, the remote geography both increases costs associated with infrastructure diffusion and makes rural markets less attractive for outside investment. Second, the economic structure of rural places seems a detriment insofar as their industries are neither heavily IT-producing or IT-using. Finally, the human capital found in rural areas does not seem especially attractive either as a labor market or a consumer market. While no studies providing definitive data were found, it might be speculated that urban areas are likely to possess a higher absolute number and proportionate share of the more rapidly growing IT-intensive industries than rural areas. Rural economies tend to be dominated by traditional extractive industries, lower-skill manufacturers, local government institutions, and a relatively large proportion of retail and service proprietors. Many of these economic sectors are not projected to experience particularly strong growth. Traditional rural assets that tended to lower production costs may not be an advantage for IT-related industries. Such a characterization would not bode well for prospects that rural areas might commonly host high-tech IT industries. We also can consider the characteristics of rural labor markets. IT-related occupations tend to be highly skilled, and require frequent updating. Correspondingly, the wages for IT workers tend to be higher than the economy-wide average. The wage gap between IT workers and other workers is likely to widen. Here, again, to the extent urban places have a relatively greater quantity of people possessing needed occupational skills, potential employers will find urban locations more attractive locations. Rural Telecommunications Infrastructure Not surprisingly, rural areas are lagging behind more populous urban areas in the development of telecommunications infrastructure capable of the high-speed transmission of large quantities of data. The problem is one of bandwidth capacity, or the amount of data that can flow through the lines connecting us to the Internet. An assessment of the rural information infrastructure found that rural areas were lagging behind urban places in the availability of telecommunications technologies. Problems of distance and low population densities hindered the diffusion of these technologies, even though rural areas may benefit relatively more with access to such services as telemedicine, electronic commerce, and distance education. While technology exists to close the gap between urban and rural areas, service providers are moving most quickly to build the urban telecommunications infrastructure. For the most remote rural users, there are no existing technologies that can deliver all of the telecommunications services that may be desirable. Rural Leadership and Institutional Capacity One of the more inscrutable but essential qualities of rural places that affects community economic viability is the quality of their leaders and institutions. Clearly, visionary and effective leaders can have a significant impact on a community. What a single individual can accomplish, however, is small compared to the potential of organized groups banding together to achieve community goals. Thus, the quality of local institutions and their interactions are critical to creating an environment conducive to taking action that can improve community viability. To energize local leaders and institutions, rural communities must foster a broad-based understanding of the opportunities that information technologies provide. Among the local institutions that are well-positioned to lead the effort are schools and libraries, given the numerous government and foundation initiatives to provide Internet access. Beyond these groups, however, local business organizations, local governments, and civic and service groups must grasp the potential for individual, business and organizational benefit from information technologies. The Internet itself can become a tool for social/organizational development and goal attainment. Particularly in rural communities, where so much depends on voluntary efforts by community groups, this capacity would strengthen local institutions. The question and challenge is whether rural community leaders, for whom much of the new advanced telecommunication technology is alien, can learn to harness its potential. 1/ Based on “Internet-Based Commerce: Implications for Rural Communities.” Reviews of Economic Development Literature and Practice: No. 5. U.S. Economic Development Administration. The full report is available on the EDA Web site at: 2/ Assistant Professor in the Department of Agricultural Economics and Director of the Office of Local Government, Kansas State University-Extension. Ron Shaffer Community Development Economist