While the national labor force grew nearly 10 percent from 1994
to 2001, the work force in Hastings, Nebraska, (population 24,000)
shrank by 3 percent. That's a situation common in many small
towns and rural areas, especially in the Upper Midwest, where
populations are falling, jobs are evaporating and new businesses
are weary about starting.
Allen Harpham founded Computer Consultants of Hastings Inc. in
1992 and has watched smaller towns in his area depopulate as
residents move to cities or even out of state to find greater
opportunity. "The communities with a thousand people or less
are struggling," says the employer of three.
Harpham, 42, lays some blame on state and local government
policies, which have closed small-town schools to cut costs while
failing to give meaningful assistance to small businesses. But
access to broader markets via the internet has helped local
entrepreneurs start and stay in business, says Harpham.
"I'd say we're holding our own."
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That long-playing scenario may be changing, however, as interest
in rural entrepreneurship grips Main Street America. Applying new
approaches ranging from publicly funded startup consulting services
to angel investor introduction networks, small towns, states and
the federal government are turning rural economic development away
from attempts to lure big employers and toward cultivating
homegrown businesses.
About 30 towns including Littleton, Colorado, and Chico,
California-have engaged in "economic gardening." States
are also jumping onboard. "Five years ago, there wasn't a
single state where this was a policy direction," says Don
Macke, co-director of the Center for Rural Entrepreneurship in Lincoln,
Nebraska. "Now there are probably a dozen."
Washington is also taking note, expanding an SBA program called
HUBZone which helps small firms compete for federal contracts to
rural counties with high unemployment rates.
Rural entrepreneurship itself began increasing long before the
policies started appearing, according to Jason Henderson, senior
economist at the Center for the Study of Rural America in Kansas City,
Missouri. "In the 1990s, the number of nonfarm proprietors in
rural, nonmetro areas rose 2.7 percent a year," compared to
2.2 percent a year in the '80s, Henderson says.
A new approach to encouraging rural entrepreneurs may further
increase that rate. Historically, small towns have leaned on an
"if you build it, they will come" strategy. Economic
development agencies have created industrial and business parks and
tried to lure businesses by touting low labor costs. That
doesn't work anymore, Henderson says, because globalization
means labor costs are always lower overseas.
Recent initiatives offer free land and tax breaks to encourage
people to relocate to rural states. Iowa is mulling a tax break for
residents under 30. But similar economic incentives haven't
lured big companies, largely because other communities can easily
match them. Critics doubt they'll work for small firms or
individuals.
Economic gardening is more sophisticated. It includes publicly
funded services that train entrepreneurs to start, run and grow
businesses, as well as provide advice on applying for SBA backed
loans, financial management and marketing.
Networking is another component. The University of Northern Iowa
in Cedar Falls has set up an online portal called MyEntreNet to help entrepreneurs tap each other's
knowledge. Some communities work to introduce local angel investors
to entrepreneurs. A few fund low-interest small-business loan
programs with local taxes.
All told, economic gardening is a more comprehensive approach to
helping entrepreneurs than any economic development efforts to
date. "This isn't about programs," stresses Macke.
"It's about helping communities and regions create systems
that support small businesses."