Start up the rural economy

Published 12:00 am Thursday, April 3, 2014

RALEIGH — During most of its history, North Carolina was a state of widely dispersed residents. There were no truly big cities, many small towns and fewer sparsely populated counties than, say, Virginia or Georgia had. Particularly along the state’s rivers and streams, you’d find a thriving mill town or farming village every few miles.
That’s not what North Carolina looks like anymore.
The Census Bureau just put out its population-growth figures for 2013. North Carolina added nearly 100,000 new residents through birth and migration last year. Nearly half, about 45,000, arrived in the state’s two most-populous urban counties of Mecklenburg and Wake.
Their suburbs also experienced rapid growth. If you add the populations of the Charlotte and Triangle metropolitan areas together, you get 4 million people. Add in the Piedmont Triad, Asheville, Fayetteville, and Wilmington metros, and you get 6.5 million, or nearly two-thirds of the state’s population.

Now, it’s important not to push the story of North Carolina’s impending Manhattanization too far. Plenty of places in the state’s fast-growing metropolitan areas still look rural. There are still working farms and small towns in Wake, Buncombe, Forsyth, Union, Gaston, Johnston, Harnett and other “metro” counties. The population densities of Charlotte, Raleigh and other cities are still far lower than those of urban cores in the Northeast and Pacific Coast. And the share of North Carolinians who live in rural areas or small cities (regardless of their proximity to big cities) was about 45 percent as of the 2010 Census, still higher than the national average of 29 percent.
People have been moving from farms to cities ever since cities were invented. They came seeking jobs, higher education and urban amenities. They often found what they were looking for and hung around. Attempts to obstruct this natural flow would be fruitless and counterproductive.

But a third of North Carolinians still live outside major metropolitan areas. They inhabit communities with proud histories, natural resources and significant public and private capital. While the political influence of rural and small-city North Carolina may have waned, it’s not zero. Millions of people still cast votes in places such as Hickory, Shelby, Rocky Mount, Lumberton, Greenville, Elizabeth City and Wilson.
For today’s new generation of North Carolina politicians, the sweet spot lies between daring too little and promising too much. Giving rural residents the false hope that a few new roads or tax incentives will lead to massive business relocations employing thousands of people is both cruel and politically dangerous. Fortunately, there is a better answer — and plenty of new empirical research to support it.
Rather than simply embarking on a new “buffalo hunt” for industrial prospects, North Carolina’s small towns and rural communities should focus on cultivating entrepreneurs. People who start their own businesses are more likely than corporate CEOs or relocation consultants to value what rural areas have to offer, including natural amenities and lower costs for land and labor.

Although the rate of business starts usually correlates with job and income growth across the board, the effect appears to be particularly strong in non-metro counties, where new business owners are often locals or have family ties to the area. That means they are less likely to leave as their revenues and payrolls grow.
As three Ohio State University economists put it in a new Journal of Regional Science study, economic developers in rural areas are more likely to succeed by “supporting homegrown entrepreneurs” than by chasing “the latest ‘hot’ industry.”
What can local policymakers do to promote entrepreneurship? The preponderance of academic research suggests that keeping tax burdens, tax complexity and regulatory costs as low as possible raises the likelihood of business starts.
So do measures that raise the skill level of the local workforce through high-school completion, apprenticeships and employer-led job training.
Many potential entrepreneurs also respond favorably to marketing efforts stressing the natural and cultural amenities that make rural communities distinctive.
Modern economies are never static. Free enterprise is both creative and destructive at the same time. We’ve heard enough about the latter. Now is the time for creativity.

John Hood is president of the John Locke Foundation in Raleigh.