Paths to a stronger rural economy

RURAL America is seeing much of its traditional livelihood contracting and its markets drying up. But across the country, new ideas are beginning to take root. For J. E. (Tex) Gates, it's computerizing the chicken house.

Since he couldn't afford modernizing, Mr. Gates got an insurance company to build the computerized operation and lease it to him. He plans eventually to buy it from them. ``It's a real future for a young person,'' he says, standing amid 22,000 bantering birds on the farm he runs with his son.

In Hibbing, Minn., it's selling chopsticks to Japan. Battered by the downturn in taconite mining, the community attracted an entrepreneur who built a $5.3 million chopsticks plant, which begins production this month. Six billion chopsticks have been presold to Japan for the next five years.

In Louisiana, it's tanning alligator hides. Instead of Louisianans shipping 21,000 untreated hides a year to Italy and France, state agriculture officials are trying to lure two Italian tanneries to the Louisiana swamps.

Faced with economic contraction, American communities that make their living from the land are shifting gears. Instead of shipping out raw materials, they are looking for new products to make and new places to sell them. The common thread: the discovery of a new niche in America and the world economy. ``It would be a depression if we didn't have solutions,'' sums up Mayor Richard A. Nordvald of Hibbing, which is pinched by the mining woes in Minnesota's Iron Range.

The question now facing US policymakers: Are these grassroots responses enough?

Arkansas may provide some clues. Once one of the poorest states in the United States, and still among its most rural (half of its people live in communities of 2,500 or less), Arkansas has diversified its farming base, developed tourism, and become a major destination for retiring Americans. After Florida, it now has the highest percentage of people over age 60.

That influx of senior citizens often revitalizes rural areas. ``We've never lost a school finance vote since Bella Vista came in,'' says Burton Stacy, president of the Bank of Bentonville. Bella Vista Village, a retirement community outside Bentonville, has 8,000 year-round residents. ``Those people believe in quality education, and that has long-term significance for our area.''

``Many of our residents get bored with retirement after a while, and end up tinkering in business or volunteering with local services or the schools,'' says Body Billingsley, Bella Vista's project director. That, he notes, also helps nearby towns attract new enterprises. ``That's part of what's moved this area up from one of the poorest in the state to the fastest growing.''

The state is also working to maintain and strengthen its diversity in agriculture. Farmers in the more depressed eastern part of the state, where traditional row crops are grown, are being encouraged to grow crops that can be used as chicken feed by the state's booming poultry producers. Some rice farmers, suffering from poor rice prices, have built ponds to grow catfish, another growing market as the nation consumes more fish and white meat (such a poultry).

There are indications that the business community is beginning to recognize its stake in a healthy rural economy. One of the most promising examples is Wal-Mart Stores' ``Buy American'' program. The Arkansas-based discount retailer, second in national sales to K mart, has pledged to buy US products whenever possible, in some cases giving domestic manufacturers more lead time in filling orders, or even shaving its own profit margins if it means replacing a foreign product with a domestically made equivalent.

The program was ``not designed with rural America in mind,'' says Wal-Mart spokesman Jim von Gremp, but many of the manufacturers the company has worked with are rural. The chain has replaced foreign-made flannel shirts with ones made in Brinkley, Ark.; foreign-manufactured file cabinets with equivalents from Fort Smith, Ark.; and foreign portable fans with some made in Franklin, Tenn.

``Our rural customers don't have the job flexibility of people in the metropolitan areas, so those people appreciate what we're trying to do, and they support it,'' says Mr. von Gremp. Since the program's inception a little over a year ago, Wal-Mart has converted about $200 million in purchases to domestic products.

No one believes that such grassroots efforts will alone reverse rural America's downturn. But Wal-Mart's efforts may have saved 4,500 US jobs.

The issue for policymakers, according to government officials, businessmen, and economists, is to determine how best to support rural America.

``The problems of rural America constitute one of the major issues facing this country today,'' says Arkansas Gov. Bill Clinton. ``Our national government has to recognize its responsibility for investment in rural areas. And every state should be developing a strategy for rural development incentives -- in education, training, improvement of infrastructure, and to help the farm economy diversify.

``In the short term, the cities may be benefiting from low commodity prices and other difficulties of the rural areas. But in the long run, the whole country will be hurt if we don't have a strong agriculture and reinvestment in those industries that are found in rural America.''

Determining how to do this will undoubtedly center on how to deal with the world market. With virtually all of its natural-resource industries on the defensive for the past five years because of foreign competition, rural America is in various stages of smashing the competitive ball back into the world's court.

``There's a new attitude out there,'' says Bob Peacock, head of a family-run sawmill in Oregon. ``Tighten your belt, get a little smarter, and get through this thing.'' Oregon's lumber companies have been squeezed severely by foreign competition and Mr. Peacock is installing state-of-the-art equipment to make lumber products for export to Japan.

No one, however, is quite sure how the world market will respond. A crucial signal may come in agriculture, since the US has just embarked on a new policy to recapture export markets by reducing US farm prices. Virtually every economist believes that, barring something unforeseen, US exports will not improve significantly before the end of the decade. Even that view may be too rosy, says Richard Critchfield, an authority on third-world rural issues. Lower US prices are unlikely to keep Asia, for example, from using new and rapidly spreading technology to boost production.

The next year may prove crucial in this debate over free-market ideology, says Ross Korves, chief policy analyst with the American Farm Bureau Federation, who favors the approach.``If we don't experience increased exports in the next 12 months, I think we've lost the political debate.''

And so the battle is joined. This is not merely a fight over market ideologies. Fundamentally, it's a struggle to determine rural America's proper place -- in the US and in the world.

Alvin Wheaton, a farmer from Lewis, Kan., doubts that rural America will be able to maintain its place in the world market. ``If we're going to pay parity for their cars, then we ought to get parity out of our wheat,'' he says. ``If they don't want to do that, let's put America back to work.''

Rural America's place has changed, says ``Tex'' Gates, the Arkansas chicken farmer, because it can no longer dictate to the world. He observes that during President Carter's Soviet grain embargo, for example, ``the Russians didn't starve. They just got their wheat elsewhere.''

Rural America must broaden, not contract, its horizon, he says. ``We have to be more efficient ourselves. Just higher prices are not going to help.''

Final article of a five-part series. Earlier articles ran April 24, 25, 30, and May 1.