Economic Development

Policy makers are at a crossroads of a rural policy that has traditionally focused on agriculture and a rural policy that will divulge into the broad array of issues that surround the rural economy as a whole. Community-preserving issues are surfacing at a greater rate than ever before: connecting rural communities to the digital economy, diversifying businesses in small towns, and bettering education throughout the remote areas of our state. Because the rural economy is changing rapidly, our rural policies need to change.

Throughout the past year South Dakota has seen two indications of this change. The opening of the Lake Area Corn Producer's Ethanol Plant and the future opening of the Lake Norden cheese plant as announced by Davisco Foods International have been accompanied by statements such as "cutting edge technology" and "single largest one time private investment in South Dakota's history." These businesses will revive their communities. However, without the broad-based adjustment of South Dakota's rural policy that accommodates such high performance companies, the revival will stop at the county lines.

Even though agriculture will remain a key factor in South Dakota's economy, agriculture will not ensure economic growth. As is pointed out by the opening of the Dakota Ethanol Plant and the Davisco announcement, the future of rural South Dakota depends on more than a prosperous agriculture sector. Rural policy needs two dimensions: providing a safety net for family farms and small rural businesses that struggle to survive during changing economic conditions, and it must foster an environment that encourages high performance companies such as the two new businesses mentioned above.

An environment that encourages high performance companies is characterized by redirecting current resources, not adding additional resources, towards three areas of necessity: an adequate infrastructure, substantial human capital, and quality leadership.

Road maintenance and inadequate Internet access constitute the two largest infrastructure problems facing rural communities. Information and communication technologies can erase many of the disadvantages facing an isolated community. Outside the metropolitan areas and the interstate corridors, rural communities lag behind with regards to high-speed Internet access.

A classic example of how to improve telecommunications with minimal increase in funding is that of Nebraska's efforts in the early 1990's. Since then 6,700 miles of fiber optics have been laid throughout Nebraska linking county seats and the system is being used by state officials to sponsor numerous small-town experiments in telemedicine, distance education, and government services.

This approach can be applied to South Dakota's current situation with wired schools. Public policy now needs to be adjusted to allow the private sector, courthouses, and state government to tap into the existing infrastructure.

Human capital has been plagued for years by insufficiently trained workers and managers exacerbated by out-migration of our youth, either out of state or to in state urban areas. According to economist Martin Jischke the four most promising ways to improve human capital are the following: utilize distance learning, strengthen the rural education system, import new human capital, and create a rural environment that will better attract and retain people with exceptional skills and work ethics.

Strong local leadership contributes to a business friendly environment as well. The past years have emphasized local decision making. The advantages are it creates a direct link between the decisions and their consequences. The disadvantage is it is sometimes hard to find effective leaders who can successfully plan and carry out an agenda of local development. Leadership will determine those communities that are winners or losers.

Though the obstacles for South Dakota's rural policies seem insurmountable, our state's rural areas do have attributes in their favor. Agriculture should continue to prosper due to technological improvements within the industry. With no corporate income tax, no personal income tax, no business inventory tax, and bountiful raw resources that leave this state every year, the stage is set for a prosperous future for manufacturing in South Dakota. Finally, better telecommunications will inevitably put more goods and services at the fingertips of rural consumers and expanded markets. The prosperity of South Dakota?s rural communities depends on a rural policy that goes beyond agriculture and focuses on the development of whole communities as well.

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(Ron Williamson is President of Great Plains Public Policy Institute, a research and educational institute. Permission to reprint in whole or in part is hereby granted, provided that the author and his affiliation are cited.)

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