A Heartland Comeback?

BusinessNorth Exclusives NationÂ's Â'HeartlandÂ' is ready for a comeback 1/16/2007 by Wayne Nelson Even with a housing slump and a run up in oil prices to record levels, businesses helped keep the economy humming in 2006 with capital spending for new offices, equipment and technology upgrades. The regionÂ's economy rode that wave with the rest of the nation. But as it has for more than a half century, that wave had crested by the time it hit Northeastern Minnesota and Northwest Wisconsin. ItÂ's been a common story across the Great Plains and rural Midwest since the nation shifted from an agrarian society in the early 1900s first to an industrial, and then an information economy. But slowly and nearly imperceptibly since the 1970s, the rural out migration from the nationÂ's interior has reversed and Americans are moving to its small towns and cities in increasing numbers. Two think tanks, the New America Foundation in Washington, DC, and CEO Praxis in Grand Forks, ND, have jointly studied this demographic shift and concluded thereÂ's a potential resurgence ahead for rural regions with adequate public/private investment in high-speed communications, regional airports and the availability of urban-level cultural amenities. Their study was issued in early November. Coincidentally, it hit just as a national election was returning some political influence to the Midwest and rural Great Plains, at least for the next two years. That clout could help to jumpstart a turnaround in the nationÂ's interior. Â"Rebuilding AmericaÂ's Productive Economy: a Heartland Development Strategy,Â" notes this small town renaissance already is occurring in several remote and Â"re-emerging hubÂ" communities. Among the former group are the Rapid City/Black Hills region of South Dakota, Wenatchee, WA, Bozeman, MT and St. George, UT. Many are evolving from tourist destinations into sophisticated technology-based economies, the study concludes. Â'Re-emerging hub citiesÂ' Among the larger re-emerging hub cities cited are Sioux Falls, SD; Boise, ID; Des Moines, IA; and Fargo, ND. FargoÂ's metropolitan population surged more than 20 percent in the 1990s to about 180,000. Each of these rebounds is unique. Fargo is emerging as a manufacturing and applied biotech center, said Delore Zimmerman, president of CEO Praxis. He said at least two catalysts have fueled FargoÂ's resurgence. Microsoft Business Solutions acquired Great Plains Software in the early 1990s and has invested heavily in the operation. It employs more than 2,000 workers there. Meanwhile, North Dakota State UniversityÂ's Center for Nanoskill Science a pioneer in wireless telecom network research, helped attract Alien Technology, a California nanotechnology firm. Collectively, these resurging Heartland communities are exploiting their lower costs of living, good public schools and universities, and quality-of-life attractions for middle class families to lure high-end business and professional service firms, information service companies and innovative small manufacturers. At least three factors seem to be driving the increasing appeal for working and living in some small towns and cities in the Heartland, according to the study. • The costs of urban living, particularly for housing, as well as doing business, continue to rise in the nationÂ's coastal regions. • A technological revolution is allowing business operations— from precision manufacturing and high-tech services to warehousing — to locate far from metropolitan areas. • A rising influx of immigrants are finding their way to the Heartland. While some are attracted by low-wage jobs in the packing and other low-skill industries, many of these newcomers are educated professionals, lured by the low cost of living and high-pay jobs. North and South Dakota and Iowa were among states with the fastest growing immigrant populations in the 1990s. Â"As the nationÂ's population grows from 300 million today to some 400 million in 2050, these factors will become even more important,Â" the study concludes. Â"In contrast to the picture of emptying towns . . . so often conveyed in the media, we see the Heartland as a potential hotbed of capitalist creation and innovation. It is a reality already taking shape in the Â'technology corridorsÂ' in the Dakotas . . . revived communities along the eastern Cascades and with the growth of ethanol and biomass facilities across the country.Â" Natural resource-based industry Higher oil costs have hit remote rural areas particularly hard. Paradoxically, the likelihood those higher costs are permanent also holds some of the greatest promise for rural communities with natural resource-based economies. The most striking example so far: Demand for corn as an input in ethanol production has helped to double corn prices over the last two years. ThatÂ's a major boon for the rural Farm Belt. Zimmerman believes further biofuel development will have to come from non-corn sources, most likely produced from grasses and wood waste, inputs in abundance in Northeastern Minnesota and Northwest Wisconsin. Natural resource-based economies that also muster the transportation and technology infrastructure, along with the cultural amenities mentioned earlier, will be best positioned for the high-value-added manufacturing that comes with the development of new renewable fuels and other bio-tech advances, he said. Â"We think thereÂ's tremendous value-added manufacturing potential in your area,Â" Zimmerman said. Making it happen The Heartland faces major challenges in turning that potential into a viable new era. There is a shortage of fiber-optic capacity, airports, professionals and skilled technicians. To overcome these obstacles, CEO Praxis and the New America Foundation propose a public/private strategy underpinned by these and other policy recommendations. • A points-based system similar to those in place in Canada, Great Britain and New Zealand to increase immigration of professionals and skilled workers into the Heartland. Such a push is needed just to fill a growing shortage of qualified applicants for existing jobs. • A New Homestead Act. Two returning U.S. Senators, Byron Dorgan, D-ND, and Charles Hagel, R-NE, have proposed such a law to award aid to pursue a college degree, buy a home or start a business for anyone making a commitment to live in a rural area that has experienced long-term out migration. Their proposal also would create a New Homestead Venture Capital Fund to promote business development and growth in high out migration areas. • An American Heartland Development Bank. The study authors propose the federal government also create such an institution with $10 billion in capitalization to make investment loans in telecommunications and transportation infrastructure, energy production and distribution infrastructure and specialized science, technology and training centers. Members would include federal and state governments, banks, investment funds, state retirement funds, local and regional development organizations, corporations and university alumni foundations within the Heartland and would subscribe the bankÂ's capital. Â"In many ways, the American Heartland boasts better prospects than at any time since the early 20th century,Â" the study concludes. It also notes the political and institutional barriers in the way of a turnaround. In addition to the public costs are concerns that extending broadband to the Heartland would be detrimental to the aesthetics of empty spaces. Â"We should not attempt to freeze non-metropolitan America into some sort of demographic and economic still life. The Heartland can provide the nation with an outlet for its expanded population and business with a locale for the production of globally competitive goods and services,Â" it concludes.>