Creating Rural Wealth

Trying to "attract" jobs to rural communities has never worked for most places. Development is a do it yourself job — and the process begins with a plan for building wealth.

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It’s pretty clear that old approaches to rural development (like issuing tax breaks to attract factories) don’t work all that well – but what else is there? 

A lot of folks all over the country have been working on that question, and a group involved with the Ford Foundation has been trying to pull it all together and explain emerging practices as a single process. This group of Ford folks didn’t invent something new. They have tried to explain an approach to development and to create a system for how communities can better themselves and their economies.

We can call it a “wealth creation approach” to development.

Instead of trying to “attract” jobs over which rural communities have little control, this approach is about creating durable livelihoods by developing the assets that rural places do control. That includes natural assets like forests, farms, and wind rights as well as workers’ skills, social networks, and innovation. When rural communities develop these assets in response to market demand, when they connect with urban areas in ways that benefit both places, and when they focus on creating multiple kinds of wealth – that’s when they begin to create wealth and livelihoods that benefit rural places over the long haul.

Here’s what the wealth creation process looks like in southeast Ohio, where the Wealth From Forests initiative is already underway. 

Historically, this region has exported its logs and lumber as a raw commodity. Prices are kept low, and any processing of the wood is done elsewhere.

Southeast Ohio
There’s more money to be made in value-added finished products like cabinets, flooring, and trim. But that work has become harder in Central Appalachia, because loggers, mills, and manufacturers have been disappearing in record numbers.

Meanwhile, however, consumers want sustainable, certified wood products. Filling that market need can create more than one kind of wealth — not only economic well being but also a sustainable ecosystem. 

The Wealth From Forests initiative has stepped in to supply this market.

Michelle Decker, executive director at Rural Action, a 20-year old development organization in Trimble, Ohio, said her organization saw a chance to connect producers in its region with interested buyers. “We’re building a wood products brokering business to help locally owned producers access the green market,” Decker said. They started out working with buyers in Virginia and Tennessee, but now are bidding on jobs in Ohio, New York, and Pennsylvania. 

As these orders flow into the region, it raises the demand for logs that come from land managed sustainably, which in turn increases acres under management. Rural Action makes it a point to work only with processors and mills that are locally owned, regardless of their size. By helping these operators find buyers for their products, Rural Action helps them build their businesses. 

And local operators are learning about both market opportunities and the process of obtaining green certification.

The business cycle Rural Action has helped create financial wealth for the firms and ecological wealth for the region’s forests, and it is creating a wealth of knowledge among local firms.

Rural Action is building a “value chain” — a series of economic and social connections that reaches from the forest owners to manufacturers to customers. It’s not simply economic links between the companies that cut, shape and sell wood to consumers. The goal is to build relationships between all these links in the economic chain so that they can learn from each other and begin to see how their individual economic decisions impact the larger community. Over time, real wealth is created when people share the same goals for their businesses, for the goods they buy and for the places where they live.

A timberman with Rich Douglas Logging thins a pine stand near Athens, Ohio.

“Our next step is engaging a larger community of players in the value chain,” Decker said. Rural Action will host an Ohio meeting in early November with two dozen architects, cabinet and stair manufacturers, brokers, retailers, trade associations, a builder, a general contractor, and a financial organization. The project will host similar meetings in four other Appalachian states. 

“We’ll help the participants look at how they can get more involved in the value chain, find out what their self interest is in building that chain, and hopefully increase private sector investment in this approach,” Decker said. Architects can specify Central Appalachian hardwood, for example, while cabinet and stair makers can become certified.

Decker said her group was attracted to the wealth creation approach because, “as a development organization, we were looking for high-impact, accelerated strategies for revitalizing our region. While we’ve always been place-based, a value chain makes you see the region in market terms. You might get wood in Kentucky, have it milled in West Virginia, finished in Ohio, and sent to a builder in North Carolina.” 

Decker said a regional approach is necessary today because so much local infrastructure has been lost in the wood products sector. “We’ve seen mills close in the recession,” she added. 

The wealth creation approach is “a great way to think about moving the whole sector,” she said. “You recognize the comprehensiveness of the approach you need to take. You can’t just focus on mills or architects. You need to see the whole system. You begin to see the gaps.” 

There is value to be added from forest to installed flooring. The object is to capture as much of that value as possible locally.
For example, if no architects are specifying sustainable Appalachian wood, she explained, “it may mean you need to educate architects about opportunities.” 

The point of it all is not simply to move sustainable wood. The point is to create many kinds of wealth that stay local, benefiting rural communities. Toward that end, the Wealth From Forests project began by identifying specific indicators of local wealth that it would try to impact, and it’s measuring progress as it goes along. Included are measures such as the number of acres managed sustainably, and the sales volume of firms participating in the project.  

The wealth creation approach “is a business approach that’s very helpful to nonprofit development organizations,” Decker said. “Yet the focus on multiple forms of wealth keeps reminding you of what you’re trying to achieve for our communities.” 

Dozens of people at the Ford project have been working on this system over four years, and this is what we’ve learned so far about the wealth creation approach: You build value chains that connect rural and urban areas in mutually beneficial ways. You respond to market demand. You work collaboratively, not as isolated organizations. And you focus on building and measuring multiple forms of wealth that stay local. To learn more, go here

Marjorie Kelly ([email protected]) is with Tellus Institute in Boston and is an adviser to the Wealth Creation in Rural Communities project, which is part of the Expanding Livelihood Opportunities for Poor Households Initiative of the Ford Foundation.

 

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