John Hood: Start up the rural economy

Apr. 07, 2014 @ 08:56 PM

RALEIGH — During most of its history, North Carolina was a state of widely dispersed residents. There were no truly big cities and many small towns. 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 state added nearly 100,000 new residents through birth and migration last year. Nearly half, about 45,000, arrived in the two most-populous urban counties, 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 share of North Carolinians who live in rural areas or small cities (regardless of their proximity to big cities) is still far higher than the national average.
A third of North Carolinians live outside major metropolitan areas. They inhabit communities with proud histories, natural resources, and significant public and private capital. 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.
Rather than simply embarking on a new “buffalo hunt” for industrial prospects, North Carolina’s 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.
What can local policymakers do to promote entrepreneurship? The preponderance of academic research suggests that keeping tax burdens 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.
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 and publisher of Representations of fact and opinions are solely those of the author.