2004 Rural Partners Forum
Keynote Address by Dr. Karl Stauber
President, Northwest Area Foundation
September 30, 2004
It's wonderful to be home, and it's also dangerous, for reasons that you just saw [referring to introduction by old friend Tom Lambeth]. It's always dangerous to tell stories when you're home, because there are people around... I knew Billy Ray when he had hair. He and I worked in state government together. Tom has already told you about being a babysitter. What Tom didn't fully report, which is part of the biting incident, Tom thought being a babysitter meant you were supposed to sit on children. And that's why he got bitten and of course you've met my parents and anything I say that's wrong, I'm sure they'll correct it.
I want to thank you for being leaders in North Carolina, in rural development, at a challenging time. It is a hard time to be a leader in the United States. As Tom mentioned, when I was [up for appointment as] Undersecretary [of the U.S. Department of Agriculture], I was having trouble getting confirmed. It took me six months and sixteen days to get through Senate confirmation. Any Senator can put a hold on your name and they don't have to tell you why. They can just put a hold on it. Usually they want something. The first Senator that put a hold on my name was John McCain from Arizona. He wanted a Coast Guard station in Phoenix kept open. If you are ever drowning in Phoenix, and the Coast Guard saves you, you can thank me, because we still have a Coast Guard station because of that. So to prove it was a both sides of the aisle deal, the next person to put a hold on my name was Max Baucus, democratic Senator from Montana. Senator Baucus wanted a deal related to some research facilities in Sydney, Montana. We worked that out. Those research facilities are now the property of Montana State University and they're in good hands. But the third person to put a hold on my name was Senator Helms. Nobody could figure out what Senator Helms wanted. Well, a friend of mine in the department, who's from North Carolina also, Charlie Rawls, said to me one day when we were talking about this, " You know Jim Graham?" and I said, "Yep." My family's had involvement with Jim Graham for a long time. He said, "Go see Jim Graham; he can find out." So I called Mr. Graham's office and got an appointment and came down to see him and walked into his office and he looked at me and he said, "Are you MB's grandson?" I said, "No, sir, I'm MB's great-grandson." Then he knew exactly who I was because he had known my father and my great-grandfather. So he got Jesse Helms on the phone. I could only hear half of the conversation. They chit chat for a few minutes and he says, "Jesse, I've got Karl Stauber in my office. He's up for Undersecretary at the USDA. I understand you put a hold on him. I know this boy, what's wrong with this boy?" I was 40 some years old. But, they're having that conversation, and Jim Graham puts his hand over the phone and he looks at me with this kind of sickened look on his face, and he said, " Are you a vegetarian?" I said, "No, no, no sir, I eat meat." He says,"Jesse, this boy eats meat, I've seen him eat meat." Which was true. We had been to the farmer's market together and had sausage biscuits. And, so they finished their conversation, and I flew back to Washington and the next day I was confirmed by the Senate of the United States. That is a true story. But it illustrates how hard it is to be in public service in these challenging times.
The presentation I'm going to make in the next few minutes is going to focus on rural America. You've got to decide how much of this applies to North Carolina. I've been gone for 28 years. I get to come back to Iredell County and other places in the state, but I'm always a visitor, and I understand that. So you need to decide what applies and what doesn't apply.
The first thing I want to say is that of all the states I know and I'm one of those lucky people, I've spent at least three weeks in every state in the Union. And I don't have any desire so say I've spent four weeks in every state in the Union. But of all the states I know, North Carolina is in the best position to demonstrate to the rest of the United States how to do rural development. So, as you listen to this, think about this both in terms of what fits with North Carolina, but also think about it in terms of your leadership role in the nation. The people in this room have the ability to create a new vision and a new practice for rural development in the United States. It's on the par with the scientific agricultural revolution that occurred in the 180-1920 period, and is on par with the rural manufacturing revolution that occurred throughout the United States between 1950 and the 1970's. North Carolina is in this leadership role because of things like this center, the non-profits that you have in this state, the funders that you have in this state, the system of community colleges, which is the model for much of the rest of the country; the system of regional universities and research universities and a history of political leaders who have been willing to take some tough positions and step up and make some tough decisions. So, no state, in my opinion, is better positioned, but I don't want to mislead you. What I'm about to suggest is very hard and will take 20 years. Anybody that comes in and tells you they've got easy answers and they're going to happen short term, well, we'll talk about them in a minute.
It seems to me that there are three critical questions that we need to ask ourselves. What do we do? How do we do it? And how do we get the political will to do it? So, those are the three questions that I want to talk about briefly.
What do we do? Well, I think we know the answer to what do we do. How do we do it? I think we've got some good ideas, but there aren't any blueprints. And, third, do we have the political will to do it? well, as I travel around the country working on rural development, and I was in Washington State on Monday and Tuesday, talking about rural development, working on rural development, it reminds me of an experience I had as a child. We got to spend a week some summers down in Wrightsville Beach; this was before anything was taller than three stories except the water tower. I've been back once and have just been astonished by all those buildings down there. We used to go crabbing and one thing I learned as a kid was when you put the first crab in, it can crawl out. When you put the second crab in, they both can crawl out. But, after about the third crab, whenever one tries to get out, all the rest of them pull it back in. And that's one of the things that are happening in rural development policy and rural development discussions throughout the country. You see the blue crabs in the bucket; somebody wants to try something new, somebody wants to try something different and the blue crabs kind of reach up and pull it back.
I'm going to talk about four things that we do. And what I'm suggesting is not easy. And none of it happens over night. But it's based on kind of my own study of the issue reviewing the literature hard and spending much of the last 15 years working on these issues.
The first thing we have to do is we have to focus on building new competitive advantage, not protecting old competitive advantage. Easy to say, hard to do, good example of blue crabs. Communities and regions throughout the United States that are stuck in the old competitive advantage and protecting the old competitive advantages are going to die. And some are going to die. I mean, I wish I could stand up here and say do these four things and every community is going to be just fine. But I'd be fooling you. Some communities are going to die, some communities are already dying; but the communities that are not willing to look at how they create new competitive advantage are the ones that are most likely to die - the ones that are going to stay stuck in protecting the old competitive advantage.
Secondly, and this is another tough one, we need to think about our economic and social networks regionally, not simply locally. Throughout the United States, many parts of the country are burdened by old political and non-profit structures that no longer fit the world. When I was a kid in Iredell County you would have thought that Harmony and Cool Springs had been on opposite sides of the civil war. How many places I go where when we start talking about regional cooperation, one of the first things I hear about is the football game in 1968. Or the basketball game in communities that are too small to have had a football team. And they talk about, "well, they bought off the refs in 1968." That's not the way it works. Regional approaches can be more successful economically and politically than single community approaches. There are times when single community approaches are going to make a lot of sense. But I think we have to really open ourselves to working much more on a regional basis rather than having to reinvent all the infrastructure and pay for the inefficiencies that come with that.
Thirdly, economic engines are vital to rural communities. Economic engines are necessary, but they are not sufficient by themselves to sustain rural communities. Let me stay with the train metaphor. The foundation that I run was created by the son of the founder of the Great Northern Railway, and so I try and use railway metaphors when I can. Economic engines pull the train. But community capacity builds the tracks. If you don't have the tracks - I mean, imagine what a train looks like without tracks - you're going to have a great engine, you're going to have a whole bunch of cars attached to it, but if you don't have the tracks to take it somewhere it won't go anywhere. If you look at Bob Putnam's work, or Mill Duncan's work, "World Apart," what you see is a clear pattern. We have to do economic development, we have to do community development, and we have to do leadership development and we have to do them all together. These are the three legs of the stool, and you are the folks that are that board that holds those legs together in this room, and it's real easy to get stuck on one leg of the stool, but as we look down the road, I think it's very clear that we've got to have all three.
Fourth, as we do this work, we need to clearly focus on wealth building, and it needs to be wealth building in and for rural communities. Rural communities where people are just getting by are rural ghettos, and North Carolina's got some rural ghettos. North Carolina's also got some rural deserts. But because of lack of time, I'll just stick to the ghettos right now. We don't need more rural ghettos in this state or anywhere else in the country. What we need is rural prosperity. Rural development should create wealth for some group; why else do it? So when your community is asked to invest in rural development and wealth creating efforts, you ought to ask the question, "Where will the wealth go?" If a significant portion of the wealth does not stay in your region, why should you invest? And this ought to become a screen in which you look at things. And by wealth, I don't mean just economic wealth. I mean better schools, I mean better connections to the global economy, I mean healthier kids. Can rural areas move from subsistence to increasing rural prosperity? I think the answer is very clearly yes. But answering that question takes us from "What we do with a piece of the puzzle?" to "How do we do it?"
Now I want to talk about four examples very quickly of how we do it, and I want to say that there are really hundreds of ways to do it. They are not four perfect examples. These are illustrations of new approaches. In fact anyone that says to you that they have the way, go to the video store and rent the "Music Man" starring Robert Preston. You remember that whole thing about selling trombones and uniforms and all that kind of stuff? That was a big city guy coming down to Gary, Indiana, and trying to rip off all the country people. Now, of course along the way he met Marion the librarian and the rest is history as they say. There are a lot of people running around in the country that are trying to sell "the answer." You probably get to run into some of them here.
I would argue that we are back to at least thinking about the three legs of the stool, and back to thinking about, ok, how does this create wealth, who does it create wealth for, and how does that wealth stay in the community? Four examples quickly. First example I want to talk about is entrepreneurship. This is a place where you are playing a leadership role. Earlier I talked about the scientific agricultural revolution between 1890 and 1920 and the rural manufacturing revolution between 1950 and the 1970's. We need a new rural economic revolution, and I think it's going to be more than anything else based on entrepreneurship. Places like the Rural Center are going to lead that. But how do we do this? How do we do this in rural areas? How do we do this with people of color? How do we do this with people who don't have MBA's from fancy universities? Well, we're learning how to do it and you're one of the places that's leading that. But I will tell you that Nebraska is ahead of you. Iowa's ahead of you, and maybe Oregon's ahead of you. There are other states that have been investing in this strategy longer and have done it more aggressively and so just as you're leading and there are other states that need to look at you, I encourage you to also go look at others. It took us 50 years to figure out the scientific revolution in agriculture - 50 years. It took us 20-30 years to figure out the rural manufacturing revolution. So, this is going to be like those revolutions. It's going to take a long time, and it's going to require new institutional arrangements. Think about the financial mechanisms. We created something called the Farmer's Home Administration to help finance part of that revolution in agriculture. We created an industrial revenue bond to help finance that rural manufacturing revolution. Training and support - we created the extension service in community colleges and dedicated leadership organizations like land grant universities and chambers of commerce. Those are all critical institutions to those two revolutions. What are the critical institutions that you're creating right now that will be here 15 years from now? We will look back upon them as the land grants; we will look back upon them as chambers of commerce. So, in the next 20 years, we're going to have to build an institutional framework that supports and rewards entrepreneurship. I think it's interesting that every land grant university in the country, there are 76 of them, all of them in the lower 48 have a college of agriculture or the equivalent. None of them have a college of rural development or the equivalent. As we go forward, we've got to have our key institutions that are willing to create key institutions. Maybe the center is in fact the model for the rest of the country, but it's got to be a piece of the puzzle, and entrepreneurship, I think, is kind of the lead economic engine.
Secondly, another illustration where you're way ahead of the pack is in what's called clusters. Stewart Rosenfeld with Regional Technology Strategies, who's based here in North Carolina, has looked at this around the world, and what you have in some regions is you have similar industries emerge. And those industries can either fight with each other and kill each other or they can cooperate with each other, build stronger [?] and on occasion compete with each other. Examples of the clusters would be not too far west of here, the sock industry in North Carolina; the toy industry in Northern Italy;, rural automobile manufacturing, secondary parts industry in rural Tennessee. These are all examples of where regions have come together and asked themselves regionally as well as by firm: " How do we increase competitive advantage, looking forward?"
The third example has already talked about a little bit here tonight or at least been hinted at, and that's the role of the universities as rural economic engines. Strong research universities, particularly those with strong science departments and strong MBA's, if you look around the country, have been incredible economic engines in the last 30 years. One of the best examples in America is right here - the Research Triangle Park; in Texas; In Boston, Massachusetts; Seattle, Washington; Silicon Valley; Johnston County in Eastern Iowa, around the University of Iowa; the Twin Cities, those kind of places. But what's wrong with them? They're all urban and suburban examples. We don't have great universities with super science programs very often that are located in rural communities. So what we've got to figure out, I would say for the elected officials in the room, the challenge is how do we say to the university systems, and you've got one of the best in your community colleges and in your regional universities and in your research universities, how do we say to them, "look, we want a contract. We'll continue to support you but you've got to create mechanisms that bring your best science and your best business skills to our community so that the jobs that get created are not just within 50 miles of N.C. State, Chapel Hill and Duke, but are in fact, spread throughout the entire state.
Fourth, and I'll move towards wrap up now because I imagine there are some people in this room that want to go listen to a debate. As you know better than I, the United States has lost millions of manufacturing jobs in the last few years. Many of them in rural areas. Many of them here in North Carolina. I want to give you an example of a non-profit initiative that has turned that around; it actually stopped that from happening. There's a group in Fergus Falls, Minnesota, that's not too far from Lake Wobegon, for those of you who listen to radio, called the West Central Initiative. They realized 12 years ago that they were losing manufacturing jobs. They realized the reason that they were losing manufacturing jobs was because their workers couldn't compete on a global basis. Either you've got to compete on price, which they couldn't do, or you've got to compete on quality, including service. So, the West Central Initiative created something called Workforce 2020, which is a regional approach like I talked about and that's focused on competitive advantage. They've focused for the last 12 years on raising worker productivity on a firm-by-firm basis; it's firm focused, it's not just," well maybe someday you'll get a job." These are people that are already working. Worker training directly tied to productivity and to firm profitability. In 12 years they've trained 7,800 workers. It cost them $3.8 million. They've raised wages $15.8 million a year and have produced economic benefits in that region that are anticipated to be somewhere between $75 and $100 million a year. Incredible payoff, but they've done it by not sitting back and saying, "Well, geez, we're losing jobs." They've analyzed why they're losing jobs; they've focused on worker productivity, and this region is now experiencing a really interesting phenomenon, a phenomenon that virtually any rural community would like. They've got young people moving back. And the young people are moving back want to live there; they like the lifestyle, but now they're moving back because they're able to get living wage jobs, not minimum wage jobs, but living wage jobs.
So, I've talked about two of the three questions. How do we develop the political will to make the necessary changes in rural America and rural North Carolina? Well, you know more about that than I do. Remember the old story about if you put a frog, this is a science experiment, you put a frog in a pan of water, put it on the stove, and you turn the heat up very slowly, a couple of degrees an hour. The frog will sit there until it boils to death. If on the other hand, you put that frog in the same pan of water on the stove and you turn the heat up all at once, the frog will sit there for a few minutes, and then it will jump out. Well, there are a lot of conversations I hear in rural communities, people talking about "Won't it be wonderful when the water temperature gets back to what it used to be?" or out our way, the equivalent is," Geez, when corn gets to $4.00 a bushel everything will be fine." Well, that's not getting the frog out of the pan. Leadership is about encouraging the frog to jump, and it's about helping the frog figure out where to jump. Now, I'm not suggesting that this is easy, but you, in fact, are the leaders in this room and you are the leaders for the state.
I want to just mention briefly three challenges that you're going to face in your leadership. One, and I haven't looked at the North Carolina demographics, maybe you're not there yet, but nationally, we're a suburban nation. The majority of the electorate lives in the suburbs. They don't live in the cities, they don't live in the rural communities, they live in the suburbs. In 1992, for the first time, the majority of votes cast for President were cast in suburban districts. In '94 for the first time in American history the top five positions in the U.S. House of Representatives, three Republicans and two Democrats, were all from suburban districts - the first time in American history that you didn't have one of the top five leadership positions in the House from a rural district. In 2000, for the first time in American history, the Census shows that the majority of Americans live in the suburbs. So one of the challenges that you have as rural leaders is you've got this new constituency out there that you've got to convince that it's in their interest to put money in your community.
The second thing that complicates that is we're doing it in a time, and this is a challenge to hear and probably everyone in this room knows it, I don't anticipate the domestic spending of the federal government to increase for the rest of my career. In fact, I anticipate that it'll decline. So to the extent that you think that Washington is going to pay for this solution that you come up with...Washington may pay for part of it, but Washington is going to pay for a smaller part of it than it has any time in the last 50 years. So, you've got to figure out how to cut the deal here and what the deal looks like. North Carolina gives me hope. The Rural Center gives me hope; it is truly a national model. But nobody is going to save rural North Carolina, except the people that are in this group and your allies. And from my point of view, that's the way it ought to be, because it's your part of the world and you're responsible for it.
So, old ways are not working, I think most of us know that. We're finding new ways by trial and error; it'll take us 20 years to figure that out. We're five years into it, so we've got 15 more to go. The forces of status quo are out there and they're going to resist, they are already resisting; you know that better than I do. But we know what to do: Focus on new competitive advantage; think about regional approaches, not just local; focus on all three legs of the stool at the same time; and focus on wealth building activities and figure out who in your community and how your community benefits from those wealth building activities. Questions about how we do it - will we have the political will? North Carolina has probably got the best track record in the country. But you've got to take us up to the next level. You've got to demonstrate to the rest of the country that it can be done and in fact you've already started. Thank you very much.