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The Regional Divide and the Future of Small Towns

Paul Collits

Manager Regional Policy, NSW Department of State and Regional Development
Adjunct Senior Lecturer, Faculty of the Built Environment, UNSW

• Background Paper

Speech Notes

What I will talk about...

• Some views on regional Australia
• Some facts about regional Australia and small towns - key trends
• The big picture economic, social and cultural trends
• The impact of the knowledge economy
• Realities facing regions and dispelling some myths
• Particular issues - the flight of youth
• Drivers of regional development
• Who does it - government or communities or both?
• Defining "success"

Some Views on Regional Australia

• John Anderson (Deputy Prime Minister):
  • Recently I was talking to a journalist about country Australia and he asked if I was afraid of One Nation. I replied no, I was not afraid of One Nation, the political entity, but I was afraid of Australia becoming two nations (1999)
• Roy Powell:
  • "... I am presenting a bleak picture. It is one that underpins many of the trends affecting rural/regional Australia. Our old structures and systems are not working, we lack scale, and we are losing industries, people and services to the urban areas"
  • "Small towns are at the end of the chain with little going for them"
• Australian politician:
  • "I believe in the merits of great cities. Sydney will always be dominant. Little towns are going to find it increasingly difficult to survive unless they become suburbs of larger centres, but that's history"
• Olfert and Weinand:
  • "... most inland rural communities in New South Wales have historically depended on primary agriculture, forestry and mining for their economic bases. Retail trade and services developed around transport and distribution centres to serve the primary sectors. Where the primary sectors have been characterised by sparse settlement and labour-saving technological changes, inland communities have experienced decline in function, and sometimes in population as well".
• The ABS sums up the plight of small towns thus:
  • People living in declining towns risk losing their savings, livelihood and support systems as they confront the break-up of their community, loss of jobs, deteriorating infrastructure and declining property values. In addition, declining towns often lose services through the closure of schools, hospitals, retail establishments and banks. Such closures have a direct impact on the health and well being of remaining residents, but they can also have psychological impact, with many seeing the closure of central services as signalling the "death of a town"
• Gordon Forth:
  • "... the decline and ultimate demise of many smaller country towns is part of an inevitable historical process and should be accepted as such"
Cities as the Crucible of Creativity - Landry and Bianchini
• "Historically cities have been one of the greatest manifestations of the flowering of the human mind. There has always been creativity in the cities. They are the repositories of creativity because of their role as markets and trading centres and their critical mass of entrepreneurs, artists, intellectuals, students, administrators and power brokers. They are often cosmopolitan, encourage racial and cultural intermixing and offer opportunities for face to face interaction. They allow people to mix in myriad combinations their ideas, aspirations, dreams, problems, projects, conflicts, memories, anxieties, loves, passions, obsessions and fears. Cities have identities and histories lastingly represented by landscapes and topography, the liveliness and diversity of their cultural and social life and their civic traditions, festivals and rituals."

What is Happening in Regional Australia? Key Trends

• Persistent metropolitan primacy
• Emergence of Sydney as a global city
• Corporatisation of the farm economy
• Acceleration of "sea change"' (the big shift)
• Higher unemployment on the coast
• Regionalisation and the growth of "sponge cities"
• Small inland (wheat-sheep belt) town decline
• Lower incomes in regional areas (15%) and some towns largely dependent on social security
• Loss of young people and an ageing population
• Drift to the sun belt
• Inner city living trendy now ("Manhattanisation")
• Decline of traditional industries, eg meat processing, timber, dairying
• Globalisation is empowering and disempowering regions - "creative destruction"
• There is persistently high unemployment in some regions
• Massive environmental issues, eg water, salinity, native vegetation
• Multiple divides and apparently growing disparities rather than a simple "city-country divide"
• Increasing complexity of trends and processes

Changing Economic Functions of Regional Towns (Murphy et al)

• Since the 1950s, there are 400 new places over 1k people
• 1k to 5k category has remained static
• Places over 10k up from 48 to 113
• There is increased functional diversity
• Uneven distribution of resource extraction and processing centres
• Only a small number of highly specialised centres
• Substantial decline of manufacturing centres
• More places oriented to leisure, lifestyle, tourism

"Sea Change" (Murphy and Burnley)

• The great change - counter-urbanisation
• 1 million have left Australian capital cities since 1970s
• 70% in movers of working age
• Where? Coast and peri-metropolitan areas
• Who? Retirees, lone eagles, gentrifiers, welfare migrants (forced relocators), families, ferals/ alternatives
• Why? 15% work; 8% housing; 30% environment/ amenity; 11% retirement; multi-causality; varies with age
• Live in a quieter place; amenity; lifestyle;
• Downshifters

Dimensions of Small Town Population Decline 1997-2002

• NSW LGAs over 20 k: 4 out of 35 lost population
• LGAs 10k to 20k: 5 out of 20
• LGAs 5k to 10k: 13 out of 29
• LGAs 1k to 5k: 31 out of 41
• The pattern is clear
• New Zealand: districts and cities over 20k (under 100k): 9 out of 29 lost population
• Districts 10k to 20k: 9 out of 12
• Districts 5k to 10k: 10 out of 12
• Districts 1k to 5k: 1 out of 2

"Big Picture" Drivers of Change Affecting Regions

• The spatial pattern of economic activity is increasingly shaped by economic, social and cultural drivers that are interlinked
• Post-industrial society and the knowledge economy
• The world is global and local, not national
• The cult of lifelong learning
• The internet has changed everything
• The buzz of the city - "hub culture"; F2F
• Globalisation = multiculturalism
• The baby boomers approach retirement
• Two income families and consumer power
• New location drivers in the knowledge economy
• The rise and location of skilled workers
• Outsourcing and the creation of new service industries
• Lifestyle choices reinforced by rising affluence
• Feminisation of the workforce
• Environmentalism and the carrying capacity debate
• Career shifting and career uncertainty
• Declining cost of transport and communications
• Portable professions
• People are retiring or semi-retiring early
• People are living longer and more healthily
• Instantaneous communications - time driven economy
• Business in the coffee shop
• Marrying less and later (the Bridget Jones economy)
• Outsourcing / downsizing by companies
• Increased tolerance of alternative lifestyles
• People today expect more from the places they live
• What are the spatial implications?

The New Emphasis on Education

• The knowledge economy
• The perceived need for two degrees
• Lifelong learning driven by career shifting and by desire for self-actualisation
• Dramatic increase in school completion rates - from 35% in 1980 to 75% now
• Higher education enrolments - 1980 was 320k; now 830k
• A driving force for youth out-migration
• The annual, almost manic media focus on the Higher School Certificate in NSW;
• The willingness of parents to move house (with its attendant high transaction costs) in order to qualify residentially for attendance by their children at better state schools;
• The massive growth in numbers of students in Year Six sitting for selective high school entry;
• The employment of subject coaches during secondary school and even primary school;
• The growth in selective schools;
• The huge growth in numbers of students at private schools;
• The growth in regional universities and campuses; and
• The growth in postgraduate study

Regional Realities

• Places with scale, a diverse economic base and global connectedness will do best
• Most people prefer to live on the coast in Australia (Bernard Salt)
• Globalisation favours big cities and city regions
• Young people move out and move on
• Not every region is a winner from restructuring - national gains generate regional losers
• Some of the things that drive regional success are beyond the capacity of regions and governments to influence
• "Australia used to ride on the sheep's back and the miner's barrow. Today it is powered by the shiny towers in our central business districts, by our vibrant inner city neighbours and our suburban enterprises"
  • Marcus Spiller and Andrew McDougall
• "Step back and ask, what is the most striking feature of economic activity? The short answer is, surely, concentration"
• Paul Krugman

The Exodus of Youth - Can It Be Stopped?

• The issue that most worries small town communities
• Lost youth = lost skills, new ideas, leadership, future growth, vitality
• 1996-2001 - net loss from country areas to capital cities of 15-24 yo of 56k
• In 2001 - no of 15-24 yo in the smallest rural areas 36% less than 5-14 yo 10 years earlier
• 85% of Coffs Harbour Year 11 Students intend to leave the region (a university town in a high amenity location - Murphy and Burnley)
• This is inevitable and not new - most young people move (64% in 2001)
• Life cycles and the three Es - education, excitement, employment (also love, high incomes, and jobs choice)
• Once moved, other factors provide a lock-in effect
• Career moving and thick labour markets
• Yet 68% of all young movers stayed in the same region
• 1996-2001 - 60k young people left capital cities to go to other places
• Strategy should focus on winning them back

Exodus of Youth - The Regional Business Development Analysis

• "Young people often move from regional to metropolitan areas for education and employment reasons. We believe that time spent in the city or working overseas provides invaluable life experiences that can only benefit regional business's innovation and competitiveness"

It is Not All Bad for Regions, Including Small Towns

• There is ongoing metropolitan out-migration
• There is a regional housing boom
• Bigger city incomes mean regional tourism opportunities
• There are new industries appearing
• There is endogenous business development
• Many regions are globally connected
• Growth potential in leisure, construction, information technology
• Competitive advantage can be created

Some Myths about Regional Development

• Regional Australia as a whole is in decline;
• There is a single entity called "regional Australia"
• There is a drift to the cities in aggregate terms;
• It is open to governments to favour some regions (small towns?) over others;
• Cities are growing at the expense of regional areas;
• Regions are in decline because cities are growing;
• Youth out-migration is all one way - to the city
• Unemployment is worse outside the cities
• Big infrastructure projects will populate the inland;
• Population loss equals decline;
• Economic restructuring inevitably leads to negative outcomes - higher unemployment or out-migration;
• Economic rationalism /neo-liberalism has caused regional decline;
• Regional Australia or Regional NZ can be fixed up by government policy change; and
• Declining farm populations are necessarily a bad thing for regional areas

Two Regional Australias

• One view - regional Australia differentiated, complex, not in universal decline, having many growth sectors and places, driven by local factors, having good prospects, sees government as a partner but not as a solution, see opportunities in globalisation - focus on getting on with it, on regional competitive advantage
• Another view - regional Australia in decline, "crisis", as a result of government policy failure, blames economic rationalism or neo-liberalism, focus is on political activity, lobbying, looks to government for solutions, focus on relationship to the city

Explanations of Regional Success

• Traditional theories -
• industry location;
• central place;
• agglomeration economies;
• cumulative causation;
• core and periphery

What drives regional development, then?

• Is it the natural advantages of a region?
• Is it biophysical resources? Is it location?
• Is it proximity to a large market?
• Is it critical mass? In other words, is the size of the local economy important?
• Is it the presence of industries that are growing nationally?
• Is it economic diversity? Is it local leadership?
• Is it a welcoming business climate?
• Is it human capital, either in Putnam's version (social capital) or Florida's (creative capital)?
• Is it a welcoming business climate?
• Is it human capital, either in Putnam's version (social capital) or Florida's (creative capital)?
• Is it the passion of the community and its active involvement in local economic development?
• Is it being entrepreneurial?
• Is it collaboration among the key stakeholders? Is it having a positive attitude to change?
• Is it global connectedness?
• Is it having a local economic development agency?
• Is it having amenity and a high quality of life that appeals to "sea changers"?
• Is it being cosmopolitan?
• Is it a welcoming "people climate"?
• Is it infrastructure, such as the proximity to an international airport?
• Is it clusters of industries?
• Is it the existence of tacit knowledge shared among networks of connected firms and other regional players? Is it government assistance?

Recent Thinking on Regional Success

• Porter and clusters
• Challenged by new growth theories - growth driven by knowledge (Paul Romer)
• And by "new regionalism" - the innovative, networked regional economy and "tacit knowledge"
• And by the creative capital theory (eg Florida)
• There is no consensus on what drives regional growth
• It is hard to measure what drives regional growth
• Hence there are no easy answers to the $64 question

Heroes and Successes

• Tim Fischer's heroes - Nundle, Parkes, Holbrook
• Townlife Development Program - Nymagee, Gloucester, Lockhart
• The Coolah story - UNE study
• Varying success factors - resources; entrepreneurship; fear of decline; imagination; partnership with govt; specialisation; diversity
• The lessons vary

Nundle

• North west NSW
• Familiar decline - empty shops, run down businesses, out-migration
• Peter Howarth
• Turnaround - entrepreneurial attitude, town support, lateral thinking, marketing
• Private sector resources

Coolah

• Central West NSW
• Economic restructuring on top of gradual decline
• Determination to fight back
• Dynamic leadership group
• Town support and Council on side
• Range of projects - civic pride
• Huge outside resources
• Good natural factors
• Decline has been stemmed

Creative Destruction and Economic Success

• Joseph Schumpeter
• Economic restructuring as a creative process
• Entrepreneurship leads to new growth
• Restructuring is not a disaster - lower unemployment, higher employment growth, less out-migration
• Disasters trigger activist responses
• Shaffer - a "slight" level of dissatisfaction
• Slow, invisible decline harder to counter
• Highly visible problems are of greater concern to government

Characteristics of Successful Places - Joel Kotkin

• IT revolution has "reshuffled the geographic deck"
• Any place can be a player if it has dynamism and cultural richness
• Critical asset - access to the skilled labour that dominates the new economy
• Places need to "plunge into the hard work of re-invention"
• Nerdistan; Valhalla; Midopolis; Boutique city
• Reference: The New Geography

Kotkin

• "In the past, people and companies located to be close to physical assets... Why else did people and businesses migrate to fundamentally inhospitable places? Today, in the information age, the critical asset is no longer a physical one; it is access to highly skilled labour, most particularly the scientists, engineers and other professionals who dominate the new economy" Joel Kotkin
• "Virtually any kind of place can be a player in the information age if it has the right characteristics"

Mark Drabenstott - Finding the New Economic Engine

• Tapping the digital economy will take:
• Broadband infrastructure
• Savvy entrepreneurs
• Skilled workforce
• High quality of life
• Growth occurring where there is scenery; a retail hub; and near a city
• 4 out of 10 US rural places growing

Successful Places- Phil Burgess (Center for the New West, Denver)

• Places must be fast, flexible, customised, global and networked
• Things work - responsive govt; robust civic order (see Putnam);
• Good jobs and wages important
• Enterprises that have a future
• Build on existing strengths
• More per capita wealth
• Focus on capacity building; LEDs as "brokers"
• Growth or not

Successful Places - Florida

• The creatives want authentic experiences - "buzz", hip urban lifestyle
• They need to be able to "plug in" to a place easily
• Integrate, don't segregate land uses
• Avoid sprawl
• "People climate" as well as "business climate"
• Lower entry barriers for new arrivals, especially for the CC
• Strengthen research universities
• Encourage diversity, eg ethnic diversity
• Preserve regional authenticity; don't re-create
• Encourage people living down town
• Be open to new ideas
• THESE CANNOT BE LEGISLATED

Florida

• "An attractive place doesn't have to be a big city, but it has to be cosmopolitan - a place where anyone can find a peer group to be comfortable with, and also find other groups to be stimulated by; a place seething with the interplay of cultures and ideas; a place where outsiders can quickly become insiders."
• Kahn: A great city has two hallmarks: tolerance for strangers and intolerance for mediocrity.
• For Florida, these are qualities that appeal to the creative class - they are also conducive to innovation, risk-taking and the formation of new businesses

The Welsh Development Agency - Competing With the World

• The best performing regions had:
  • A strategic or central location
  • Well-developed transport and telecommunications infrastructure
  • Innovative businesses
  • An entrepreneurial culture
  • A small number of "driver" industry clusters
  • A polycentric urban structure
  • Long-established industries
  • Businesses in the region recognised the need for productivity and competitive advantage
  • Strong small and medium enterprise support systems
  • A highly skilled workforce and world class educational institutions
  • A high quality of life
  • A strong self-image and local pride
  • Highly developed networking within the region
  • International networks
  • High quality analysis of their situation.
  • Locally appropriate levels of autonomy and leadership

Main Street Program Success Factors

• Community ownership of the planning process;
• Commitment to working in partnership with other local organisations;
• Commitment to funding the program locally;
• Local council support and involvement;
• An active committee with broad representation from local government, business and community groups;
• Local leadership;
• Broad community support for the local program;
• Knowing the local economy;
• Focusing on the retention and expansion of existing businesses rather than attempting to attract large employers;
• A realistic strategic plan developed through a public consultation process;
• Detailed action plans;
• A human resource commitment to implementing the strategic plan;
• Monitoring progress and ongoing evaluation;
• Keeping people informed, particularly through positive media coverage;
• Acknowledging and celebrating successes.

Community takes a multi-functional approach

• Strategic use of resources
• Merge economic and social goals and build capacity
• Mobilise community around priorities
• Mobilise internal assets and leverage external resources
• Critical mass of cooperating organisations
• Formal and informal leadership that is inclusive and visionary
• All community involved
• Investment in education and lifelong learning
• The need to evaluate using adequate information

Successful Places - What will they do, though?

• Traditional industries, eg mining
• Traditional industries, new products and niches
• New industries
• Tourism
• Events, festivals
• Amenity, lifestyle - downshifters, lone eagles
• Retirement services - health, aged care
• Opportunities through IT

Achieving Regional Success - What Can Communities Do?

• Roy Powell: "Regional Australia's future will not happen as a matter of course"
• EM Schumacher - perhaps we cannot raise the winds but each of us can put up the sail so that when the wind comes we can catch it"
• Tom Peters - "inventors of urban, rural and suburban tomorrows"
• Art not science - imperfect knowledge
• Too much butcher's paper?
• The importance of understanding context

The Local Economic Developer

• Gordon Forth :
  • "Amongst the false wizards, who have intentionally or unintentionally misled Australia's regional communities regarding the realities of decline, are certain opportunistic consultants with their glossy well-rehearsed butcher's paper routines, less than honest politicians and the small town revivalists - the professional optimists with their quick-fix solutions for the complex problems of small town decline"
• A young profession
• Facing isolation
• Poorly resourced
• Playing a new game
• Needing multi skills
• Huge and often unrealistic expectations among stakeholders
• Battling local agendas and politics
• Unable to pull all the levers
• One step forward, two steps back

The Local Economic Developer's Task

• O'Neill:
  • "Like the builders of a cathedral, those who would create a new structure of opportunity face a life of slow cutting on a hard stone" The flea scratching the elephant?

Local Strategy Choices

• The level and duration of assistance / incentives
• Hunting versus gardening
• Focus on the firm or the community (eg infrastructure; capacity building) or the region
• Diversify or specialise (clusters)?
• What kind of industries to attract
• How much community involvement?
• Business climate versus people climate
• Choices matter because resources are finite and expectations high

Achieving Regional Success - What Can Governments Do?

• What governments should do depends partly on what they can do
• Tyranny of the macro (Sorensen; Ellyard); regional realities
• One, though important, part of the mix
• Government can provide infrastructure , services and technical support - active partnership
• Not be a barrier to development
• The three choices re small towns - save all, save none (the buffalo commons; see Forth), save some
• How to decide which towns to help - the best prospects, the worst prospects, or the self-selectors?

Challenges of Regional Policy

• There are multiple and often ill-defined objectives
• There is a lack of agreement over what "regional" means
• There are many levels at which policy can be applied
• There are multiple choices over which policy instruments to use
• There is a lack of capacity directly to shape outcomes
• Regions are unequal in the extent to which they can benefit from policy interventions
• There are conflicting theories and a lack of consensus over the drivers of regional success
• There is a huge impact on regional outcomes from OTHER policies and from processes that governments cannot control
• Regional conditions vary over space and time
• The problem of evaluation - it is difficult to know what works and difficult to measure the impact of what we do
• There is waxing and waning of government interest in regional development
• Regional policy can take a long time to work

Yet Much is Demanded of Regional Policy

• A more highly populated inland
• Less regional out-migration
• Retention of young people in regions
• A less dominant capital city
• A more favourable regional business climate
• Regional "well being"
• Lower regional unemployment
• Fewer inter-regional disparities
• Higher regional incomes
• This list merely scratches the surface

The Current Regional Policy Consensus in Australia

• Bottom up, community driven (DIY?)
• Regional competitive advantage
• Region-specific programs
• Development must be economically sustainable
• Role of government is one of facilitation
• The key word is "partnership"
• Targeted and selective assistance
• Focus on enhancing existing regional businesses
• New players - "meso" level strategy formation
• There is no one "silver bullet" policy solution

The NSW Government's Approach

• "Strategic intervention"
• Local solutions to local problems
• Government works in partnership with businesses, communities, industries and regions
• Not a particular focus on small towns
• Programs are tailored to regional conditions and regional problems
• A commitment of around $25 m in 2003-04
• $6.5 b in regional investment and over 28 000 regional jobs created or retained through 900 projects since 1995

Regional Development Programs in New South Wales

• Programs assist enterprises, communities, industries and regions
  • Regional Business Development Scheme
  • Regional Development Boards
  • Agribusiness Alternatives / Export Advisers Program
  • Country Embassy
  • Regional Business Investment Tours
  • New Market Expansion Scheme
  • Country Lifestyles Program
• Community based programs -
  • Main Street / Small Towns Program
  • Townlife Development Program
  • Developing Regional Resources Program
  • Business Retention and Expansion Program
  • Web site - http://www.regionalcommunities.nsw.gov.au
  • Annual Community Economic Development conference

Learning from Success and Factoring in Reality

• There is not salvation, only grinding, hard work
• The old prayer - change the things we can; accept the things we cannot change; and learn to know the difference
• Some successes cannot be transferred - adapt, don't adopt (Mathisen)
• Develop characteristics rather than copy strategies

Defining Success in Regional Development

• Defining success one of the three great questions of regional development
• The others are - Who is responsible for regional development? and What causes regional growth?
• We often define success in terms of growth - this is at best a partial account of well being
• Success= managing change; positioning for opportunities
• Sustainability means capacity for reinvention
• Maslow's hierarchy of needs

Summing Up

• The macro forces are not good for small towns generally, but they are not all bad
• It really is up to towns to save themselves
• There are keys to unlocking the door to success
• Success must be defined realistically
• Passion is not enough
• Let the young people go, but give them reasons to return
• Genuinely welcome new ideas and new people

Some Useful Sources

• J R Bray: Social Indicators for Regional Australia (Dept of Family and Community Services)
• B Salt: The Big Shift
• D Henton: Grassroots Leaders for a New Economy
• R Florida: The Rise of the Creative Class
• J Kotkin: The New Geography
• C Cocklin, M Alston: Community Sustainability in Rural Australia
• Welsh Development Agency: Competing With the World
• Web sites - Collaborative Economics, The Center for the New West, Center for the Study of Rural America, NSW Community Builders, Regional Business Development Analysis, Bureau of Transport and Regional Economics

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