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The Regional Divide and the Future of Small Towns

Paul Collits

Manager Regional Policy, New South Wales Department of State and Regional Development
Adjunct Senior Lecturer, Faculty of the Built Environment, University of New South Wales

Presentation to the "From Strength to Strength" Regional Development Conference, Timaru, New Zealand, September 2003

> >Speech Notes

Background Paper

The above analysis sets out what is going on in the regional world, and what is driving the trends. As indicated at the outset, one of the great questions is - who is responsible for doing something about small town decline and survival? Is it government, or is it communities themselves?

The Emerging Regional Policy Consensus

Australian governments, despite their political differences and the inevitable blame-shifting that goes on in a federal system of government, have reached something of a consensus in relation to regional problems and their solution. The consensus consists of the following elements:

• Sustainable development;
• Regionalism and regional competitive advantage;
• Region specific policies and "local solutions to local problems";
• The "bottom up" approach and community driven economic development;
• Facilitation, partnerships, the self-help ethos and the emergence of new "meso" level organisations that drive regional strategies;
• An emphasis on regional leadership;
• A focus on growing existing businesses rather than industry attraction; and
• A move to selective and targeted regional assistance and away from open-ended assistance.

No two governments ever have exactly the same approach to regional development, for the latter includes a whole range of philosophies, objectives, definitions of "regional", policy instruments, tools, implementation strategies, bureaucratic structures, funding mechanisms, and so on.

Yet in Australia, and perhaps many other countries with an interest in spatial economic development, certain ways of thinking about regional development have emerged over the last twenty years. There is a certain coherence to these ways of thinking, and a commonality. If one looks at a contemporary New South Wales regional policy document, or at papers from the 1999 Regional Australia Summit, or at the 1999 South Australian Task Force review, or at the Western Australian policy development process of the late 1990s, one will be struck by the commonality of language and policy approach.

One of the key developments in regional policy over the last twenty years has been the emergence of new objectives, new concepts, new regional development tools, and new ways of thinking about regional development. Hurley (1993) suggested that a new set of "buzz words" had crept into the Australian regional policy lexicon.

These are the new ideas that have shaped the way governments think about regional development and respond to regional problems. The current NSW Government has dubbed this approach "strategic intervention", with the emphasis on the "strategic" rather than on the "intervention".

According to recent governments, regional development must be "sustainable". In other words, economic development in non-metropolitan areas should be based on private investment, or "commercial realism". Assistance is provided only where there is a solid business case for the development, and there is a strong preference for new industries with strong future prospects. There is a close link between sustainable development and the notion of regional competitive advantage, and an emphasis on indigenous investment. Sustainable development implies that government policies should not be used artificially to support regions and that policies should be consistent with market-driven outcomes.

The focus of regional policy has become infused with the notion of regionalism. This at times has included metropolitan regions. According to McKinsey:

Regions are becoming the natural units for making change happen.

On this view, "regions compete - not countries". The notions of regionalism and regional competitive advantage have become embedded in government regional policy thinking and programs, including Working Nation's Regional Best Practice Program, the and the Regional Business Development Scheme in New South Wales.

The emphasis on regional competitive advantage runs counter to the whole balanced development ethos, at a number of levels. Development should occur where it will be "competitive", not where it may be "needed" on balanced development grounds. And the point of reference for regional success is no longer how well the region does against Sydney, but how well it does against other regions, and against its own previous performance.

Carter argued strongly for region-specific policies, and these have largely been adopted by all governments, to the clear detriment of those who argue for "blanket" policies that assist all non-metropolitan regions. New programs find "local solution to local problems", rejecting the "one size fits all" approaches of the past and recognising that regional problems vary from place to place and over time. Place management has become an important tool in some cases. The Hunter and Illawarra Advantage Funds in New South Wales, the Regional Assistance Program (RAP), the Regional Economic Transition Scheme and the Country Centres Growth Strategy best exemplify the new thinking.

That solutions should be tailored to local problems also reflects the notion that communities should drive their own development. This is the "bottom up" approach that so clearly rejects the centralist, top down model. What distinguishes the bottom up, community economic development model is the notion of local "ownership" of strategies, the conviction that local actions make a difference to outcomes, and the emphasis on endogenous development. The philosophy is seen in the NSW Main Street/Small Towns Program and the Commonwealth's Country Centres Project (1987) and Regional Solutions Program. The community economic development spirit also drove the 1999 Regional Australia Summit. On this view, the role of government here is extremely limited:

All government can really do for the future of our regions is to give them the tools for success - the "how" part.

This is the "facilitation" or "partnership" role of government that is central to the new policy consensus, where governments assist regions to become "investment ready", essentially by helping to build regional capacity and empowerment. There would be no rescue by the "cavalry". The directed development model seen in balanced development thinking has no place in the new approach. A plethora of "meso" level organisations has emerged, for example Regional Development Boards, to fill the void left as governments have devolved strategy formulation to the regions.

Also related to the partnership approach is the key role of leadership now central to the policy consensus. Governments have recognised the key role of local leadership in achieving regional development success, and in some cases have encouraged its development.

Governments have either de-emphasised or removed the tools of balanced development, mainly firm relocation, and increasingly focused on indigenous development, fortified by McKinsey's finding that up to 70 % of new regional jobs were created by existing businesses. Equally, "targeted" assistance has become the norm, replacing the open-ended assistance beloved of balanced development supporters.

The visions of governments for regional development linked to these new approaches vary, from a "strong" regional Australia to one where the benefits of economic growth are shared by all regions. Objectives of policy have become more specific, related to the solution of very particular problems in space or in time, and far removed from the decentralisation objectives of the 1960s.

The regional policy approach described here is often contrasted with approaches overseas, for example the United States and Europe. Yet Hugonnier (1999) demonstrates that many Organisation for Economic Cooperation and Development (OECD) countries have adopted policies that resonate with those described above.

The NSW Government has what might be termed a "pragmatic incremental" approach to regional policy, as to most things. The Government itself has described its approach as "strategic intervention". The emphasis is very much on the "strategic" rather then the "intervention".

The Government tries to cover all the policy and political bases, focusing largely (not unreasonably) on job creation as a success marker. Its regular reports on the impacts of its programs typically on jobs created or retained in regional New South Wales through its programs; investment dollars generated; and the number of projects in which the Government has played some assistance role.

The policy does not try to resolve regional disparities. It does not focus on depressed regions. The Government has not commissioned the production of regional indicators of the kind developed, for example, in Western Australia, that would identify regions in distress. Nor does it exclusively target identified growth poles in the way that governments did in the 1970s, through the Growth Centres Program and related decentralisation measures.

The objective of policy is very broad - it is to ensure that the benefits of economic growth are not denied to regional New South Wales. The Government therefore helps growing regions, declining regions, regions experiencing economic shocks, regions experiencing slow decline, with various tailored programs and with no particular discernible geographic priority. Its interventions also cut in at a range of levels - the individual enterprise, the community, the region and the industry. One community or region, therefore, might experience a wide range of policy interventions over time. The Government also provides indirect assistance through a whole range of "meso level" organisations charged with the task of driving local economic development, in addition to its own investment attraction efforts.

Governments in Australia have generally moved away from "smokestack chasing", and have focused more on growing existing regional businesses. Business location should be economically sustainable, hence "as of right" assistance designed to "compensate" firms for higher regional location costs have been abandoned. Top down policy is out, replaced by the ubiquitous "partnerships" with local communities which are increasingly responsible for their own destinies. Regional leadership is emphasised, if not always clearly defined. Helping regions to achieve competitive advantage is the ultimate goal of policy. Often this amounts to helping regions to cope with economic change.

These are all worthwhile goals. Governments have sensibly recognised their own limitations in relation to regional policy.

A number of things follow from this policy position. Decentralisation has been all but abandoned as a policy objective. While regional disparities are recognised, they are not the drivers of policy. Hence the lack of desire to measure how regions are doing. The aim is for regions to "do better" economically, but not particularly in relation to other regions. By attacking "problems" rather than "problem regions", the Government can avoid the fear of being seen to favour some regions over others. For example, over one hundred communities have received assistance through the Main Street Small Towns Program, the Government's flagship community economic development program.

In New South Wales, "problem towns" are often identified and defined in terms of specific problems or events or issues rather than certain states. Assistance is provided in response to a particular issue, and success is defined according to how well the problem is addressed, rather than in terms of progress towards a defined end state for the community or region.

For example, the Regional Economic Transition Scheme (RETS) assists towns that have undergone economic shocks. The trigger for assistance is a ministerial decision rather than a set of identifying characteristics such as the prevailing unemployment rate that automatically triggers policy intervention. This is characteristic of a policy approach that I describe elsewhere as the "tyranny of the announcable". Ministerial discretion plays an important role in regional policy interventions. The task is made to fit what is achievable.

This definition differs markedly from the definition of "success" put forward by interest groups who demand that disparities be reduced.

Identifying successful towns in New South Wales is not difficult, either in terms of low unemployment, population stability or growth, or income per capita. Certain patterns of success might be identified. Yet the nature of the Government's many (though limited) policy interventions and the restricted nature of evaluation efforts to date make it difficult to identify success factors in (or outside) the programs.

The question answered in most program evaluations is not "Is this region doing better than it did before?" or "Is this region doing better than non-assisted regions?" but rather "Did the program have its intended effect, for example in creating x number of jobs or creating x dollars of investment?"

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