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Economies of Scale by Gregg Motley

Greg Motley. President of the Bourbon County Economic Development Council. Submitted photo.

Economies of Scale

Rural areas will never be able to compete, if the measuring stick is scale; and that has been the trend in the vast majorities of industries and markets. Consider the following as examples:

Agricultural

In 1900, 40% of Americans employed, age 10 and over, worked in agriculture. By 1960, that number was 8%. In real numbers, despite the labor force increasing by 1.54 times, the number of people employed in agriculture was nearly cut in half. By 1920, more Americans were employed in manufacturing than on our farms. This despite the number of acres farmed dramatically increasing over time, until recent years. It is easy to understand why: technology. Instead of a farmer’s sons and daughters staying on the farm to work, they have moved to the city to work in John Deere manufacturing plants, among others. This has to be the number one reason rural America’s population has dropped since 1941.

Banking

The number of banks in the US reached an all-time peak of 30,812; by the end of 2017, that number was 4,918. The two primary reasons are regulation and technology. The number dropped dramatically after Congress established the FDIC 1934, which began a rise in bank regulation. Smaller banks could not absorb the additional cost of regulation, along with the fallout of the extended Great Depression, and began to sell to larger banks. When I started in banking in 1979, there were about 14,000 banks in the US. Then, in 1986, the Savings & Loan crisis spawned a whole new set of regulations, and our latest steep decline in number of bank charters ensued. This whole dynamic was hardest on rural America. The insurance industry has experienced a similar trend, as we well know from the loss of Western Insurance.

Retail

There is no need for me to recite all the raw numbers. We all know there are less stores in our small communities than when we were kids. Improved roads and transportation made it easy to drive to the cities. Big box stores shut down Mom and Pop shops on Main Street, including the small town newspaper who lost many advertisers. The latest blow is the Internet, which has helped delivery services to the detriment of retailers everywhere. In 2020, online sales represented 21.3% of total retail sales in the US. It is not hard to understand why rural communities struggle to hold a sales tax base.

What can we do? We can’t fix it all, but we can shop where we live, we can bank with local and regional charters, we can buy our insurance from a local expert, we can employ local expertise and knowledge to build for us. You might even want to open your own small business and invest your capital on Main Street, instead of Wall Street. There is certainly not a panacea, but we can use our buying and investing power for the maximum good of our rural communities.

Lastly, I would say love and support your local farmers and ranchers. When There is no bigger business in Bourbon County than agricultural, by dollars in sales, and by employment. The vast majority of the dollars they bring into our county is outside money; this is a tide that raises all of our boats. Show our agricultural community the respect they are due.

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