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Chasing Smokestacks, Stranding Small Business: Rural Minnesota's Crisis

June 27, 2007 By Lee Egerstrom, Economic Development Fellow

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Executive Summary

The state is failing rural Minnesota. Today, the State of Minnesota's economic development policy is oriented towards large projects and larger cities. Efforts to aid rural areas are fragmented, unfocused or nonexistent.

Minnesota faces a stark, fundamental policy choice: do we invest in small town business development policy or do we return rural Minnesota to the buffalo?

Current state agency infrastructure and resources, particularly those administered by the Minnesota Department of Employment and Economic Development (DEED), can be easily retasked to better serve Minnesota's 80,000 smallest businesses. At present, little state effort is directed to aiding these entrepreneurs.

Business data suggest that a modest policy shift, realized though state agencies, will yield substantive dividends. As Luverne, Minnesota Mayor Andy Steensma states, "I would rather have 30 businesses employing 10 people (each) than have a factory come to town and employ 300 workers," he said. "We would have more diversification. And, we would have most of the profits from those businesses that stay right here in town."

This research project identifies four public policy initiatives that will result in a stronger small town business climate.

  • Entrepreneur business skill building and research
  • Business development resource coordination   
  • Development and marketing
  • Capital formation and micro-lending

Indifference, denial and neglect of our rural areas are poor public policy. By leveraging existing resources and making rural economic development a priority, Minnesota could realize a boundless future.

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