Commentary: When bigger is better

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There is a prejudice among many producers, business owners, corporate executives and even “regular” people like me—who drive used cars, paint their own houses and occasionally struggle to pay the bills—that government is inherently inefficient and ineffective, while the private sector is all elbow grease, can-do and get ’er done.

That might partly be a political point of view, but it’s often reflective of the belief that we don’t really need the federal government to perform many of the functions with which it is occupied, and thus we don’t need to be paying taxes to support many of those functions.

Big picture, that’s incredibly false and inaccurate. Seriously. As proof, let me offer an example of what I mean

Just this past week, the American Farm Bureau Federation announced what they’re calling the Rural Entrepreneurship Challenge. The project is a partnership with Georgetown University’s McDonough School of Business Global Social Enterprise Initiative and the Georgetown Entrepreneurship Initiative’s StartupHoyas.

According to an AFBF news release, this “first-of-its-kind challenge provides an opportunity for individuals to showcase ideas and business innovations being cultivated in rural regions of the United States.”

Applicants have until Sept. 15 to submit their ideas, with a group of semi-finalists to be announced at the National Summit on Rural Entrepreneurship at Georgetown University’s McDonough School of Business on Tuesday, Oct. 14, 2014. Those who make the cut will then pitch their ideas to ideas to a team of judges at AFBF’s 96th Annual Convention Jan. 9 to 1, 2015, in San Diego.

“Through the challenge, we will identify rural entrepreneurs with innovative ideas and help them remove any barriers standing between them and a viable, emerging business,” said Lisa Benson, Ph.D., AFBF’s director of rural development. “Winners will get initial capital, as well as mentoring to take them from innovative concept, to strategy, to reality. Farm Bureau recognizes that great business ideas can germinate anywhere and we’re excited to see what our members will bring to the table.”

At face value, that is a terrific idea, one that is indeed exciting. But here’s the catch: The finalists will be competing for the Rural Entrepreneur of the Year Award and prize money of up to $30,000 to implement their ideas.

Now, 30K isn’t anything to sneer at, but c’mon. What kind of game-changing entrepreneurial business kicks ass on that kind of investment? I mean, it’s nice to land that Rural Entrepreneur of the Year Award, but the cash flow’s still going to be a problem, no matter how big that trophy is.

And that’s for the winner.

It’s a nice contest, based on a bright idea, and it addresses a critical need in rural America. But in and of itself, it’s not going to remake too many of the thousands of counties and towns in desperate need of economic development across farm country.

Comparing economies of scale

Contrast that project with a recently announced White House initiative called the Rural Infrastructure Opportunity Fund. This project is also a partnership and also aimed at fostering business start-ups and entrepreneurship in rural areas. But this program is supported by a $10 billion, government-backed commitment from CoBank, a national cooperative bank within the Farm Credit System that provides loans, leases, export financing and other financial services to agribusinesses, rural utilities, affiliated Farm Credit associations and retail customers.

According to the White House news release, the fund, managed by USDA, will reduce the risk for pension funds, endowments, foundations and other institutional investors to invest in rural healthcare and educational facilities, water and wastewater treatment systems, energy projects, broadband expansion and local and regional food processing operations.

Now, there’s no guarantee that the entire sum of $10 billion is going to be sunk into a raft of rural development projects. Even the most altruistic of investors need to have confidence about the ROI of a project before they sign over any serious capital. But even a fraction of that 11-figure total dwarfs the Rural Entrepreneur of the Year award.

Meanwhile USDA Secretary Tom Vilsack announced that the Rural Business Investment Company, which was created just this April, has already raised more than $150 million in investment funds from nine Farm Credit institutions to support small business development across rural America (the AFBF-Georgetown University project is part of that initiative).

Vilsack also noted the launch of a $1.2 billion investment through USDA’s Regional Conservation Partnership Program in aimed at doubling support for natural resource conservation through partner contributions over the next five years.

Currently (FY 2014), the Natural Resources Conservation Service has $400 million in approved USDA allocations to distribute. Quoting from the grant solicitation, the goal is that “NRCS will co-invest in mobilizing creative and workable solutions to agricultural production and resource management challenges [to] benefit not only individual farming, ranching, and forest operations, but also local economies and the communities and resource users in a watershed or other geographic areas that depend on the quality of the natural resources.”

Consider that your daily dose of bureaucrat-ese, but also consider that it’s $400 million we’re talking about. USDA anticipates handing out as many as 150 grants, with a ceiling of $20 million for individual applicants. Based on past experience, that means that the grants will average about $4 to $5 million, with somewhere around 75 to 90 awards.

No disrespect to the folks at the American Farm Bureau Federation, or Georgetown University, but 100 awards at $4 million a pop trumps a check for $30,000—plus a large, shiny trophy—each and every day of the week.

Government programs certainly don’t qualify as the silver bullet that can cure the economic all the ills of rural America. But they remain lights years ahead of most private-sector programs in terms of the sheer scale of their potential impact.

And like several other things in life, with economic development funds, size does matter. □

The opinions expressed in this commentary are solely those of Dan Murphy, a veteran food-industry journalist and commentator.

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marlin fay    
grand meadow minnesota  |  July, 31, 2014 at 09:51 AM

What does a contest about starting up a business have to do with the efficiency of government? i guess I don't see any correlation between the two.

Freedom Over Force    
Hastings, NE  |  July, 31, 2014 at 11:13 AM

Dan Murphy shows a stunning lack of understanding of where all that "free" government money comes from. It does not just materialize out of nowhere, it must first be taken from each of us before the government can benevolently provide it to "cure the economic ills of rural America". There are several things wrong with this entire thesis. First, the US Constitution does not anywhere authorize this type of redistribution scheme. Yes, I know they do it all the time, but it is about time we tell them to stop. Second, if these businesses they are showering with wads of our money are such great investments, the private sector would be investing in them already. Therefore, many, if not most, will not provide a return on investment and we will have squandered large sums of taxpayer dollars, that would have been better spent by the taxpayer had it not been extracted from him. Keeping your own money to invest IS way more efficient than handing it over to the government for them to invest for you. Third, there are always strings attached to government grants, loans, etc that tie the hands of businesses thus impeding the creativity and entrepreneurship that is supposed to be stimulated by this entire effort. Your so-called "proof" that we need big government to push our economy along is woefully lacking in substance. If your hypothesis is correct, why don't we turn all our hard-earned cash over to big brother so the feds can "invest" it wisely since they know far better than anyone else how to make a good return. Our problems would be over!! They can make all the investment decisions for us since they are so smart. Oh wait, that is called communism and has never worked once yet. I strongly dispute your entire premise.

Bill Cook    
Callao, MO  |  July, 31, 2014 at 01:41 PM

Very well said Freedom Over Force. This has to be one of the silliest articles I have ever read in farm related journalism.

Bill Cook    
Callao, MO  |  July, 31, 2014 at 01:43 PM

Very well said Freedom Over Force. This has to be one of the silliest articles I have ever read in farm related journalism.

Robert Dunkle    
Skiatook, OK  |  July, 31, 2014 at 04:32 PM

I agree with "Freedom over Force". If the government didn't take so much of the wealth of this country, welfare wouldn't be needed and that is what those programs amount to. Yes, they will have to sign a paper that they will pay it back, but if the business fails, there goes the money. There is so much "corporate welfare" that the welfare programs for low income people are "pocket change". Unfortunately, that doesn't change whether there is a Democrat or a Republican in the White House. Protect our borders (military) and control interstate relationships and "get the heck" out of the rest of our business, even farming subsidies. If it won't pay to plant it, don't plant it!!!

Cody Swainston    
Angola, IN  |  August, 01, 2014 at 08:49 AM

Did this guy not take ECON 101? As earlier mentioned, where does he think government money comes from? Government can only get money from the people it governs. Government agencies essentially take from one group and give to another. They then take that money and spend it more inefficiently than the private sector ever would. Why? Because ITS NOT THEIR MONEY! Its simple, if a guy is buying lunch on the company card, he is much more likely to spend a little more on himself and maybe even offer to buy for a customer or two. If a guy is buying his own lunch, he'll spend his money much more carefully.

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