Economic Multipliers – The Economic Effects of Tourism in Rural Areas

I have to be honest and say that sometimes I do quite like “geeky” stuff. You know, things like the latest research into all sorts of subjects, facts and figures and so on.

Well one somewhat geeky subject that has always both concerned me and interested me has been the dynamics of rural populations.

Growing up on a small dairy farm on the outskirts of the west coast North Island city of New Plymouth, I saw from an early age how on one side the city steadily encroached and ate up good rural farming land (a process I admit to having had a small part in), and on the other side how farms amalgamated, got bigger and employed fewer people.

Bit by bit, rural areas become depopulated. This is a process that has happened and is happening over much of the world. As rural areas lose population, over time, they also lose public services, such as country schools. This decline then affects small service towns which also decline, and eventually die. Accelerating this decline of the retail heart of small towns has been the likes of Amazon. No small-town retailer can remotely carry the range of goods that Amazon does. If the small-town retailer does not have a point of difference, such as exemplary service, specialised knowledge or simply convenience, then it is only a matter of time before the doors close.

From my early 20s and onwards this decline in the social fabric of rural areas has often been at the back of my mind.

Some would say that this sort of decline is inevitable, a sign of the times, but I disagree. However, the answers to halt or reverse this decline are not simple, or one size fits all. Of course, some might argue, so what anyway? Does it matter if there are few people left in the countryside? (As an aside I have read that some believe that having most of the population in cities makes them easier to control. Probably not relevant in the New Zealand context, but elsewhere?)

I believe that there can be no possibility of reversing declines in rural populations without economic opportunity. Conventional land use, with relatively simple systems concentrating on producing only a handful of invariably commodity products, can not supply these economic opportunities. So what can?

I would be the first to admit that I do not have the answers about what economic opportunities there may be in different geographical areas. However, what I know is that these economic opportunities have to involve some form of layering either alongside, over or with existing farming systems. An example of layering alongside would be our horse trekking operation that operates alongside the existing farming operation on the property next door. An example of over an existing system could be some form of tree crops over animal grazed pasture (to see this in action check out this Country Calendar program on Pine Nuts over pasture)

However, it can be questioned, what benefit does any of this increase in economic activity make, other than the obvious that it offers jobs or self-employment in small scale enterprises?

This difference is where the term “Economic Multipliers” come in. Each business that generates new economic activity in an area has a different economic multiplier. As an example, I am only going to use the figures from some research on tourism.

The economic multiplier is a term that references how many more dollars each dollar of that new business generates within a community. In tourism’s case, when what the employees of that business would also spend locally is taken into account, then the multiplier is 4.56. In other words, for every new dollar in sales that a tourism business brings into that particular community, $4.56 is generated overall in economic activity. It does not take a huge amount of imagination to see the profound effect this type of new economic activity can have on rural towns and communities.

Knowing this, then what is next?

I think what is next, (if we are concerned with rural depopulation and the rundown of services), is that we should be encouraging a mindset of looking for opportunities for enterprises to work alongside conventional farms. These types of arrangements would, of course, need to be mutually beneficial, a win-win for all.

Food for thought.


Brian Megaw

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