by James A. Bacon
A couple of days ago I lamented that the purveyors of the “conventional wisdom” at a recent Federal Reserve Bank of Richmond conference on rural development had little new or insightful to offer. I must offer a partial retraction. A friend has forwarded to me a speech by bank President Tom Barkin. While most of the points he made were familiar, some were new to me — and, hey, I figure if they’re new to me, someone who has been tracking rural development issues for some 30 years, they’re probably new to many others.
In that speech, “Moving the Needle in Rural Communities,” Barkin discusses the disappearance of “anchor institutions” in rural communities such as banks, hospitals and colleges. I’ve discussed the closure of rural hospitals on this blog, but always in the context of the rural health care crisis, never the rural economic crisis. I’ve also written about the travails of small, private liberal arts colleges, but, again, only in the context of higher education affordability, never the rural economic crisis. And, frankly, it never occurred to me to write about the disappearance of banks. However, the concept of anchor institutions seems to be a useful one for understanding rural economic health, and their continued erosion is a worrisome trend.
So, here’s what Barkin had to say:
The disappearance of anchor institutions such as banks, hospitals and colleges is part of the challenge. The number of rural “banking deserts” (counties with fewer than two bank branches per 10,000 residents) in the Fifth District roughly doubled between 2012 and 2017, from 18 to 37. Twelve rural hospitals in our District have closed since 2010. Another 21 hospitals—nearly 20 percent of those in our District—are at high financial risk of closing. Many rural colleges also face serious financial struggles. Ten in our District have closed their doors since 2000.
The loss of these institutions creates direct costs in terms of residents’ access to financial services, health care and education. But there are also large indirect costs. Anchor institutions provide civic leaders and high-skilled workers who can raise the aspirations of those around them. They invest in their communities and educate residents about health, careers or finances. They supply amenities that attract talent. They create incentives for other businesses and signal a community’s vibrancy.
The online version of Barkin’s speech links to a 2017 Fed article by Helen Fessenden about the market pressures facing small private colleges. These privates, which rely primarily upon tuition revenue, receive no state subsidies and have no large endowments to float them, are vulnerable to the vagaries of the marketplace.
The article listed 13 small colleges in the Fifth Federal Reserve district (which encompasses Virginia, West Virginia, Maryland and the Carolinas) that have closed since 2000. Four of them were located in Virginia — including St. Paul’s College in tiny Lawrenceville, Va. Other Virginia colleges in rural counties, most visibly Sweet Briar College in Amherst, have encountered severe financial stress as well.
Regarding rural hospitals, Barkin’s speech did not list the 12 hospitals in the district that have closed since 2010 or the 21 hospitals that are at “high financial risk of closing.” But Bacon’s Rebellion has tracked the demise of at least two: the community hospitals in Lee County and Patrick County. I would love to see the data on “banking deserts,” and I will track that down if I can find it.
I have long thought that someone needed to create a platform for the sharing of data, insights, and best practices regarding rural development. As an organization in the business of collecting economic data, perhaps the Richmond Fed can fulfill that function for Virginia and neighboring states.
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