Undercover Economist

Why the rural idyll doesn’t come cheap

My mother-in-law’s favourite complaint is that the government ignores the interests of rural communities in favour of cities. I was reminded of that view when reading a recent report from the UK’s “Rural Advocate”, a government appointee whose job is to worry about such things. Stuart Burgess argued that rural areas were not living up to their potential, in part because of a lack of government support.

This isn’t a uniquely British trait. Proclaiming support for rural areas is de rigueur for a US presidential candidate. (Barack Obama: “If Washington continues policies that work against America’s family farmers, our rural communities will fall further behind.” John McCain, although lukewarm on government-funded anything, would make an exception for better internet access: “Government has a role to play in assuring every community in America can develop that infrastructure.”)

But who really gets the bad deal: the rural hicks or the city slickers? Urban areas are, on average, richer than rural ones, but it is a real stretch to blame that fact on a lack of government support.

Rural areas get plenty. There are the agricultural subsidies, of course. But there are also bizarre handouts – The New York Times pointed out in 2006 that Wyoming was receiving more than five times the anti-terrorism funding, per person, than New York State. The ordinary workings of the tax system distribute money to rural areas, too: according to a report published by Oxford Economics last year, Londoners pay £1,740 per person more in taxes than they receive in public services; the average resident of largely rural Wales enjoys £2,870 more in public spending than he or she pays in taxes. Per person, rural areas have more roads, miles of phone line, gas pipe and electricity cable than urban ones – funded either directly by the government, or indirectly through regulated companies.

Rural areas are not struggling because of a lack of government support. They are struggling for the obvious reason: a lack of density is a serious disadvantage. Spread over greater distances, more spending on roads, public transport subsidies, or broadband internet provides less in the way of results. Even when infrastructure is good, mere distance may make it hard to get to the closest hospital, library or Michelin-starred restaurant. With thinner labour markets, both rural employers and employees have to make the best of imperfect job matches.

Most importantly, rural areas are terribly vulnerable to economic change and the inevitable creation and destruction of jobs. If a large business shuts its doors in London or New York, sacked employees can be in job interviews for comparable positions within a few days. If the same closure happens in a small town there are no alternatives, and if you want to sell your house and move somewhere with better job prospects, you’ll find few buyers.

The rural advocate admits that rural economies enjoy high “inputs” (new businesses, educated workers, lots of “knowledge businesses”) but low “outputs” (jobs, wages). He hopes that the situation can be corrected, but I strongly suspect that it is as inevitable as the fact that few city dwellers have large gardens.

While the government can – and does – try to help deal with these disadvantages, it can only do so much. The same is true of the advantages and disadvantages of urban life. It’s not impossible that the government could provide some decent inner-city schools – although from where I live in Hackney, the prospect still seems remote. But it is impossible that government assistance could give all Londoners cheap homes and traffic-free streets.

Sometimes my wife and I grow tired of the inconveniences of urban living. I suppose we could always swap places with my mother-in-law.

Also published at ft.com, subscription free.