Small towns, rural-urban linkages and regional development

Regional development that includes urban and rural areas, people and enterprises is crucial for sustainable development. This is especially the case for low and middle income countries undergoing the urban transition, and for countries where employment opportunities need to be created in both urban and rural areas for a growing and youthful population.

Small towns are a crucial but often overlooked link between rural and urban areas

In most policy discussions, ‘urban’ is implicitly assumed to mean large cities or, at best, medium-sized urban centres. This is despite the demographic importance of small towns: more than one-fifth of the world’s urban population lives in centres with up to 50,000 inhabitants^[1]UCLG (2016) Co-creating the urban future: the agenda of metropolises, cities and territories. Fourth Global report on decentralisation and democracy, UCLG, Barcelona. It is also despite the economic importance of small towns: they are a key component of national and regional urban systems, and can play a crucial role in the development of their surrounding region.

Also often overlooked in debates on urbanisation are the profound transformations taking place in rural areas. Agricultural production systems are increasingly mechanised and consolidated, non-farm incomes are a large and growing proportion of rural households’ incomes and people are more and more mobile. Understanding these transformations is essential to understand urbanisation processes, and to ensure that they are inclusive and that planning takes into account the needs of migrants and low-income groups.

At the same time, while in many instances urban policies remain oblivious to rural perspectives, rural and agricultural policies also fail to see the significance of urban centres for rural development. The renewed interest in small towns and the recognition of their demographic, economic, social and political importance can help shift such biases. It can also highlight that, increasingly, the rural-urban divide is effectively more of a continuum where the linkages and interactions between rural and urban settlements, people and enterprises are ever stronger.

Beyond the rural-urban divide: the growing importance of spatial and sectoral rural-urban linkages and interactions

The linkages and interactions between ‘rural’ and ‘urban’ are an increasingly important component of livelihoods and production systems in most regions of the world. They are also, however, extremely diverse. This is largely because they reflect local and national socio-cultural and economic transformations, including the systems and institutions for the management of natural resources, the nature of agricultural production systems, the nature and location of manufacturing and services, as well as the shape of urban systems. At the micro level, they are also closely interrelated to differences in access to opportunities and assets based on gender, age and wealth. Indeed, complexity is the one characteristic that rural-urban linkages in different locations share. This should not be surprising, as rural-urban linkages are better defined as a complex web of connections between ‘rural’ and ‘urban’ dimensions, rather than a linear relationship. To be a useful concept for policy, however, rural-urban linkages need to be defined as clearly as possible.

A spatial definition of rural-urban linkages refers to the tangible and intangible exchanges between rural-urban areas, people and enterprises. These links are spatial in that they involve the physical movement of goods, people, money, information and waste; and the social networks and relations that span rural and urban locations. This definition is useful to describe the density and directions of linkages; however, it does little to capture the dynamics that underlie these exchanges.

A sectoral definition of rural-urban linkages focuses more narrowly on the interactions between different economic sectors – agriculture, industry and services. These can include agricultural production’s backward linkages (the manufacturing of inputs) and its forward linkages (processing, transport and distribution). This definition goes into more depth in analysing the functional links between people, activities and enterprises in different locations. However, this too has limitations: to understand and support positive rural-urban linkages what is needed is a combination of functional and spatial dimensions. Examples of positive linkages typically share one key factor: the added value produced through functional linkages is retained and reinvested locally, where with appropriate institutional support it serves as the engine of local economic development. It is here that small towns can play a central role.

The main roles of small towns

For most regional planning and policies, small towns can contribute to regional development in four main ways:

• as market nodes for agricultural produce from the rural region,
• as centres for the distribution of goods and services to rural consumers,
• as centres for the growth and consolidation of rural non-farm activities and employment (often related to the processing of agricultural products),
• as magnets for rural migrants from the surrounding region, often on a seasonal basis, thereby decreasing pressure on larger cities.

We should however avoid generalisations and keep in mind that there are great variations in the extent to which small towns can fulfil their positive role in regional development. This is reflected in their demographic transformations: while many small towns have high annual population growth rates, others are stagnating or are losing parts of their population.

Many of these variations relate to the specific context in which small towns develop – and therefore to their economic base – to land-owning structures, to the quality of transport and communications links and to the structural conditions prevailing at the international, national and local levels.

Key lessons from past experiences: policy tools for regional development

Emerging place-based territorial approaches to rural-urban partnerships call for development strategies that build on local conditions and advantages, and in so doing reduce regional inequalities and increase resilience^[2]Barca, F. (2009) An agenda for a reformed cohesion policy: a place-based approach to meeting European Union challenges and expectations, European Commission, Brussels; OECD (2013) Rural-urban partnerships: an integrated approach to economic development, OECD, Paris. They advocate bottom-up planning that involves local stakeholders and stimulates dialogue and the co-production of solutions between local government and civil society, as well as greater transparency and accountability.

But it is not clear whether they will address the key lessons from the relatively high rate of failure of regional development policies since the 1960s^[3]For a review, see Satterthwaite, D. and C. Tacoli (2003), The Urban Part of Rural Development: the Role of Small and Intermediate Urban Centres in Rural and Regional Development and Poverty Reduction, IIED, London http://pubs.iied.org/9226IIED/ . Understanding and addressing these shortcomings is essential to avoid repeating them.

Perhaps the most important lesson is that underestimating the spatial dimensions of macro-economic policies, pricing policies and sectoral policies can have powerful negative impacts on regional development. Sectoral investments that ignore local context-specific factors can result in increased poverty and exacerbate social polarisation. Equally important are issues of land tenure and security and access to resources: the ability of small towns to act as engines of economic growth and poverty reduction depends on stable demand for goods and services by a relatively broad base of producers and consumers. The implication for governance is clear: local and regional governments cannot support sustainable local development if there is no synergy with national and supra-national levels through regular and systematic dialogues.

Regional policies are most effective when they build on context-specific opportunities and constraints. This calls for adequate information and reliable data, and for a dramatic improvement on the very limited availability of subnational data to local governments, especially those of small towns in low and middle income nations. This includes information on economic activities, not forgetting the large share of the informal sector; demographic information including permanent and temporary migration; the characteristics of poverty and vulnerability, including access to housing, services and basic infrastructure; and, last but not least, detailed information on exposure to environmental hazards.

Moreover, while local institutions and governments are increasingly recognised as central to sustainable development, this has not been accompanied by an appropriate fiscal and financial architecture that enables them to perform their role. Decentralisation started in the 1980s and 1990s, but can be severely hindered by the limited powers and financial autonomy of local governments.

Local institutions also need to be accountable to their citizens, often in contexts where competing institutions such as national sectoral institutions, traditional authorities and powerful private sector actors can make this difficult. However, transparency and collaboration with local civil society and local, often small-scale, private sector actors can be key in developing new economic initiatives and diversification, and the provision of basic services. This is especially important in the face of the generalised and ongoing shrinking technical and financial support from central governments.

There are more and more examples of small towns’ positive role in regional development^[4]See footnotes i and iii; and Tacoli, C. and J. Agergaard (2017) Urbanisation, rural transformations and food systems: the role of small towns, IIED and IFAD, London and Rome http://pubs.iied.org/10806IIED/. However, we should keep in mind that local institutions alone cannot solve fundamental issues behind rural and urban inequalities, which depend largely on national policies and development strategies.