How do rural communities develop their economies

Rural areas

Stefan Becker

Dr. Stefan Becker is a political and administrative scientist. His research deals with political control and implementation in the European multilevel system with a special focus on the development of rural areas.

Christian Hundt

Dr. Christian Hundt is an economic geographer, economist and business economist. He researches the determinants of growth, development and competitiveness of regions and economies. His specialization topics include entrepreneurship, regional economic resilience, clusters and municipal finances.

Patrick Küpper

Dr. Patrick Küpper is a human geographer and researches policies for the development of peripheral regions and services of general interest, such as medical care, mobility and local supply. Current projects deal, for example, with new developments in food retailing, civic engagement, networks and innovations of micro-enterprises as well as support strategies for activating and participating regional actors.

The municipalities form the third level in Germany's political system alongside the federal and state levels. This level is of particular importance for the local and regional challenges of rural areas. In practice, however, the municipal scope for action is often limited. With the help of economic development and services of general interest, it is possible to show examples of the opportunities that municipalities have in central areas of activity in rural development.

In Germany's multilevel political system, the federal, state and local governments work closely together. On June 4, 2019, the Brandenburg government cabinet will consult with the head of the Elbe-Elster district on questions of structural development. (& copy picture-alliance, dpa / Bernd Settnik)

The German policy for rural areas arises on several levels. The European Union, the federal government and the states set the general framework by formulating goals and initiating funding programs. Ultimately, however, rural development always takes place "on site" at the municipal level. There are specific challenges here, about which the citizens express their wishes. But to what extent do the municipalities in rural areas have the legal, financial and administrative resources to respond to this? To answer this question, the article first provides a general introduction to the position and structure of municipalities in Germany. For economic development and services of general interest, concrete possibilities and limits of the municipalities in rural development are then discussed.

The position of the municipalities in the German multilevel system

When speaking of municipalities, very different things can be meant. Of central importance in Germany are the municipalities and cities, the majority of which are grouped together in rural districts. The - usually larger - urban districts are an exception. In addition to the rural districts, there are also other municipal associations, for example the association municipalities, in which several municipalities perform their administrative tasks together. Together, these local authorities form the third level in Germany's political system, alongside the federal government and the states. The city-states represent a special case: These are federal states and urban districts at the same time, so they take on the tasks of both levels. Of course, this exception does not play a role in rural areas.

Under constitutional law, the municipalities are part of the federal states, but the Basic Law (GG) guarantees them a guarantee of self-administration. With regard to the content of this guarantee, a distinction must be made between the municipalities and the municipal associations. According to Article 28, Paragraph 2, Clause 1 of the Basic Law, the municipalities must be guaranteed "to regulate all matters of the local community within the framework of the law on their own responsibility". You can therefore be given legal requirements, but within the framework of this you are allowed to act independently within your area. This results in the municipality's right to determine tasks: In principle, municipalities may take on any local task that does not violate the law. It is different with the community associations. These have "the right of self-administration" according to Article 28, Paragraph 2, Clause 2 of the Basic Law only within the framework of "their statutory area of ​​responsibility". There is therefore no general right to determine tasks at the municipal association level, which in Germany also includes the rural districts. The self-government guarantee only says that there must be municipalities in principle; individual municipalities and associations of municipalities cannot derive any protection of existing status from this. In fact, there have already been a number of regional reforms in the history of the Federal Republic, which in particular led to the amalgamation of municipalities or districts.

Tasks of the municipalities
The tasks at the municipal level are diverse. However, the spectrum is based only to a limited extent on one's own decision; it is strongly influenced by the requirements of higher levels. On the one hand, municipalities receive order matters and mandatory tasks according to instructions. In both cases, they are subject to strict legal and technical supervision, so they have no room for maneuver. These areas of responsibility include, for example, reporting, building supervision and the implementation of Bundestag and Landtag elections. On the other hand, the municipalities fulfill a number of self-governing tasks that "only" have legal supervision. But even here there are still gradations in their freedom of design. In the case of mandatory self-administration tasks, the municipality can only decide how it would like to fulfill them. It is not at their discretion that they organize, for example, the land-use planning, waste disposal or youth welfare at all. In the case of voluntary self-government tasks, however, the municipalities can also decide whether they want to carry out these tasks. This includes, in particular, state cultural offers such as museums and theaters, and economic development.

While the independent cities take on the above-mentioned tasks in full, the rural districts and the municipalities belonging to them share the duties. There are very different arrangements; Larger cities and municipalities in particular often take on tasks that the rural district takes on in smaller municipalities. There are always conflicts about the exact distribution. In 1988, the Federal Constitutional Court formulated a basic priority of municipal jurisdiction. According to this, a task can only be assigned to a higher level if the fulfillment on the parish level cannot be guaranteed. In practice, the districts take on self-administration tasks in the areas of waste management, local public transport and social welfare, among other things. In addition, the districts themselves carry out order matters. A classic example is the automotive sector. After all, municipal supervision, i.e. in particular the legal control of municipal activities, is also organized as a mandate at the district level.

revenue
The municipalities need income to carry out their tasks. In the case of the municipalities, these essentially come from four sources: (1) taxes, (2) allocations, (3) fees and contributions, and (4) other income. The first two categories are the most important for the municipalities in large-scale states. When it comes to taxes, trade tax and the share of income tax make up the largest items. The property taxes and the shares in the sales tax are of lesser importance. In addition, there are minor taxes, such as the dog tax, which, however, make up less than one percent of municipal income on a national average.

The allocations from the respective country include general payments from municipal financial equalization, but also earmarked funds, for example for individual projects or debt relief programs. Federal funds are also passed on, particularly for the area of ​​social benefits that municipalities have to pay out. In total, the allocations amount to an average of 39 percent of the municipality's income. Another eight percent contribute fees, for example for waste disposal, and contributions, for example for property developments. The other income is, for example, income from property sales or rental income; they amount to about 13 percent.

The situation is different at the district level. There is hardly any tax revenue here; Instead, the districts are financed, in addition to fees and contributions, primarily through allocations from the federal states and the district levy, which is to be paid by the associated municipalities.

(& copy Federal Association of Municipal Central Associations 2019)

The municipalities thus have a broad income base. However, your influence on this is limited. While the municipalities can at least partially determine the amount of their tax receipts themselves through a right to participate in trade and property tax, they have no influence on their shares in income tax and sales tax, as well as on the amount of the allocations by the state and federal levels. The municipalities can also only determine the income from contributions, administration and user fees to a certain extent. For they are not allowed to derive any general profit from it; in the long term, fees and contributions should only cover the costs incurred. The other income is also subject to legal and practical limits. Municipal companies, for example, are allowed to generate profits that can also flow into the municipal budget. However, these are limited by the required public purpose of the company - i.e. an inexpensive water supply. Income from sales, for example of land or apartments, can only be achieved once. It remains to be noted for the municipal level as a whole that independent changes on the income side are only possible to a limited extent. As a rule, this leads to difficult decisions in the performance of communal tasks, mostly at the expense of voluntary self-government tasks.

Local decision makers
Who makes the decisions at the communal level depends on the respective communal constitution and ordinance. Despite the close rapprochement between the countries, there are still many peculiarities. With the exception of the city-states, all mayors are now directly elected; however, their exact position often differs. It is an exclusive main office in only a few countries. In addition to the full-time mayors, there are usually also volunteers who are currently active in smaller communities and receive an expense allowance for this. In addition, the positions differ in the precise relationships with the community council. In most countries the mayors act as chairpersons of the municipal council, in other countries they are "only" members. Overall, however, the mayors have enormous control options at the municipal level thanks to their preparatory and implementation skills.

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Mayor by chance and an honorary position with responsibility

It was only by chance that master electrician Peter Dreiling became mayor, Peter Dreiling. But that's often the way it is in the country [...] In Marth, Dreiling's Thuringian village [in Eichsfeld], only about 350 people live, so the mayor can't talk himself out of it. [...]

And that's why he, 66 years old, is almost always on the go. [...] In the valley lies the village, a church tower, light and dark red bricks. After the fall of the Wall, the color of the roofs made it easy to see who found work in the east and who in the west. Now everything is new, the village sparkles in the morning sun. Marth is actually doing pretty well.

[...] After the fall of the Wall, many electrical companies went bankrupt, says Dreiling. He persevered. From Monday to Sunday evening, it was all about the operation. It took a year and a half before he got a telephone connection. Seven years until the first order came from the east. [...]

Dreiling does not see himself as a politician, but as a doer and problem solver who runs the village just like he ran his small electrical company for years. The master electrician never aspired to political office. But then a few years ago there was trouble in the village. Marth was once an important agricultural location, there were 1,000 cows here. In the nineties there were fewer and fewer, but a company wanted to relocate its egg production to Marth, with 56,000 chickens. Master electrician Dreiling wanted to prevent that. There was a hearing in the village, he made his arguments with others, but he lost. The opponents of the resettlement vowed to prevent similar actions in the future. "And then I was pushed towards the candidacy," remembers Dreiling. This is how the master electrician became mayor. "It's been going pretty well so far," he says. Nevertheless, he wants to put an end to politics, which he does not like to call politics. He wants younger people to take over, who have a different approach to the citizens. And Dreiling wants something else: "I want my freedom again."

But that's not that easy. Because in the mayoral election in April last year, Dreiling refused to run, but so did all the other Marther citizens. There was no name on the ballot paper. According to the law, citizens can then write down the name of their favorite. 58 chose Dreiling. However, another man received 44 votes. Electrician Dreiling, who no longer wanted to be mayor, had to go to the runoff election. He won just under 51.4 percent. Elections will not take place again for five years. Dreiling has not yet got his freedom back.

Not only in Marth, the candidates for political offices are missing. When 543 honorary mayors were voted three years ago, there was not a single candidate in several municipalities. In many municipalities only one person stood to vote, and the citizens did not have the right choice either. In the municipal elections in Rhineland-Palatinate in May [2019], not a single candidate stood for election in 465 municipalities, so a fifth of all municipalities were without applicants. In seven Brandenburg municipalities, the mayoral election was canceled completely for the same reason. Mecklenburg-Western Pomerania is also familiar with the problem.

Mostly it is not difficult to find applicants for the post of district administrator, there are also enough candidates for the town halls in North Rhine-Westphalia - because these posts are full-time. So there is an appropriate remuneration, and not just an allowance for expenses - little compensation, a lot of effort. In rural federal states such as Rhineland-Palatinate and Thuringia, the communities are often small and the mayors work on a voluntary basis. Dreiling gets 450 euros, he says: "You can't calculate the hourly wage there."

Dreiling and other local politicians are also annoyed that they can hardly shape anything. They find there is too little money and too many rules. For example building law: within 20 years the number of regulations has quadrupled. 5,000 became 20,000. [...]

[...] There has been no club life for years. Only teams from other places play on the sports field, Marth has not been able to get his own team together for a long time. The restaurant is only open for a few days. And the tone has also become rougher, local politicians are threatened. Dissatisfied people set fire to their cars, smear their citizens' offices, and throw stones through the windows of their houses.

[...] [Marth's Mayor Dreiling] sometimes wants more recognition. Marth is part of an administrative community, it lets other people do administrative tasks. Otherwise the community is still independent and still has its own household. Dreiling fought against the Thuringian regional reform. The red-red-green state government under Bodo Ramelow had planned to enlarge the local structures in order to react to the aging of the population, also to the move from the rural regions towards the big cities. There was fierce opposition and the territorial reform was canceled. The citizens here are happy to continue to have their own political structures that have grown locally. Hardly anyone wants to get involved beyond the protest.

Why does master electrician Dreiling still do that to himself? Because no one else does it, for one thing. And because it gives him joy, too, despite everything. [...]

Dreiling is not only a mayor, but sometimes also a caterer, pastor, motivator, finance minister. The people expected their mayor to ensure law and order in the village. Dreiling believes that this is good politics. "I have to organize construction sites, locally and in people's heads." He is currently waiting for the village renewal decision.[...] 60 Eichsfelder had already started a family in another place because they could not have settled in Marth. Because Dreiling is not allowed to issue building permits. "But then I'm the idiot who didn't get it right," he says. Such experiences would cause citizens to lose more and more confidence in political and social institutions. [...] The fact that Marth is also subsidized by politics, that the castle ruins on the Rusteberg were renovated with subsidies and that the village will probably soon receive tens of thousands of euros for village renewal doesn't count for much. Mayor Dreiling says: "Many have big problems with politics." And the mayor has some too. [...]

Mona Jaeger, "Somebody has to do it", in: Frankfurter Allgemeine Zeitung of September 17, 2019; © All rights reserved. Frankfurter Allgemeine Zeitung GmbH, Frankfurt. Provided by the Frankfurter Allgemeine Archiv

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The municipal councils are still considered to be the main political organs of the municipalities. They make trend-setting local political decisions, for example in the context of budget statutes. At the same time, the municipal councils have important control functions vis-à-vis the administration. For their work, the members usually organize themselves along party-political groups, similar to the Bundestag and the state parliaments. In contrast to the local MPs, however, they work on a voluntary basis. Another difference is the passive and active voting rights. In principle, all resident EU citizens are entitled to vote in local elections - in many countries from the age of 16. They can also be elected, but depending on the position they are aiming for, only when they reach a higher age. This peculiarity in the electoral law also applies to the district level, where a similar distribution of competencies prevails. The elected district assemblies are the main political organs with fundamental decision-making powers. It sometimes happens that members of the local council also belong to the district council. The district administrators, in turn, have central preparatory and executive competencies. For this they are directly elected - with the exception of Schleswig-Holstein and Baden-Württemberg, where the district councils take on this task. Even if, by the way, a lot is reminiscent of the separation of powers at federal and state level: Municipal councils and district assemblies are also formally part of the executive; so they do not pass laws. In substance, however, the regulation of communal affairs through statutes has the character of a law, and the organization of communal councils and district assemblies is similar to that of the "real" parliaments.

Local government
Ultimately, it is the local government that is responsible for making decisions. The municipalities - and there in particular the mayors and district administrators - can decide largely freely about their organization. The fact that the municipalities occupy a prominent position in the German administrative system is evident not least in the public service. After all, a third of all employees (with the exception of those in social insurance) work there at the municipal level. Against the background that the majority of state employees work in the education sector, the municipalities are thus a key pillar of public administration. Indeed, most contacts between citizens and the state arise at the local level. However, many local governments, especially in smaller municipalities, are faced with major challenges in still performing all of their tasks in an appropriate manner.

In the course of many years of austerity efforts, the workforce in many local governments has shrunk without reducing the number of tasks at the same time. On the contrary, there are always new requirements, and not only when doing public tasks. The administrative organization is also subject to constant change, currently mainly due to digitization. In addition, citizens are now making higher demands with regard to participation in public decisions. Since many local administrations have to cope with their own demographic change due to their age structure at the same time, there are not always sufficient prerequisites for being fully involved in all local areas of responsibility. As with expenditure, it is often the voluntary self-administration tasks that suffer the most. In the same way, the funding measures of the EU, the federal government and the federal states in some places are not only ineffective because the municipalities cannot raise the required own funds. They also often lack the staff to apply for funds, which are quite complicated.

Other municipalities, on the other hand, find themselves in the situation of being able to keep sufficiently qualified staff available due to a good income situation. Your administration is thus generally more capable of acting, and access to funding opportunities is easier. The extent to which local councils, mayors, local administrations and citizens can shape local development depends only in part on them. Rather, there is an individual context of action, shaped by legal requirements, financial possibilities and existing expertise. In view of the local challenges, this creates room for maneuver that differs from municipality to municipality.

The ability of the municipalities to act, and especially their administrations, has long been a political issue at the higher levels. The municipalities perform a wide range of public tasks, especially on behalf of the federal and state governments. Formally, however, they are hardly involved in their decisions. For these reasons, the municipalities have come together in three central associations: the German Association of Cities, the Association of German Cities and Municipalities, and the Association of German Districts. These associations are intended to give local concerns at the federal and state level a better hearing.

The role of local authorities in rural development

Due to their formal all-round responsibility for local affairs and as the first point of contact for citizens, the municipalities generally play a key role in local development processes. They are also involved in the decision-making and implementation of measures that are particularly important in rural areas, for example in the areas of transport, settlement development and social services. At the beginning of the chapter, however, it was stated that the municipalities act in a multi-level system that influences their design options in many ways. In the following, economic development and services of general interest will be used to illustrate the specific possibilities that municipalities have in central areas of activity in rural development.

Municipal business development
Objective: Municipal economic development can generally be understood as local and regional structural policy, the main objective of which is to improve or stabilize the economic development of a municipality (for this and the following explanations, see also Thorsten Korn / Gregor van der Beek 2018, literature on Chapter 7 , in the chapter Sources, Literature and Links). Three specific sub-goals can be derived from this main goal. These include
  1. securing and expanding local and regional job opportunities,
  2. the development of a sustainable economic structure as well
  3. the maintenance of local and regional site conditions.
For the implementation of the three sub-goals, the municipalities have two basic approaches at their disposal, which can be combined with one another in practice. On the one hand, the economic policy efforts can aim at securing and supporting the already existing local companies. On the other hand, an attempt can be made to expand the existing company portfolio with new companies. The latter can take place both through the settlement of companies previously established elsewhere and through support in the establishment of originally new companies. The design options for economic development are often more limited in rural areas than in urban areas, because the number of companies is smaller, the attractiveness of the location for company settlements is often less and the potential for founders is more limited.

Advisory function: For local companies, municipal business development agencies are an important, central point of contact for information, communication and advice. This function includes, among other things, the marketing of the business location to the outside world, support in applying for funding from the EU, federal and state governments, advice on issues relating to company settlement, establishment or expansion, integration into existing company networks and mediation between companies and other economically relevant actors, such as banks and chambers. The scope and quality of the information and advice offered depend, among other things, on the number of qualified advisors. The economic development agencies in rural areas, which usually work with fewer people, could therefore be at a disadvantage here.

Space management: In addition, there are institutional limits to municipal economic development. Despite their general responsibility in local matters, the municipalities are in fact limited in their design options in many fields of action by overriding competencies at the state, federal and EU level. One exception is land management, which is almost entirely the responsibility of the municipalities. Here, the municipalities have effective instruments at their disposal in the form of land use planning and development planning in order to capitalize on the production factor soil for commercial use. This can be done, for example, by converting arable or grassland areas into commercial building land.

However, potential conflicts of use can make the acquisition and development of agricultural land more difficult. Furthermore, in the interests of sustainable spatial development, it may be necessary to reduce the new use of space for commercial purposes and instead, for example, to aim for conversions. Space management in rural areas is of particular importance because inexpensive commercial space is an important location advantage of rural areas, which can make it particularly attractive for space-intensive industries and companies. It is possible, however, that the location requirements and the space requirements of companies will change in the course of digitization and that the designation of large commercial areas will become less important.

Infrastructure Policy: The communal design options in the area of ​​infrastructure policy are relatively large, but significantly more limited in comparison to land management. The municipalities have extensive competencies here and can provide technology and start-up centers in addition to industrial and commercial areas. However, the provision of land or properties to selected companies that is below the market price and in this sense discounted or even free of charge is prohibited by EU state aid law.

The municipalities also have no direct influence on the integration into the national road and rail network. This can be a disadvantage, especially in rural areas, because the manufacturing industry, a relatively material-intensive branch of the economy, accounts for a relatively high proportion of economic output (see also chapter Economic diversity of rural areas) Since material-intensive branches of industry are also relatively transport-intensive, they need a good one Connection to the supra-regional transport network in order to be able to organize the procurement of raw materials and intermediate products, for example, as well as the sale of intermediate and finished products as cost-effectively as possible. For the local and regional competitiveness, the integration into the supra-local transport infrastructure can prove to be very important.

Education Policy: Education policy is another important field of action. At first glance, the municipalities as school bodies are of great importance here. In most federal states, primary, secondary and secondary schools are owned by the municipalities, while grammar schools, vocational schools and special needs schools are often owned by the districts. District-free cities in turn take on both. However, the school authority only affects the "external" school administration, i.e. above all buildings, equipment and school development planning. And even there, the state level severely restricts the municipal structuring options. For example, although school development planning, which deals with the long-term planning of the school offer, is part of the core area of ​​local self-government, the local authorities are mostly bound by the requirements, permits and allocations of funds from the federal states (see also Hermann Budde / Keno Frank 2018, Literature for Chapter 7, in the Sources, Literature and Links chapter). The federal states are also responsible for the "internal" school administration, in particular curricula and staffing. They are also responsible for areas that are particularly important for the promotion and development of human capital, such as the training of teachers and decisions about new university locations.

Tax Policy: The limited tax policy autonomy of the municipalities has already been pointed out, but a certain amount of room for maneuver remains. The municipalities can not only levy minor taxes (such as the dog tax), but also have freely selectable rates for property and trade tax, with the help of which they can help determine the amount of the resulting tax revenue (for an example of the calculation of trade tax, see The source text "Calculation of business tax). This instrument also harbors risks, because excessively high assessment rates could tempt companies to relocate their headquarters to locations with a lower tax burden. Another problem is the relatively high dependency of municipalities on trade tax, which is considered to be Income tax or profit tax can be subject to strong economic, branch or company-specific fluctuations.If one or more of the locally based branches is experiencing an economic downturn and is recording falling income, the communal tax revenues can shrink significantly and the options for structuring n the municipal economic development are thus restricted.

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Calculation of business tax

The starting value of the trade tax is the trade income. This essentially corresponds to the profit from commercial operations. For the further calculation steps, the trade income must be rounded down to a full 100 euros and, in the case of sole proprietorships and partnerships, reduced by an allowance of 24,500 euros. Corporations do not have an allowance, the main purpose of which is to avoid economic hardship for smaller companies. The rounded and reduced trade income is then multiplied by the nationwide uniform trade tax index of 0.035 (3.5 percent). The result is the so-called trade tax base. The latter is then multiplied by the trade tax rate to be determined by the respective municipality, which must not fall below a value of 2 (200 percent) to prevent ruinous tax competition. The result of the last multiplication corresponds to the amount of trade tax.

A calculation example:
Two person-run craft businesses in East Westphalia generate a profit of 67,850 euros each. One company is located in the city of Bielefeld, the other in the rural community of Steinheim in the Höxter district.

After rounding off and then reducing the tax exemption (minus 24,500 euros), the result for both companies is initially an interim amount of 43,300 euros each. Multiplying this intermediate amount by the trade tax index then results in a trade tax index of 1,515.50 euros each (= 43,300 times 0.035). This amount is also the same for both companies.

Only the application of the community-specific trade tax rate leads to differences, because while a rate of 4.8 (480 percent) applies in Bielefeld in 2018, it is only 4.15 (415 percent) in Steinheim. For this reason, the Bielefeld craft business pays a trade tax of 7,274.40 euros (= 1,515.50 times 4.8), while the company located in Steinheim only pays 6,289.33 euros (= 1,515.50 times 4.15) ) has to wear.

The specific levy tax rates come from the table of real tax levy rates 2014 to 2019 in the district of the IHK Ostwestfalen, Bielefeld. The calculations are based on the numerical example from IzpB booklet 333, 2017, p. 31.

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Subsidy options: Local economic development is also subject to tight limits when it comes to the granting of subsidies.Here, at most, minor subsidies of a maximum of EUR 200,000 per company are permitted within three tax years. Higher subsidy amounts are suspected of distorting competition and therefore require review and approval by the European Commission. Effective municipal options for action are also completely lacking when it comes to cushioning the local and regional effects of a sudden economic recession in the short term. During the financial and economic crisis from 2008, for example, the municipalities were completely dependent on the stabilization measures of the higher government levels. These included, for example, the federal government's economic stimulus packages, the funds of which were also used to promote municipal investments, and the monetary policy stimulus from the European Central Bank.

Economic influences: Municipal economic development is not only subject to institutional but also economic limits. Because which industries and companies will prove to be sufficiently fast-growing and competitive in the future can hardly be reliably foreseen in dynamic market-economy contexts. As soon as the state supports certain sectors or companies selectively, it claims that it has better information about markets and their developments than the market players themselves. Because this claim can hardly be met in reality, there is always a risk of wrong funding.

In addition, municipal economic development schemes have hardly any effective means of pulling regions out of a solidified growth or structural weakness. A self-reinforcing cycle of declining production, falling employment figures, falling demand and a lack of investment is difficult to break, especially since the municipalities' (already limited) options for action are further restricted by falling tax revenues. If such a scenario exists, solutions must be developed with the participation of the higher political levels.

Conversely, positive economic development can noticeably expand municipal tax revenues and opportunities for action. If the economic development agency uses these funds and the instruments available to it wisely and prudently, it can for its part contribute to an additional improvement in the economic situation. In order to expand their general scope for action, municipalities can also seek inter-municipal and regional cooperation. A distinction must be made here between far-reaching forms of cooperation such as inter-municipal commercial areas and looser cooperation such as regional marketing.

Adaptation strategies of services of general interest
The previous paragraph points out that the possibilities for regions with structural problems to bring about positive economic development on their own are limited. Against this background, it may make more sense for local and regional actors to secure or improve the quality of life of the existing population with the best possible care, instead of pursuing strategies that aim to stimulate economic development and attract residents from outside. Since many services of general interest are provided, financed or regulated by the public sector, there are at least theoretically different options for action, even for regions with few resources.

Reduction of offers and focus on the essentials: If a municipality pursues this political approach, for example, facilities will be closed, the range of services restricted, opening times reduced or public subsidies reduced, so that the users themselves have to make a higher contribution to costs. The number of hospitals in rural areas decreased by 3.7 percent from 2012 to 2017, while their number in the densely populated areas increased by 1.5 percent (all figures in this section are based on our own calculations with data from Destatis 2020 and from Patrick Küpper 2016, see literature on Chapter 1, in the Sources, Literature and Links chapter). The number of primary schools in rural areas fell by 4.4 percent in the same period; in the densely populated areas the decrease was only 2.4 percent. These reductions in supply in the five-year period from 2012 to 2017 affected the rural areas of western Germany more than those in eastern Germany with -4.5 versus -0.5 percent for hospitals and -4.7 versus -3.5 percent for primary schools. This is due to the fact that in East Germany many small institutions had already been closed in the first two decades after reunification.

The reduction in supply results in problems in particular for those population groups who cannot use a car to drive to neighboring facilities or who lack the financial means to pay additional costs. Reduction processes are often less coordinated; if, for example, the minimum number of pupils set by the state is no longer achieved, the school is closed, or if a doctor who is retiring cannot find a successor, care is lost. However, such a process can also be controlled so that the remaining facilities can be reached as easily as possible. If the offers to be closed are the last facility in town, it could make sense to maintain them because of their meeting point function and emotional significance for the local population, even if the number of users is low and the costs are high. However, regulations at higher levels restrict local leeway. For example, the federal states define certain mandatory tasks (e.g. drinking water supply and wastewater disposal) for the municipalities and assign them tasks (e.g. disaster control) that the municipalities have to fulfill and therefore cannot reduce. In addition, federal and state regulations limit the scope of action for local actors, for example in the area of ​​hospital financing. Individual or business decisions also play a role, such as the choice of location for doctors or food retailers, which can at best be influenced indirectly. Finally, reducing the number of offers can also have the opposite effect. If, for example, schools have to be closed due to state law requirements, the cost of the increased use of school buses can negate the savings. However, the cost of this school transport is borne by the municipalities, while the country that pays the teachers is making savings.

Change of organization and management: Services of general interest can also be designed with a changed organization. Citizens can take on or supplement corresponding services, for example by reviving a closed village shop as a cooperative, supplementing bus routes with volunteer-run citizen buses or helping senior citizens by going for a walk with them or doing things together. However, the potential for outsourcing tasks to citizens is quite limited: Many tasks require special expertise and continuity, which can hardly be guaranteed if they are taken on by volunteers. Especially in regions in which securing services of general interest is a particular challenge because the population is declining and the number of senior citizens who are significantly less active is increasing, many volunteers are already heavily involved (keyword: multi-function carriers).

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Advancing the village with commitment

[...] Steinbach in the Wartburg district, 1,000 inhabitants, is located on the south side of the Thuringian Forest. The road from Eisenach winds its way up the mountain over the ridge with many serpentines, and then soon the view opens into a valley in which half-timbered houses are lined up close together. [...]

Steinbach [in the Wartburg district] has hit the global headlines twice so far. The first time in 1521, when Martin Luther was imprisoned here on his way back from the Reichstag in Worms and brought to the Wartburg for his protection, as well as in the 19th and 20th centuries through his flourishing knife industry. [...] In 1989, in the GDR, more than 1,100 employees were still producing knives and locks in the "VEB Stahl- und Schneidwaren"; in the year after reunification, ten employees were left. "The machines were sold, the employees laid off," says [Markus] Malsch, whose mother "worked at Messer". [Malsch, 41 years old, was once deputy mayor and has been a member of the CDU state parliament for five years, also responsible for rural areas.]