Small Towns Battle Rural Downturn. Innovation and community spirit are helping Greenfield, Iowa, weather economic problems. RURAL AMERICA

THE farm crisis may be over, but the rural crisis isn't. ``Rural communities have gone through a very tough time in the decade of the 1980s,'' says Larry Leistritz, an agricultural economics professor at North Dakota State University.

And despite recent upturns in agriculture, mining, and manufacturing, the erosion has not stopped. North Dakota is typical of the rural downturn.

Since 1980, the state's rural areas have seen their share of statewide retail sales fall from 37 percent to 30 percent. North Dakota saw less than 1 percent employment growth between 1980 and 1987 - all of it coming from its few metropolitan areas.

``It is increasingly apparent that rural America's problems are much broader than the farm or agriculture itself,'' writes Marvin Duncan, acting chairman of the Farm Credit Administration, in a recent article for the Federal Reserve Bank of Kansas City. ``The more fundamental challenge is to broaden economic opportunity in rural America.''

It is a big challenge. But not an impossible one, as Iowa is finding out.

Between July 1987 and July 1988, 500 more people moved into the state than moved out. In March of this year, Iowa had 56,000 more workers than a year ago. Most surprisingly, half of that job growth came from nonmetropolitan areas, says Harvey Siegelman, the state economist with the Iowa Department of Economic Development.

What's happening here? Innovation and collaboration, buoyed by the general improvement in the state's economy, seems to be paying off for parts of small-town America.

``We obviously won't save all 940 communities in the state of Iowa,'' says Allan Thoms, director of the state's economic development department. ``Those communities still have to address those issues'' of development.

Unlike a lot of rural towns, Greenfield, Iowa, is tidy and upbeat. One is almost tempted to say it's too upbeat, except that presidential candidate Jesse Jackson found great support here with his outreach to the disenfranchised. He set up his headquarters for the Iowa caucuses right in Greenfield.

``Greenfield has always been a community that has pretty much done things on its own,'' says Dale Yount, former Greenfield mayor and now president of the community's economic development corporation. ``Some of our businesses are struggling. ... But I think we are remaining a viable place.''

The city has tried repeatedly to get government funds for projects, but with only 2,060 residents, it isn't big enough to qualify for many state development programs. So, it has looked inward.

``We have a community spirit that - I don't know how we got it, I don't know how we maintain it - but it's here!'' says Diane Weiland. ``In the city of Greenfield, there are over 55 organizations. ... It gets people involved.''

Ms. Weiland heads up what must surely be one of the most exotic local organizations: the Antique Preservation Association. It aims to develop a new museum, built around 10 antique restored aircraft that were donated by a local widow. To broaden the museum's appeal, the group aims to display other memorabilia and establish the Iowa Aviators Hall of Fame, which each year would induct famous Iowa aviators.

``It's a grand plan,'' Weiland confesses. ``But the opportunity is there. A community this size can't throw away an opportunity that has been given us.''

Greenfield's economy has been buoyed by an insulated-glass company, an ink manufacturer, and a mining concern that have kept local people employed. It's a county seat, which gives it a steady base of government jobs. The farming rebound has also helped.

``I'm in the best shape I've ever been right now,'' says Denny Davis, owner of a local farm-implement store and one of five city councilmen. ``The biggest problem I see right now for small towns is that people are not doing their shopping there. A lot of 'em are going to bigger towns and doing their shopping.''

In the past three years, Greenfield has lost a hardware store, a grocery store, and a Ford dealership. There's talk of a Wal Mart discount store joining the K mart in Creston, 21 miles away. The big shopping malls of Des Moines are less than an hour by car.

The population isn't growing either. School Superintendent Bill Sandholm is trying to push a merger with a nearby town whereby all seventh- and eighth-graders would be taught there and all the high school students would come to Greenfield.

Cliff Welcher, owner of Crooks Clothing, the local menswear store, doesn't seem particularly worried by the new competition.

``I can compete very well,'' he says. ``It's much less expensive for me to do business. I don't have to have the markups they have.'' As long as his customers want clothes that are a cut above the discount stores, Mr. Welcher thinks his store will survive - despite the rural downturn.

``When this thing hit, it took three or four years for us to feel it. ... And now that things have turned around a little for the better, I think it will take a little while for us to come back to the plateau.

``I feel there's a future in small towns,'' he says. ``Not everyone wants to live in the big city.''

A few new businesses have moved in: a couple of video stores, a pizza parlor, a convenience store, a beauty shop, and a shoe store. The latest new venture, the Old Hotel Restaurant and Lounge, opened two weeks ago. Co-owner John Norris has big plans for his venture: opening a banquet room and dance floor on the second story and refurbishing the shuttered third-story hotel rooms. But he's cautious about the overall rural economy.

``I'm not trying to paint a bleak future here, but there's not a lot of positive things on the horizon,'' he says. There is ``fewer and fewer youth out here, because there's fewer and fewer jobs or fewer opportunities to go with mom and dad in the farming business.'' Mr. Norris could use 15 or 16 employees in his restaurant, but he could only find 11.

One of them, Linda Terry, is a farmwife who would rather work on the farm than here in the kitchen for $4 an hour, but she says her family couldn't make it without the nonfarm jobs she and her husband hold down. ``If we got better farm policy, higher prices for farmers, I think that's the answer to the economic problems of Iowa,'' she says.

But for the most part, Greenfield seems committed to diversifying away from farming.

``For us to grow, it means that we are going to have to be successful in either having the current employers grow or we find new people,'' says Martin Dietrich, president of First Interstate Bank of Greenfield. ``If we don't have that, we could stagnate.''