This paper examines the socio-economic impact of mineral and agricultural resource extraction on local communities and explores policy options for addressing them. An emphasis on the marketization of services together with tight fiscal control has reinforced decline in many country communities in Australia and elsewhere. However, the introduction by the European Union of Regional Policy which emphasizes ‘smart specialization’ can enhance greatly the capacity of local people to generate decent livelihoods. For this to have real effect, the innovative state has to enable partnerships between communities, researchers and industry. For countries like Australia, this would be a substantive policy shift.