This paper discusses public policy processes at the local level, using south west Victoria as an illustration. After describing the place of south west Victoria in the economic global world and within the national and state policy processes, the paper then discusses the place of local autonomy in small town development. Although local economic discourses focusing on the market have been viewed as the panacea for small town survival, the author puts the case for a rediscovered discourse of community development which local groups are adopting in an attempt to stem the tide of decline. The paper concludes by arguing that succumbing to market principles of local competition is a mistake, and suggests that a more sustainable strategy would be to focus on local and regional cooperation, which rebuilds the rationale for the existence of small towns. A central part in this process is the ability to develop a strong civic culture.