Rural areas around the world face problems stemming from the globalization of agricultural and other markets, the resulting competitiveness for existing and shifting markets, loss of population, and consequent decline of economic and social infrastructure. Rural communities need to develop the ability to manage change, and this requires engaging in learning processes of both a formal and informal nature. There is a growing recognition that social capital is as important as economic capital in community development. A new model of leadership is needed that fosters social capital by drawing on knowledge and identity resources. Enhanced social relations produce social well-being and cohesion, as shown in a case study of a rural Australian town that revitalized itself through the whole-community activity of producing a huge silk tapestry. Based on 10 lessons gleaned from community development efforts in various U.S. cities, a model of "situated leadership" is postulated. Situated leadership does not flow from a predetermined "right" way to do things, but is determined by the nature of the changing situation at a particular location. The situated leader builds relationships across community sectors to establish common interests; develops relationships from qualities of historicity, externality, reciprocity, trust, and shared values; identifies relevant knowledge and identity resources; connects people with resources to plan futures; ensures the facilitation of networking across groups; and celebrates and documents successes. (Contains 16 references.) (TD)