Bacon's Rebellion

James A. Bacon


 
 

Ay-yi-yi!

Law Schools and

Baseball Stadiums?

Virginians still don't get it: To compete in a globally integrated economy, they must channel scarce resources into institutions that promote regional productivity and innovation.


 

What were they thinking?

 

Virginia’s six coal-producing counties have sparse resources to invest in local civic projects. With only one representative in Congress and five in the General Assembly, these isolated, thread-bare communities have limited clout to reel in federal and state funds. Likewise, they have little private wealth to tap. Coal barons like Jim McGlothlin and Carl Smith who scratched their first fortunes from the coal seams of Southwest Virginia have long since diversified their holdings and moved away. Although both men have contributed to local causes, they have many competing interests.

 

So, back in 1994, when local leaders mobilized to underwrite a civic project of vital community importance -- calling in every favor and pulling every string -- what did they decide to build?

 

The Appalachian School of Law.

 

Yes, a law school! As if the Commonwealth didn’t offer enough options to earn a juris doctorate at the University of Virginia, William & Mary, the University of Richmond, Washington & Lee, George Mason and Regent. Somehow, the good people of Southwest Virginia got it into their heads that they, too, wanted a piece of the law-school action.

 

What were they thinking? Lawyers do play a useful role -- as long as they’re not filing frivolous, class-action shakedown lawsuits -- but was Southwest Virginia really crippled by a deficit of attorneys? Was the prospect of leaving the region for three years to earn a degree really so debilitating for local students? Could not the sum devoted to the law school have been better invested in an institution designed to bolster the region’s economic competitiveness?

 

I do not mean to pick on Southwest Virginia. Every region in Virginia, following the piper’s call of some civic entrepreneur, has squandered political and philanthropic resources on projects of dubious value -- baseball stadiums, museums, tourist attractions, convention centers, fine arts complexes. If people want to justify such projects on the grounds that they contribute to the local quality of life, that’s their prerogative. But if Virginians are serious about building stronger economies, they are better off funneling resources into institutions of knowledge creation that improve workforce productivity or stimulate innovation in leading industries.

 

Few communities find themselves in the desperate straits of Virginia's coalfields, where mineral resources are being steadily depleted. But every region, no matter how prosperous, grapples with finite civic resources and seemingly unlimited needs. Every region should rank civic priorities –- projects that would make the greatest contribution to economic development and quality of life – to guide its investment of scarce civic resources.

 

By “civic resources” I refer to funds that can be applied to building those non-governmental institutions so crucial to the Knowledge Economy – everything from inversities to community hospitals, from museums to research institutes. These resources, in my observation, can be categorized into three types: political, philanthropic and municipal.

 

By “political” resources, I refer politely to pork barrel. Every member of Congress and every representative to the General Assembly should be good for a certain volume of pork or he’s not doing his job. Don’t misinterpret me. I regard pork barrel spending as wasteful and reprehensible, but I can’t ignore the reality of the way things work. As a rule, elected representatives with seniority and power do a better job of loading up the larder than do their juniors. (Check out U.S. Representative Congressman Rick Boucher's press releases -- the coalfield congressman could teach Joe Luter at Smithfield Foods a few tricks.) But pork is a finite resource. There’s a limit to how much even the most diligent pork packer can loot from federal and state treasuries.

 

By “philanthropic” resources I mean major contributions by foundations and, more commonly in Virginia, wealthy patrons. Here in Richmond, civic institutions have been blessed by the generosity of the Robins, Gottwald and Ukrop families as well as individuals like William H. Goodwin. But as wealthy as they are, these benefactors can part with only so many multimillion-dollar gifts.

 

Of course, every region can tap its citizenry for smaller donations, and Virginians are moderately generous. According to the National Center for Charitable Statistics, Virginians listed $3.9 billion in charitable contributions on their income tax returns in 2001. That amounted to 2.3 percent of their adjusted gross income – a sliver above the 2.2 percent national average.  But those contributions went to literally thousands of different causes including many that are national, even international in scope. As a practical matter, only a fraction of that $3.9 billion can be tapped for local projects. 

 

Finally, there are municipal resources. Local governments usually have discretionary funds they can put into local projects. But, again, there are constraints -– resistance to higher taxes and a ceaseless clamor for improved municipal services foremost among them -- on how much local governments can participate.

 

Between its political, philanthropic and municipal resources, every community has what I call a “civic capacity” to underwrite the creation of new institutions or the expansion of existing ones. In my observation, few regions have developed an organized process for deciding which proposals best match local needs. Typically, a handful of super-wealthy philanthropists set the agenda based on their personal priorities because any proposal is a non-starter without their support. This dominance is accentuated by a you-support-

my-project-and-I’ll-support-yours pattern of reciprocity among the big boys. Occasionally, a civic entrepreneur, driven by vision and passion, mobilizes the community behind a project.

 

All too often, the result is a free-for-all of too many projects competing for too few dollars. Key initiatives limp along for years as their patrons try to raise funding. When projects do succeed, it's often for idiosyncratic reasons related to local personalities and politics, not because the community has embraced an initiative that advances its vision for the future.

 

Thus, the Virginia coalfields wind up with a law school and Martinsville, a down-on-its-luck mill town, with a museum of natural history. Instead of making George Mason University a world-class center for software programming and information technology, Northern Virginia pours its energy into getting a $400 million baseball stadium. Instead of developing a vibrant, participative arts scene that will lure members of the creative class, Richmond could find itself supporting a $150 million, tax-supported performing arts center for the elite.

 

The wrong projects often get funded because people ask the wrong questions. Invariably, the merits of a project are debated free from a larger context. Would it be desirable to have a law school, or baseball stadium, or arts complex – yes or no? Sure, viewed in isolation, the answer is yes. But civic projects don’t exist in a vacuum. They compete for scarce resources. If one project is funded, then something else is not.

 

Virginians need to be disciplined about prioritizing civic projects. Local governments can’t do it -- major civic projects tend to be regional in nature, transcending local municipal boundaries. Chambers of Commerce can't do it -- they are regional in scope but their business constituencies are too narrow. Ideally, regions should set up organizations like the Hampton Roads Partnership or the now-defunct New Century Council in the Roanoke Valley, with representation from a cross section of groups and interests in the community.

 

Regional partnerships then should apply the following principles to the setting of priorities.

 

Resources are scarce. No community can afford to underwrite every idea that gets some local champion jazzed. Every project must serve a strategic goal: either building the community’s wealth-creating potential or improving the citizenry’s quality of life. Poor communities should place a greater priority on creating wealth, without which nothing else is possible. Prosperous communities, by contrast, can afford the luxury of attending to the quality of life. Indeed, in the competition for members of the wealth-producing “creative class,” some investments in quality of life become an economic development tool as well.

 

A little excellence beats a lot of mediocrity. There’s always a temptation, especially when politicians get involved, to spread the wealth, to satisfy as many constituencies as possible. But investing in mediocrity is a waste of money. In a globally integrated economy, communities must build world-class institutions capable of attracting world-class talent and producing world-class results.

 

Building excellence takes sustained commitment. It takes decades to build facilities, recruit talent, pump up endowments and create a reputation for excellence. In a hyper-competitive world, civic institutions run hard just to stay even with their peers. To gain in stature, a university, medical facility, museum or research center must sustain community support over generations.

 

Build on your strengths. If you’re looking for a quick return on investment, build on your strengths. Stick with your strongest civic institutions containing the greatest concentration of managerial and creative talent. Creative people at the top of their professions see abundant opportunities to make a mark on the world. Only prosperous communities, by contrast, can afford the luxury of starting institutions from scratch and waiting years, even decades, for the payoff.

 

Know your economy. Innovation and economic growth arise from economic ecosystems in which people, ideas, know-how and money cycle between knowledge-creating institutions and business enterprises. For a region like Northern Virginia, home to a world-class cluster of information technology companies, the top priority is a no-brainer: Transform George Mason University into a world-class center for telecommunications and systems integration – a Carnegie Mellon of the South. Likewise, Hampton Roads should build on its defense and ship-building sectors.

 

Here in Richmond, a region with a diversified economy, it’s a tougher decision. One possibility might be an Institute for Advanced Materials, playing on the presence of the large polymer- and specialty-chemicals industry… or, perhaps, a Center for Medical Logistics, exploiting the potential offered by the presence of two of the nation’s largest medical distribution companies.

 

In every case, the idea is to build a cluster of businesses and knowledge-creating institutions that can feed and support one another, creating a critical mass capable of attracting top managerial and scientific talent, conducting world-class R&D, spitting out a continual stream of innovative products, services and start-up companies, and enhancing the wealth-creating capacity of the region.

 

How would this logic apply to a place like Southwest Virginia, where the leading industry, coal mining, is in irreversible decline? Does it make sense to invest resources in an industry which, given the dictates of geology, may no longer exist in 30 years?

 

I have a one-word response: Texas. The Lone Star State remains the global leader in the petroleum industry despite the fact that its oilfields have experienced dwindling production for decades. Oil service companies that originated to support local oil drillers now ply global markets.

 

By analogy, Central Appalachia is home to a cluster of mining equipment manufacturers. Virginia Tech, on the fringe of the coalfields, boasts the largest mining engineering department in the country. Bluefield, W.Va. -- right across the state line -- hosts the annual Bluefield Coal Show, one of the nation’s largest conventions displaying coal mining equipment and technology. Virginia’s coal production may be modest but manufacturers of mining equipment have located facilities in Virginia to take advantage of its favorable, right-to-work labor climate. Numerous geological, engineering and environmental consulting services do business in the region as well.

 

While coal production has leveled off in the Eastern U.S. coalfields, it is booming overseas. Virgin coal seams are being opened in locales as far flung as China and Colombia. Tremendous market opportunities exist for companies to export state-of-the-art mining technology, mining management, geological and environmental services and deal-making savvy.

 

But that’s not all. Coal mining may be a mature, capital-intensive business, but it’s becoming more knowledge-driven all the time. Researchers are developing clean-coal technologies for removing sulfur, ash and other impurities from the fuel. Others are developing techniques for tapping methane – an explosive gas once vented from coal mines – and converting it into a fuel. Who knows what other technologies might revitalize the industry? Perhaps, one day, remotely operated machines may spare miners the discomforts and dangers of working all day underground.

 

No offense to the Appalachian School of Law, which I'm sure is a fine institution, but churning out lawyers does not add one whit to the wealth-creating potential of Southwest Virginia. What an opportunity lost! Just think what might be accomplished if a comparably sized institution, with 20 faculty and more than 20 support personnel, instead were developing technologies and best practices that increase the competitiveness of Virginia's mining equipment and services sector?

 

A Center for Mining Machinery and Technology, or some such entity, could serve the existing mining machinery cluster much in the same manner as, say, the Institute for Textile Technology in Charlottesville helps sustain the textile industry. Playing off the knowledge-generating assets at Virginia Tech, such a center might encourage developers of mining machinery to locate more manufacturing, R&D, start-up enterprises and, conceivably, even headquarters functions to Southwest Virginia.

 

It's time for all Virginians to think strategically about the future of their communities and to align their political, philanthropic and municipal resources with their goals. Haphazard and uncoordinated initiatives will yield haphazard, uncoordinated results. Mobilizing civic resources behind carefully chosen projects will pay rewards long into the future.

-- October 6, 2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fire back!

 

You can berate Bacon at [email protected]

baconsrebellion.com

 

Or read his profile here.