Category Archives: Economic development

Sticking it to the Chinese

factory manBy Peter Galuszka

This  is a review of “Factory Man,” a book about the Virginia furniture business and dealing with the inequities of Chinese trade by Beth Macy (Little Brown, 451 pages). This was first published in the October 2014 Bulletin of the Overseas Press Club of America in New York of which I am a member.

The hills around Danville Va. are blessed with some of the finest hardwoods around such as oak, hickory and cherry trees. It is those trees, and the people who work with them, that have made for one of the more vicious global trade wars in recent history.

They also represent one of the few trade victories American industry has had, according to Beth Macy, a Roanoke Times reporter who has written a lively and deeply reported book about Vaughan Bassett, a local firm that is now the largest American furniture maker. Boss John D. Bassett (“JBIII”) refused to succumb to an onslaught of cheap Chinese labor and government subsidies that helped shutter 63,300 U.S. factories and five million jobs from 2001 to 2012. By standing up to Beijing, he saved his company and 700 jobs.

Macy’s first book is of value to anyone who covers global trade issues. She punctures the conceit, held by many journalists in the New York-Washington axis, that globalization is a great and inevitable thing. I heard this constantly at BusinessWeek where I worked as an editor and bureau chief in the 1980s and 1990s.

What’s lost in the laud of so-called “free” trade is what happens to the people who lose. Their secure employment turned overnight into a new world of Medicaid, food stamps and family strife.

Big Journalism doesn’t seem to care much. “Even globalization guru Tom Freidman, writing in “The World Is Flat,” briefly acknowledges the agony caused by offshoring.” But she notes that it’s easy for him to say since Friedman, “lives in an 11,400 square foot house with his heiress wife” in Bethesda, Md., a “cushy” Washington suburb five hours by car from the turmoil farther south.

For years, Bassett and its sister factories were part of a network of Southern-style company towns with their own issues, such as paying African-American workers half of what whites got. By the 1970s, U.S. furniture quality and productivity were slipping. A Taiwanese chemist discovered how to make rubber trees useful for furniture after they stopped producing latex, giving rise to an expanded Asian export furniture business.

Chinese industrialists took over. They visited U.S. factories, where, according to Macy, naïve executives handed over their production secrets. In short order, cheap Chinese knockoffs were stealing market share from the Americans. A Chinese executive named He Yun Feng bluntly suggested to JBIII that he shut his plants and hand his business over. Proud JBIII didn’t turn tail. Instead, he shored up his production and cut costs while preserving as many jobs as he could. He also bucked his reluctant industry and challenged the Chinese for dumping and manipulating their currency to give them unfair trade advantages.

“The last thing they wanted to hear was that China may have been breaking the law.” Macy quotes JBIII as saying. That’s the nut of Macy’s excellent book. A tighter edit, especially in the early history of the Basset family, might have helped, but her story is powerful and well told.

OPC member Galuszka lives in the Richmond, Va. area and is author of “Thunder on the Mountain; Death at Massey and the Dirty Secrets Behind Big Coal” St. Martin’s Press, 2012.

Why Virginia Has No Renewable Energy

offshore wind By Peter Galuszka

For all the hew and cry over renewable energy sources and the “War on Coal,” it is extremely interesting to see just how much progress Virginia has made with renewable energy. The answer: hardly any to none.

A moment of clarity came when I was perusing blog postings by IvyMain, a D.C. area lawyer and Virginia Sierra Club activist who is quite often ahead of the curve on energy issues.

She posted a table of how Virginia compares with neighboring states in development of solar and wind power.

Leading her list is West Virginia with 583 megawatts of wind power. Next is North Carolina with 335 megawatts of solar power. Maryland is almost equally split between solar and wind with 262 megawatts.

And Virginia? A whopping 18 megawatts of solar and zip-o wind.

The State Corporation Commission has written against proposal EPA regs limiting carbon emissions saying it would shut down too many coal-fired plants. Solar and wind could make up some of it, but the SCC claims that “there is still zero probability that wind and solar resources can be developed in the time and on a scale necessary to accommodate the zero-carbon generations levels needed” to help meet the EPA’s carbon emission goals by 2030. Even more curious, the SCC used EPA figures that Virginia has 351 megawatts of renewable power. Hmmm.

One can almost see a clever and duplicitous scheme here. One reason why Virginia’s neighbors have remarkably more renewable power than Virginia is that they have mandatory renewable portfolio standards. In Maryland, 20 percent of all electricity generated must come from renewable sources by 2020. In North Carolina, it is 12.5 percent by 2021 and in coal-rich West Virginia, it is 25% renewable by 2025.

Virginia’s “voluntary” goal is 12 percent by 2022. Why so little and voluntary? Easy. Dominion Virginia Power has a legal deal going where it has a “monopoly” on electricity distribution and according to IvyMain cracks down wherever possible on independent solar generation. She notes that Dominion squelched a solar project at Washington & Lee University a few years ago and has attacked similar plans. After preventing renewable power from developing, Dominion and its allies can then say we must keep big, traditional  facilities (nuclear, natural gas and coal-fired) going because there’s so little available on the renewable front.

Dominion, of course, is a huge political contributor. According to the Virginia Public Access Project, Dominion and Dominion Resources combined are the No. 1 corporate donors in this state. They gave about $1,042,580 this year. The No. 3 corporate donor is Alpha Natural Resources, a major coal company based in Bristol that gave $218,874.

Conservative commentators regularly pin the EPA’s flexible but stricter rules on a so-called “War on Coal” led by President Barack Obama. Yet, Virginia is a small coal producer compared to West Virginia, which is presumably ground zero in the fight against the Black Diamonds. So, how come West Virginia, the No. 2 coal state, has mandatory renewable standards and leads the pack in renewable energy?

The answer is that West Virginia’ leadership knows that its coal days are numbered and this started long before Obama came to power. The Mountain state has plenty of, well, mountains that can be great foundations for wind. So, too, does Virginia – the exact same mountain ranges in fact. But that doesn’t seem to matter. One noted right-winger blogged about the supposed “War on Coal” and then tried to preempt responses that broadened the reasons for coal’s demise:

“No lectures about the coal industry, please. I understand that the current woes of the coal industry stem in large measure from coal’s loss of competitiveness to natural gas as a fuel and to cyclical movements in the market for metallurgical coal (used by the steel industry). However, the Appalachian coal industry still produces a lot of steam coal for power plants, and the EPA rules would destroy much of that market. Clearly, the EPA rules, which are not yet in effect, have not yet destroyed a single coal-mining job. Come back to me in 2020 and it will be a very different story.”

Today’s New York Times has a story about political races in West Virginia where coal and Obama are naturally issues. The story contains this revealing passage:

“The coal industry’s long decline is economically complex. When Alpha Natural Resources, one of West Virginia’s largest coal operators, warned 1,100 employees of potential layoffs in July, it blamed a worldwide glut of coal, competition from cheaper natural gas, and lower-cost coal from western basis – as well as Environmental Protection Agency regulations.

“But in the charged political arena, complexities fade and both sides identify a sole culprit for the industry’s struggles: the administration’s anti-coal regulations.”

So there you have it. In Virginia, rules are set up to prevent renewables from being established while political types and their conservative blogger handmaidens beat the drum against the EPA and Obama.

Brat’s Strange Immigrant-Bashing

BratBy Peter Galuszka

It must have been an interesting scene. Congressional candidate David Brat had been invited to a meeting of the Virginia Hispanic Chamber of Commerce along with his Democratic rival Jack Trammell to outline his views on immigration and undocumented aliens.

Brat, an obscure economics professor who nailed powerhouse Eric Cantor in a Republican primary for the 7th Congressional District in June, danced around the topic, according to a news account.

It took several attempts to get him off his spiel on just how wonderful free market capitalism is to actually address the issue at hand. Before him were a couple dozen business executives, many of them Hispanic.

They, naturally, were interested in Brat’s views because of his over-the-top Latino-baiting during the primary campaign. One of Brat’s ads trumpeted: “There are 20 million Americans who can’t find a full time job. But Eric Cantor wants to give corporations another 20 million foreign workers to hire instead.”

Finally, Brat claimed, “I have never said I’m against legal immigration.” He later said, “nations that function under the rule of law do well.” Brat also said he wants to “secure” the U.S. border with Mexico. Trammell said he supports the DREAM Act that could provide a path to U.S. citizenship for some of the 11 million undocumented aliens in this country.

Brat’s immigrant-baiting and his “rule of law” smacks of a lot of ugliness in American history. “Know–Nothings” of white Anglo Saxons beat and harassed Catholic immigrants, primarily from Ireland. Chinese were harassed on the West Coast and Japanese-Americans were locked up in concentration camps during World War II. Jewish newcomers were met with restrictive covenants and college quotas.

In Richmond during the 1920s, efforts by Catholic Italian-Americans to build a monument to Christopher Columbus were fought by the Ku Klux Klan, which insisted that any such statue not dirty-up Monument Avenue and its parade of Confederate generals. Columbus had to go elsewhere in the city.

There’s a new twist and judging from Brat’s behavior on Tuesday. He seems uneasy by getting so out front on immigrant-bashing. He’s not the only Republican to take such strident stands. Look at New Hampshire, where Scott P. Brown, a Republican, faces Jeanne Shaheen, a Democrat, in a closely-watched race for the U.S. Senate.

Groups backing Brown, such as John Bolton, the surly former U.S. Ambassador to the United Nations, have run anti-Shaheen ads showing throngs of people clambering over a border just before showing Islamic militants beheading James Foley, a journalist and New Hampshire native, according to the New York Times. The ad was pulled after the Foley family complained, the Times says.

A major coincidence is that the Times‘ description of New Hampshire almost matches that of Virginia’s 7th Congressional District. Neither seems a hot bed of immigrant strife and threats.

The Granite State has one of the smallest populations of illegal immigrants in the country, the Times says. Of the state’s 1.3 million residents, only 5 percent are foreign-born and 3 percent are Hispanic.

The Virginia district has a population of 757,917 of whom 12.7 percent are foreign born and 4.9 percent are Hispanic. Most of the residents, 74.3 percent are white.

The district runs from the largely white and well-off western Richmond suburbs in Henrico and Chesterfield Counties and scoots northwest across mostly rural farmland to east of Charlottesville and up to Madison. With only 7.6 percent of the people living below the poverty level, it isn’t exactly a barrio of Los Angeles.

It is hard to imagine hordes of brown-skinned people swarming from up Mexico or Central America displacing the managerial executives, small business people and farmers in the Seventh. People that Brat seems to be worried about are employed in other nearby areas, such as the poultry plants of the Shenandoah Valley. But those workers are there because of local labor shortages. One wonders where Brat gets his ideas that illegal immigrants are going to steal true-blue American jobs in his district.

Last June during the primary, there was plenty of news about thousands of young Hispanic children coming across the southern border from Central America. At the time, there were estimates that up to 90,000 such children might come illegally into the U.S. this year. Many are fleeing gang violence in their homelands.

This is apparently what Brat is running against – a bunch of poor, 12-year-old Nicaraguans out to steal jobs and provide cover for Islamic terrorists. Their plight is a serious issue, but it is a humanitarian one. Brat chose to make it an odd classroom lesson in economics. He says the U.S. should not put up “green lights” and “incentivizing children from other countries to come here illegally and at their own peril.”

The news from the border seems to have calmed down since June. Brat may have found that now it is likely he’s going to Washington, playing the Hispanic-baiting card may not work as well on the national scene as it apparently did in his mostly-white district. It could be why he was hemming and hawing so much before the Virginia Hispanic Chamber of Commerce.

Illegal immigrant Ayn Rand

Illegal immigrant Ayn Rand

Perhaps other Republican politicians are having the same epiphany. As the New York Times writes: “Republicans have long relied on illegal immigration to rally the conservative base, even if the threat seemed more theoretical than tangible in most of the country. But in several of this year’s midterm Senate campaigns — including Arkansas and Kansas, as well as New Hampshire — Republicans’ stance on immigration is posing difficult questions about what the party wants to be in the longer term.”

There’s another strange contradiction with Brat. He’s a former divinity student interested in probing how unfettered free market capitalism can magically make the right choices for the betterment of mankind.

He draws a lot of his thinking from Ayn Rand, the famous thinker, refugee from the Bolsheviks and backer of her own brand of anti-government capitalism.

It may interest Brat that by today’s standards, Rand would have been an illegal immigrant.

EPA Carbon Rules: Ask the SCC

The SCC: An Emerald Palace?

The Emerald Palace or the SCC?

By Peter Galuszka

Last week, State Corporation Commission drew attention when its staff wrote to the U.S. Environmental Protection Agency, at the EPA’s request, to respond to one of the biggest proposed steps the nation has seen in cutting carbon dioxide emissions.

The report sparked considerable interest and confusion over what the SCC staff actually meant when it predicted that proposed EPA rules to cut carbon emissions 30 percent below 2005 levels by 2030.

The staff report, written by William H. Chambliss, SCC general counsel, said that EPA’s proposed limits would cost Virginia ratepayers from $5.5 billion to $6 billion extra. It claims that the state would have to shut down fossil-fuel, predominately coal-fired, plants producing 2,851 megawatts and replace it with only 351 megawatts of land-based wind power. This would badly impact the reliability of the state’s power supply, the staff said.

My immediate question was why so much and where, exactly? Precisely what power stations would have to be shut down? Where did the ratepayer increase numbers come from? Is there is a list of all the coal-fired plants affected? Dominion Virginia Power, the state’s largest utility, has long-standing plans to shut down two aging power stations at Yorktown and Chesapeake with about 920 megawatts of power? How does that factor in?

So, I contacted Ken Schrad, the spokesman for the SCC, by phone and email and asked some questions. He kindly provided the following answers (in italics):

Where are the affected plants precisely?

The numbers come directly from the EPA’s own spread sheets and the EPA does not identify the specific units.” 

How many plants are coal-fired?

Of the 2,851 MW, EPA predicts 2,803 MW of coal units and 48 MW of combustion turbines which could be natural gas or oil-fired CTs. Assuming Yorktown and Chesapeake are included in the EPA estimate, SCC staff knows that those planned retirements total approximately 920 MW.  The output of those units varies depending on when operating (summer or winter).”

Where does the 351 megawatt of land-based wind power, the only available replacement source for the lost fossil-fuel power, come from?

“The 351 MW figure is also direct from the EPA’s analysis which does not identify where EPA believes these undeveloped projects would ultimately materialize.  As staff noted in its comments, the SCC has approved the only request the Commission has received for a certificate for a wind project (Highland New Wind).  Approved in December 2007, the project envisioned up to 20 turbines with each turbine capable of producing up to 2MWs.  That project has not been built.   DEQ now has regulatory responsibility for permitting most solar and wind projects in Virginia. “

How do you answer criticism from environmental groups that Virginia has already attained 80 percent of the EPA’s carbon reduction already?

“Staff has no information regarding this assertion, the costs incurred to reach such a figure, how that attainment level was achieved, or the starting point from which such has materialized.”

The SCC staff recommends that the EPA adopt “an alternative carbon emission rate of 1,216 pounds of carbon dioxide per Megawatt hour of power. The EPA is proposing tighter limits of 843 of CO2/MWh for plants to attain by 2020 and levels of 810 pounds of CO2/MWh for plants to comply by 2030 because it would be more affordable. How much more affordable would the SCC’s suggested rate be? Continue reading

Could Surry Be an 80-Year Nuke?

Surry1By Peter Galuszka

Here’s a new twist on the carbon emission debate: Dominion Virginia Power is considering seeking federal approval run its 40-plus year-old Surry nuclear power station for another 40 or so years.

The arguments in favor are that keeping the two-units at Surry (1,600 megawatts) going would be a lot cheaper than building a brand new plant. Nukes do not contribute much at all to greenhouse gases and climate change compared to coal or natural gas plants.

The huge issue, however, is safety. Can you really expect a nuke whose design dates back to the 1960s to run until 2054? Surry’s plants near Jamestown were once the most heavily fined in the nation because of their repeated safety problems. Constant use can affect any number of crucial components such as making reactor metal brittle, pulverizing concrete and becoming more susceptible to earthquakes and storms.

According to the New York Times, Dominion hasn’t decided whether to apply to extend Surry’s life span. Other possible extended life reactors are Duke’s three Oconee units near Seneca, S.C. and Exelon’s Peach Bottom not that far from Three Mile Island in Pennsylvania.

Dominion is also pushing ahead with a third new unit at North Anna, but the price tag for that apparently would be many times what extending Surry would be. But there are no hard figures about the cost of the new nuke ($10 billion to $14 billion, maybe) or how much Surry would cost.

The news is curious coming just as the staff of the State Corporation Commission came out with a curious report slamming proposal EPA rules on cutting carbon emissions. Although the SCC’s opinions are murky and badly-documented, it raises fears that a bunch of coal-fired generation in Virginia will be shut down due to EPA regs. Hot flash: a bunch was going to be shut down anyway because it dates back to the 1940s and 1950s.

I don’t know enough about the current Surry operation to know what and how extending its life would proceed and whether it would be safe.

That said, I refer to my own reporting past – the 1979 when I was a reporter at The Virginian-Pilot. Another reporter and I spent weeks at the Nuclear Regulatory Commission’s archives in Bethesda, Md. poring over safety documents. This was back when newspapers had the money to do that kind of reporting.

Our result was a big investigative piece that made banner headlines on the front page one Sunday with two full pages inside. I’d include the cite since it is too old to have one. We found a multitude of issues at Surry ranging from faulty radiation monitoring for workers to faulty snubbers which are rod-like shock absorbers to mitigate earthquake-like movements.

Dominion, then Vepco, hated the story and tried to tear it down. But Vepco was undergoing a corporate sea-change away from its institutional arrogance related to some extent by the former Navy submarine officers were not used to being questioned by outsiders. Vepco was getting hit by Wall Street because its sloppy nuclear program resulted in extended outages. They ended up hiring a ringer engineer who cleaned up their act and later the company transformed into something more modern.

Even so, a decade after we did our story, there were still plenty of concerns about safety at Surry.

The big question is how can you keep a car designed in the 1960s going strong nearly 100 years later? Maybe they have the answers in Havana.

More Coal Industry Propaganda

coal woman By Peter Galuszka

If you read a blog posting just below this (the one with the coal miner with an intense look on his grit-covered face), you will see how hyperbole, confusion, misunderstanding, ignorance and one-sided arguments twist something very important to all Virginians – how to deal with carbon dioxide and climate change – into a swamp of disinformation..

The news is that the State Corporation Commission has responded to the federal government’s proposed rules that carbon emissions be cut 30 percent below 2005 levels by 2030 by complaining that it would cost ratepayers up to $6 billion.

This is because Virginia utilities may have to shut down 2,851 megawatts worth of electrical generation with only 351 megawatts (at present) of “unreliable” wind power to replace it.

The image one gets from the presentation of the blog post is that it is “The EPA’s War on Virginia” with the haggard-looking miner thrown in, we are given the impression that it is more of the “War on Coal” that the coal industry has been promoting in recent years to blunt much-needed mine safety laws and moves to police highly destructive mountaintop removal practices.

The author does not address any of this. But since he’s handing us the “War on Coal” propaganda line, let’s take his arguments apart. This won’t take too long.

  • The author fails to note part of the Richmond Times Dispatch story upon which he bases his opinions. There is a very important comment: “It appears the staff has misread the rule,” said Cale Jaffe, director of the Southern Environmental Law Center’s Virginia office. “Analyses that we have reviewed show that Virginia is already 80 percent of the way to meeting Virginia’s carbon pollution target under the Clean Power Plan. “Almost all of those reductions are coming from coal plant retirements and natural gas conversions that the utilities put in place long before the Clean Power Plan was even released,” Jaffe said.
  • That said, let’s take a look at coal-fired plants in the state which are the biggest carbon offenders. For starters let’s look at Dominion Virginia Power, the state’s largest utility. It has already converted three coal-fired plants – Altavista, Southampton and Bremo Bluff – to biomass. The 50-plus-year-old Yorktown plant (335 megawatts) is due to retire in 2015. Another aging plant – Chesapeake (609) megawatts — is also due to retire by 2015. The point here is that these plants are being closed because Dominion realizes that it is just too hard to keep 50 or 60 year plants operating efficiently and cheaply. It would be like keeping that 1960 Corvair because you don’t want to put oil workers out of work.
  • Dominion’s biggest problem and the biggest single air polluter in the state is the Chesterfield station with 1380 megawatts. Yes, it does need more controls. Then there’s Clover (882 megawatts) and Mecklenburg (138 megawatts). That brings us up to 2400 megawatts that might need upgrades. Let’s see. The two nuclear units at North Anna put out a little more than 1,700 megawatts just so we get some scale here. Dominon also has Virginia City (585 megawatts) which just opened, uses coal and biomass and has advanced fluidized bed burning methods.
  • Out west, Appalachian Power has 705 megawatts at Clinch River and 430 megawatts at Glen Lyn. Two of those three units there were built in (my God!) 1944 so I guess the blog author wants to keep those great granddaddies running to save miners’ jobs. Actually they are so unneeded that they have been on extended startups.Besides these Cogentrix has a couple small, modern plants in Portsmouth and Hopewell.
  • One reason there so little renewable generation (6 percent) is that the utilities do not have mandatory renewable portfolio standards to force them into wind and solar, etc. Virginia’s neighbors do.

All of this gets back to Jaffe’s point that the blog author so easily ignores. A lot of the carbon cuts are going to come from plants that are aging and are going to be closed anyway.

The SCC may complain about the $6 billion but guess what, you beleaguered electricity users? If Dominion puts a third nuke at North Anna, that’s easily $10 billion. Is that going to raise rates sky high? Where’s the outcry? It’s almost double what helping save the planet from carbon dioxide will cost.

The blog author’s hyperbole about the poor coal industry shows his ignorance of the topic. Virginia’s rather small coal industry (No. 12 in production) reached its peak in 1991. Natural gas has displaced a lot of expensive coal. Gas prices would have to triple to make Central Appalachian coal competitive again. There’s lots of metallurgical coal for steel, but the Asian economic slump has dropped prices maybe 60 percent.

I won’t comment on the author’s lame and misunderstood point about climate change not happening.

The blog author may want to blame that on Obama and the EPA but that would be almost as ridiculous as his blog post. I decline to name him because I don’t want to embarrass him.

Redefining Richmond: Arts! Culture! Food!

ICTby James A. Bacon

Richmonders berate themselves (and outsiders mock them) for their inability to decide where and how to build a baseball stadium for a AA baseball team. If the region’s political and civic leadership can’t pull off this most basic of regional tasks, one might legitimately wonder if they can accomplish anything useful at all. But it turns out that Richmonders can mobilize behind civic projects — it just has to be the right kind.

A case in point is Virginia Commonwealth University’s Institute for Contemporary Art, which has raised $33 million of its $37 million funding goal. Construction of the facility, designed by an award-winning New York architect, is located at Belvidere and Broad, one of the region’s busiest intersections and a gateway to downtown. This project, which will showcase art from VCU, one of the nation’s leading art schools, has not been controversial at all. Funds were raised through contributions by local philanthropists. With help from a construction loan from the VCU Foundation, construction began in June.

A city and region define themselves by the long-term investments they make in civic infrastructure. To pick a very different example: Buffalo, N.Y., a region of comparable size to Richmond, has poured money into a pro football complex downtown more magnificent than anything than Richmonders could conceive of erecting in their own city — and locals still aren’t satisfied. Buffalo groups are exploring an even more grandiose facility. Richmond has nothing to compare. But it does have arts and culture out the wazoo. And we locals like it that way.

Speaking to the Richmond chapter of Commercial Real Estate Women, Institute Director Lisa Freiman outlined the vision. As reported by Virginia Business, the institute will  showcase a changing array of exhibitions not only by VCU artists “but the best of contemporary art from around the world.” Freiman predicts that the facility “will create opportunities for cultural tourism and community revitalization.”

The tie-in between contemporary art and economic development is stronger in Richmond than it would be in many other regions. The advertising industry is remarkably vibrant for a region Richmond’s size. Local companies serve national clients, and they employ artists, graphic artists, videographers and the like. There is a easy, natural cross-over between the art world and the advertising world. Supporting one supports the other.

rappahannock

Travis Croxton (left) and Ryan Croxton, owners of the Rappahannock restaurant. Photo credit: Times-Dispatch.

Meanwhile Richmond — and Virginia as a whole — is developing the reputation as an up-and-coming foodie region. Esquire Magazine has just named Virginia “The Food Region of 2014″ in its 2014 Food and Drink Awards. “The Old Dominion has seemingly overnight exploded into one of the country’s greatest gastro regions,” writes the magazine, as reported in the Times-Dispatch. While the recognition goes to Virginia as a whole, Richmond is a vibrant part of the state’s foodie scene. Rappahannock restaurant won recognition as one of the 12 “Best New Restaurants” in the country.

The article cited Virginia’s diverse geography and the ability to source fresh, locally grown produce and artisinal food products from the mountains to the Chesapeake Bay as a big plus for restaurants aspiring to national quality. I’m sure that’s a factor, but I think the story is bigger than that. Richmond and Virginia produce great restaurants because the local marketplace supports them. People are willing to pay premium prices that restaurants must charge in order to recruit and pay chefs of national caliber.

New Yorkers and Washingtonians may laugh at Richmond’s pretensions in the worlds of art and cuisine — to many we’re still a hicksville backwater still fighting the Civil War. What they don’t see is how the region is steadily reinventing itself. Once the city prided itself on being a regional center of corporate headquarters. That prop to the economy suffered heavy damage during the recession of 2007-2008 and has been slow to recover. But there has been tremendous activity beneath the surface. Redevelopment along the downtown canal. The Richmond Folk Festival. Converting the James River into the region’s “Central Park.” The boom in downtown living. The French Film Festival. The gentrification of Church Hill and Scotts Addition. The creation of a fantastic network of mountain biking trails. The rise of the foodie movement and the renaissance of locally grown food.

Unconsciously, Richmond has been building the foundations of the “creative class” economy. It’s becoming the kind of place where creatives want to live, work and play. When creatives settle here, they start new businesses. In time, some of those businesses become success stories and economic dynamos that will propel regional growth. VCU’s Institute for Contemporary Art symbolizes how Richmond is redefining itself as something very different and very new.

The Forbidden City Comes to Virginia

forbidden cityBy Peter Galuszka

The Forbidden City has come to Virginia and it’s definitely worth a look.

Rarely-seen works from the Palace Museum in Beijing’s Forbidden City, the imperial residence of Chinese emperors from the Ming to the end of the Qing Dynasty (roughly from about 1406 to 1912) go on display tomorrow at the Virginia Museum of Fine Art in Richmond.

Putting the exhibits together took lots of work and diplomacy, VMFA Alex Nygeres told guests and the news media Wednesday at a morning event. There were plenty of visits back and forth and there are plans for the VMFA to reciprocate by sending its famed Faberge Egg exhibit from the Russian Romanov era to China. The Ambassador from the People’s Republic of China to the U.S. attended a gala, $10,000 a table event the evening of Oct. 14.

I’m no expert of Chinese art, but the exhibit was highly impressive. The many works included court paintings, religious artifacts and costumes, including an early form of body armor for soldiers which consisted of layers of tough cloth protecting vital organs and appendages.

The exhibit opens at a time of unsettled relations between the U.S. and the People’s Republic. China has been torn by pro-democracy protests in Hong Kong. Workers’ expectations are rising as China’s economy is slowing. Beijing is becoming more aggressive as a regional military power and its efforts to censor Web-based information and launch cyber spying are worrisome.

Another issue is that given the tough, expansionist diplomacy of Russia’s Vladimir Putin and the negative reaction from the West, Moscow is looking for more links with China. Relations between the two have always been up and down. Not that long ago, experts believed that if there were a nuclear weapons attacks, it might occur between those two countries. Now, peace has returned and both may be able to exploit their close geography and relative strengths in energy and population in a way based on economics and not Communist ideology.

On the bright side, China does have money and is fast developing expertise. China’s Shandong Tranlin paper company is investing $2 billion in a modern paper plant in eastern Chesterfield County that will employ 2,000. It won’t use trees, but leftovers from farm fields and is supposed to be less polluting than paper mills most Americans are familiar with. What’s more, Gov. Terry McAuliffe is off on a trade mission to China in a few days.

In any event, the Forbidden City is worth a look. It runs until Jan. 11.

Woo hoo! Giving Money to Rich, Out-of-State Capitalists Is Fun!

Richmond Mayor Dwight Jones (left) and Governor Terry McAuliffe.

Capitalist benefactors: Richmond Mayor Dwight Jones (left) and Governor Terry McAuliffe.

Richmond is home to numerous craft brewers: Legend Brewing, Triple Crossing, Richbrau, Strangeways and Hardywood Park, just to name five that show up on the first page of a Google search. But when it comes to rolling out the red carpet, state and local government is lavishing its favors upon Stone Brewing, of Escondido, Calif. — $23 million in City of Richmond bonds to build the brewery, $8 million to build a restaurant, $5 million from the Governor’s Opportunity Fund and potentially $250,000 from the Governor’s Agriculture and Forestry Industries Development Fund.

Admittedly, none of the local brewers have achieved the scale of Stone Brewing, which announced last week that it would invest $74 million in Richmond, creating 300 jobs. In a state economy struggling for traction, Stone’s announcement is the fifth largest economic development deal (ranked by investment) so far this year.

But the massive loans and subsidies raise a number of issues of equity and fairness, as Bart Hinkle noted one such issue in his Times-Dispatch op-ed this morning:

Stone executive Steve Wagner says other factors determined its final decision: water supply, wastewater capacity and proximity to suppliers. If that’s true, then Richmond should have been able to land the brewery without the handouts. It’s bad enough to think officials felt they had no choice but to offer Stone public inducements. It’s even worse to think the inducements were necessary.

Hinkle also wonders, as I do, how the home-grown brewers feel about the special treatment accorded their potential competitor. While the Stone Brewing brewery will serve a wider East Coast market, its restaurant will compete more directly with local brew-pubs. And, really, how many brew pubs can a city Richmond’s size support? Will Stone Brewing’s presence crowd out local players? Nobody knows but it’s a risk worth pondering.

There’s one other issue: Richmond apparently will be issuing $31 million in municipal bonds to help finance construction of the brewery and the restaurant. The city has finite borrowing capacity. If it borrows $31 million to back the Stone project, that’s $31 million it cannot spend elsewhere without endangering its AA+ (Standard & Poors) bond rating. This is a city, mind you, that wants to issue bonds for an $80 million baseball stadium and redevelopment project in Shockoe Bottom, $8 million to create a Bus Rapid Transit system along Broad Street, spend millions more to the city bicycle-ready for an international bike race in 2015, push ambitious housing-redevelopment and neighborhood-revitalization goals the city’s East End, support a new children’s hospital, and presumably pursue other capital improvement projects and economic development opportunities as opportunities arise.

Its good that Mayor Dwight Jones has a can-do attitude. But the city needs to pick its projects wisely. It needs to leverage its public investment to the max. And it needs to keep some powder dry for other opportunities that may appear. The best criteria to adopt when investment public dollars is this: Would I invest this money if it belonged to me? Am I maximizing  risk-adjusted Return on Investment? I have seen no evidence that the Stone Brewing deal would pass that test.

– JAB

Why We’re Being Railroaded On “STEM”

 csx engineBy Peter Galuszka

When it comes to education, a constant mantra chanted by the Virginia chattering class is “STEM.”

How many times have you heard that our students are far behind in “STEM” (Science Technology Engineering and Mathematics)? We have to drain funding from more traditional areas of study (that actually might make them better human beings like literature, art or history) and give it to STEM. The two types of popular STEM are, of course, computer science (we’re all “illiterate” claims one journalist-turned computer science advocate) and biotechnology.

But how important is STEM, really? And if Virginia joins the STEM parade and puts all of its eggs in that basket, will the jobs actually be there?

The fact of the matter is that we don’t know what jobs will be around in the future and like the famous generals planning for the last war, we may be stuck planning for the digital explosion of Bill Gates and Steve Jobs that is like, so, 25 years ago.

To get an idea where markets may be, look at today’s news. Canadian Pacific is making a play for CSX railroad (headquartered in Richmond not that long ago) because of the unexpected explosion in fracked oil.

CP handles a lot of freight in the western part of Canada and U.S. where some of the most impressive new fracked shale oil are, namely the Bakken fields of North Dakota and Alberta. CP wants access to eastern U.S. refineries and transshipping points, such as a transloading spot at the mouth of the York River. CSX is stuck with dirty old coal where production and exports are down, although it has an extensive rail network in the Old Dominion.

The combined market value of the two firms is $62 billion — a far bigger potential deal than the $26 billion Warren Buffett paid for Burlington Northern Sante Fe in 2010. There are problems, to be sure. CSX isn’t interested and the Surface Transportation Board, a federal entity, nixed a matchup of Canadian National and Burlington a little while back.

But this isn’t really the point. The point is that the Old Steel Rail pushed by new sources of oil and to some extent natural gas has surprisingly turned domestic economics upside down. Many of the new oil fields are in places where there are not pipelines, so rail is the only answer. In 2008, according to the Wall Street Journal, six or so American railroads generated $25.8 million in hauling crude oil. Last year that shot up to $2.15 billion.

So, what does that mean for students? A lot actually, especially when we blather on about old-style STEM that might have them inventing yet another cell-phone app that has a half-life of maybe a few months. Doesn’t matter, every Virginia legislator, economic development official and education advocate seems to be hypnotized by the STEM genie.

A piece I just did for the up-and-coming Chesterfield Observer on vocation education in that county:

“The recent push to educate students in so-called STEM (Science, Technology, Engineering and Mathematics) may be case in point. The goal is to churn out bright, highly trained young people able to compete in the global economy with their counterparts from foreign lands.

“A subset of this area of concentration is computer science, which goes beyond knowing the basics and gets into the nitty-gritty of learning code and writing computer languages. By some accounts, such skills will be necessary to fill more than 2 million jobs expected to become open in the state by 2020.

“Critics question, however, if overspecialization in technology at earlier ages prevents students from exploring studies such as art and literature that might make them better rounded adults. And, specialization often assumes that jobs will be waiting after high school and college when they might not be.

“Peter Cappelli, a professor of management at the Wharton School of the University of Pennsylvania, has written about such problems of academic overspecialization in national publications such as The Wall Street Journal. He recently responded to questions from the Chesterfield Observer via email.”

“Not many science grads are getting jobs in their field,” Cappelli says. “The evidence suggests that about two thirds of the IT (information technology) grads got jobs in their fields, about the same for engineering. There is no guarantee in those fields. It’s all about hitting the appropriate subspecialty that happens to be hot. There are still lots of unemployed engineers and IT people.”

So there you have it. In my opinion, the over-emphasis on STEM training has the unfortunate effect of producing young adults who have one goal in mind – getting a job and making money, not helping humankind. And, if you insist on STEM, why not branch into something where there are actually jobs namely petroleum engineering, geology and transportation engineering.

I’ll leave the dangers of added petroleum cargoes in trains to another post.