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A
decade ago, regional leaders of Southside and
Southwest Virginia were presented with a once-in-a-
lifetime opportunity to restore prosperity to their
ailing communities whose manufacturing-based
economies had been hollowed out by the wholesale
migration of furniture, apparel and other light
manufacturing overseas. Then-Gov.
Jim Gilmore set aside half the proceeds due Virginia
in the Master Settlement Agreement with the
cigarette companies for the purpose of transforming
the economies of these two down-trodden regions. To
date, the Virginia Tobacco Indemnification and
Community Revitalization Commission, which was
created to administer the monies, has spent $432
million on more than 900 revitalization projects. Further,
by securitizing revenues due from the cigarette
companies, the Commission has created a $1 billion
endowment to fund future programs. Given
conservative actuarial assumptions, the endowment
should spit out $60 million a year for years to
come... basically forever.
No other region of
Virginia possesses a comparable war chest for
investing in economic and community development.(1)
Ten years later, it's worth taking stock of what the
Tobacco Commission has accomplished with its
windfall. Has the Commission succeeded, or even come
close to succeeding, in meeting early aspirations of
"transforming" the region -- evolving from
farming, mining and manufacturing into the Knowledge
Economy in the same way that, say, Ireland did?
That's what a blue
ribbon panel, consisting of former Gov. Gerald L.
Baliles, Hugh Keogh, CEO of the Virginia Chamber of
Commerce, J. Robert Bray, former executive director
of the Virginia Ports Authority, and other prominent
Virginians set out to examine. The group's
conclusions aren't pretty. Despite wording dry
enough to parch the mouth, the report made plain
that no such transformation has occurred. States the
report:
Given the
existing state of the Southside and Southwest
economies, it is fair to ask whether the
expenditure of over $400 million by the TICR since
the year 2000 on “regional transformation”
projects has had the desired transformative effect
on the regions. ...
Despite this spending, population in the region
continues to decline, wage rates still lag behind
the rest of the state, there is persistent high
unemployment and poor educational attainment is
still endemic.
The blue ribbon
panel identified a number of problems large and
small that need fixing. It suggests a number of
well-considered process changes: tweaking
administration of the Commissions' tobacco-funded
endowment, routinely updating the Commission's
strategic plan and streamlining the governing
organization. The panel also calls for collecting
data and measuring outcomes.
One set of
proposals runs deeper: ever-so-delicately
challenging the parceling out of dollars to every
town, city and county throughout the region in
response to "grass roots initiatives," an
approach that ensures that every political
jurisdiction gets its "fair share" but
fritters away millions in marginal projects.
Instead, the panel recommends treating disbursements
as "investments" that pay off well into
the future. Along the same lines, the report urges
the Commission to stop doling out micro grants,
under $100,000, and instead support larger
initiatives that hold out the potential to create
transformational change.
Finally, and most
importantly, the panel recommends investing
strategically in education. "The [panel]
believes that education from preschool to high
school and beyond high school is the future of
Southside and Southwest Virginia," reads the
report. "No miles of highways constructed, no
tens of thousands of feet of water or sewer lines
laid, nor any number of industrial park buildings
erected can change this."
I would put the
argument more bluntly than the authors of the blue
ribbon report. Not only has the Commission failed to
"transform" the Southside/Southwest
Virginia economy, it has squandered many of its
resources. By keeping the old economy on life
support, it has failed to steer sufficient resources
into the new economy. For all intents, the economies
of Southside and Southwest Virginia look very much
like they did 10 years ago -- the main difference
being that the light-manufacturing economic base is
somewhat more diverse and less dependent upon
apparel and furniture than before.
The most visible
progress the Commission has made in adapting to the
new economy is building the regions' high-speed
Internet infrastructure. But outside of a few
showcases, like Danville's Center for Advanced
Learning and Research and the Southwest Virginia
Higher Education Center in Abingdon, communities
cling to light manufacturing as a source of jobs and
taxes. Education levels lag hopelesly behind those
of Virginia and the rest of the United States. And
there is little evidence that attitudes have
fundamentally changed. Community leaders persist,
for instance, in lobbying for the construction of
horrendously expensive four-lane highways and
Interstates, as if more asphalt somehow could revive
corporate investment in the digital age.
Over and above the
blue ribbon pane's sober analysis, I would add the
following point: Rising energy prices are
devastating the rural standard of living (2).
Virginia's mill town economies support a highly
dispersed population -- dozens of hamlets and mill
towns, farmettes strung along country roads, houses
built in scattered cul de sacs -- that entail
long-distance commutes to manufacturing facilities.
Inhabitants of rural counties suffer more than most
Americans from the surge in gasoline prices. The
scattered, low-density human settlement patterns
were affordable when gasoline was cheap. Many
factory workers supplement their wages by raising a
few cattle or growing tobacco or corn on the side.
But the low-density settlement pattern is crippling
in an era of expensive energy.
Unfortunately, the
problem is bigger even than energy scarcity. The
United States' competitive advantage in the global
economy resides in knowledge-intensive industries
that leverage productivity and innovation. To
compete, businesses need employees with high levels
of skills and education. To recruit a workforce,
successful businesses must locate in proximity to
large labor pools -- i.e., large metropolitan areas.
(In some instances, corporations are willing to
locate near university towns where they can recruit
grads with specialized knowledge sets.)
Not only are businesses biased towards locating in
large metro areas, but the most cutting-edge
businesses migrate toward metropolitan areas
associated with particular industry clusters
-- finance in New York, computers in San Jose,
movies in Los Angeles, biotech in Boston, etc. --
where highly industry-specific industry knowledge
can be shared, start-up and expansion capital is
available and executives with industry-relevant
backgrounds can be recruited.
Virginia mill towns, like mill towns everywhere
across the United States, lack the size to create
knowledge- intensive labor pools. They lack the
business clusters that support industry-specific
innovation. And they lack the amenities required to
recruit, retain and remunerate the highly educated
employees needed to run, or start up, successful
enterprises. As creative-class guru Richard Florida
observes, the best educated Americans are going
where the wealth-generating opportunities are -- a
relative handful of large, dynamic metropolitan
regions. If even once prosperous regions like
Detroit, Cleveland and even Pittsburgh are having a
difficult time competing for top talent, mill towns
aren't even in the race.
The Tobacco
commission simply has not come to grips with this
problem. But even if it did, even if the Commission
followed the advice of its blue ribbon study group
and invested more heavily in education, it wouldn't
make much difference. Tragically, the vast majority
of newly educated residents of Southside and
Southwest simply would emigrate to metro regions
where they could better utilize their skills and
make more money. This problem is not unique to
non-metropolitan Virginia -- it's a pattern seen
across the country.
Politically, of
course, the Tobacco commissioners cannot throw up
their hands and say, "We're doomed. We give
up." But unless they are willing to make really
tough decisions -- in effect, to perform
economic-development triage -- Southside and
Southwest Virginia probably are doomed to
failure.
It is absolutely
crucial that the Tobacco Commission stop frittering
away resources on tiny community projects that
protect a few jobs for a few years but fail to
achieve lasting transformation. As far as I can see,
the regions' only hope is to concentrate resources
in creating a handful of economically viable cities
that possess the size and resources to attract both
human capital and investment capital.
It is possible --
not likely, but possible -- that cities like
Danville, Martinsville and Bristol/Abingdon have
sufficient population and resources to lure
corporate and individual refugees from the high
costs and dysfunctional human settlement patterns of
the large metro regions. Danville, which has done a
remarkable job of reinventing its economy in the
face of hurricane-like erosion of its old economic
base, shows it has the will and imagination to fight
for its economic life.
However, the strategy of supporting
"urban" economic activity (primarily
manufacturing) in dispersed, low-density human
settlement patterns across thousands of square miles
becomes less and less viable with every increase in
the price of gasoline and the steady migration of
the creative class to large metropolitan areas.
Until the Tobacco Commission abandons the delusion
that conventional strategies can work, the cause is
futile, and the leaders of Southside and Southwest
Virginia are peddling false hope to the people they
serve.
--
July 21, 2008
(1).
The Tobacco Commission funds are supplemented by
hefty community endowments in Danville and
Martinsville, raised through the sale of their
community hospitals to for-profit health care
companies, as well as special levies on the coal
industry to finance economic diversification in the
coalfield counties. These resources are leveraged
through special dispensations from the Governor's
Opportunity Fund.
(2).
I follow Ed Risse in using the term
"rural" advisedly. Rural economies are
based upon farming, forestry and the extraction of
natural resources. Outside of the coalfield
counties, where coal mining still underpins the
local economy, manufacturing is still the dominant
primary industry in Southside and Southwest
Virginia. Industrial plants are concentrated for the
most part in industrial parks, which require
significant infrastructure investment in roads,
water, sewer and electricity. The challenges that
factories face in competing for workers are
essentially urban in nature. Additional problems
arise from the fact that much of the workforce lives
in the "countryside" -- in human
settlement patterns reminiscent of the agricultural
era -- while depending upon the automobile and cheap
gasoline to get to work.
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