The Brutal Facts Facing Southside and Southwest Virginia

The Tobacco Indemnification and Community Revitalization Commission (TICR) has spent 12 years and $756 million on the goal of revitalizing the tobacco- and manufacturing-dependent economy of Southside and Southwest Virginia. What do the residents of those regions have to show for all that money?

That’s the question I would like to have seen answered in a draft report by the Joint Legislative Audit and Review Commission (JLARC). JLARC didn’t go that route, although its report does take as a starting point that the hoped-for economic transformation has yet to occur. Unfortunately, TICR has only $606 million left to spend, which, at its current annual “burn rate” of 15% of its endowment, will reduce annual spending to less than 10% of the current level within 14 years.

JLARC offers some reasonable recommendations: (1) slow the draw down of funds to extend the life of the endowment; (2) consider more “strategic” objectives in the region’s workforce; (3) alter the project evaluation process to screen out weak proposals; and (4) do a better job of monitoring projects for performance.

These would all be helpful, but it is hard to imagine them making much difference to the big picture. The mill-town economy of these regions is not adapted to the increasingly knowledge-intensive nature of work or the globalized nature of the world trading system. A majority of funds have not gone to transforming the region — pole vaulting from a light-manufacturing economy to a knowledge economy, as, say, Ireland or Bavaria have (See “Job Creation in the Countryside“) — but to prop up an antiquated and uncompetitive base of economic activity, mainly light manufacturing and call centers.

Yes, there have been investments in broadband and Danville’s showcase R&D center, but 12 years of effort leave the two regions essentially unchanged.

The problems of Virginia’s tobacco regions are hardly unique to Virginia. Mill-town economies across the country that relied upon cheap land, low taxes and cheap labor have been devastated in a world where China, India and other developing countries have even cheaper land, lower taxes and lower-paid labor. Adding to their regions’ woes, the two regions never developed a culture that valued education — a precondition for transitioning to a knowledge economy.

The sad reality is that Southside and Southwest Virginia are largely doomed to decline as population growth and capital investment continue to gravitate to America’s largest metropolitan regions. Smearing small investments across a swath of small towns doesn’t come close to creating the economic conditions required for success in today’s economy. That’s not what the politicians and civic leaders of the tobacco communities want to hear but it’s the truth.

The only hope I can see — and this is a long shot — would be to concentrate the remaining $600 million in a handful of places that have a prayer of gaining the critical mass needed to compete for financial and human capital. That would include the region’s two small metropolitan areas, Danville and Bristol-Abingdon, and possibly Farmville, which is home to Longwood University and Hampton-Sydney. Conceivably, these three centers could function as magnets for economic refugees from more remote communities who would find the prospect of living only an hour from home in a second-tier city preferable to moving to a big, scary place like Northern Virginia.

Otherwise, the most useful way to spend the TICR money would be to assist those who want to better themselves by picking up the tab for their U-Haul rentals when they move to Washington, Charlotte, Houston or anywhere else that offers solid job prospects.

(Click on map for more legible image.)

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