Economic Development Triage

Some truths are just too hard for politicians to speak: There are some things that constituents refuse to hear. That’s why we have blogs.

One of those truths here in Virginia is that Southside and Southwest Virginia are experiencing an irreversible decline that cannot be halted as long as current economic trends and development policies hold. This is not a reflection upon the earnestness, work ethic or moral worthiness of the people of those regions. It’s just the way it is.

I developed that theme in two recent blog posts, which I’ve knitted together in a single piece, “No Salvaging the Mill Towns“.) If you haven’t read the blog posts yet, skip them and read the column. If you have read the blog posts, you might revisit the column anyway: It states the case more lucidly.

The occasion for these observations is a report by a blue-ribbon panel that has surveyed the handicraft of the Virginia Tobacco Indemnification and Community Revitalization Commission after 10 years and $400 million parceled out over 900 projects smeared across the region. The panel recommends adopting an “investor” approach to disseminating funds rather than a grants approach, in which funds are doled out to every town, city and county throughout the region. Likewise, the study group recommended making fewer micro grants under $100,000 and concentrating on projects that offer potential to transform the two regions.

As Heinz Guderian, the theoretician behind the Wehrmacht’s WWII blitzkrieg tactics, famously said (in German, of course), “Kick ’em, don’t splatter ’em.” In other words, if you want to achieve a breakthrough, concentrate your resources.

Fortunately, community leaders in Southwest Virginia are getting the picture. One reader has sent me a widely circulated letter written by Barnie Day, a Patrick County community banker, board member of the Tobacco Commission and former General Assembly delegate (and former Bacon’s Rebellion columnist) who, by speaking the hard truth, no doubt has transformed himself into political paraiah.

“We have fertilized and watered the seeds of our own failure,” Day wrote, “with how we have chosen to structure and govern ourselves, with how we have chosen to allocate — in basically a ‘might is right’ fashion — the spoils of this endeavor. … Not only has [this approach] pitted region against region and local government against local government, but in many cases it has fostered spending for spending’s sake — spending without impact — spending sometimes based on little more than availability of funding.”

As Day admits, he argued for and — “God forbid” — actually received funding for a “covered bridge festival.” The Tobacco Commission has lavished hundreds of millions of dollars on sewer lines, shell buildings, community centers, institutes, partnerships and initiatives of all sorts. “But what nags at me is this question: “Will any of them make a 100-year difference?”

In my column, I argue that the problem runs even deeper. The dispersed, low-density settlement patterns of Southside and Southwest Virginia — small towns, tens of thousands of homestead scattered along country roads — are not sustainable (a) in an age of energy scarcity that drives up the cost of gasoline and (b) in a Knowledge Economy in which the “clustering force” rewards companies for locating near large pools of skilled labor.

If there’s any hope for the region, it’s in conducting economic-development triage and concentrating resources into a handful of urban areas — Danville, Bristol, perhaps Martinsville — that are large enough to compete for human capital. Such a policy would be political suicidal for any community leader to advocate. But the hell of it is, the strategy of spreading around the tobacco booty to placate local politicos is doomed to failure. Southside and SW Virginia get only one chance at this: They have to do it right.

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  1. Larry Gross Avatar
    Larry Gross

    forget trying to pick urban winners and losers.

    Do this:

    Any/Every kid that gets an "A" average is guaranteed by the State of Virgina – 2 full years in the nearest community college – and it includes full room & board.

    At that community college – an "A" in a designated curricula – (curricula that fulfills Va job needs" gets full-boat paid scholarships at the nearest 4-year college.

    Moral of the Story:

    Don't get government involved in attempting to determine geographic economic outcomes.

    As far as I know, no Government has demonstrated any level of competency in attempting this.. but I could have my mind changed with good evidence to the contrary.

    It's a proven fact. If you offer most kids free college – more than a few of them will take you up on the offer in a heartbeat.

    If you want "triage" – then let QCA "float" on a competitive basis as to who gets the "free" education.

    In other words.., if you have more applicants than money, let the highest QCAs win.

    Let's use that tobacco money like we would … teaching folks to fish rather tha giving them fish.

  2. Not your father's economic developer Avatar
    Not your father’s economic developer

    LG, You think traffic is bad in Northern Virginia now? Try giving up on rural economic development.

    JB, I read the long piece and I have a really hard time with just how definitive your judgement is. It’s only 10 years into trying to reverse a multi-generational turn in Southwest and Southside.

  3. Jim Bacon Avatar
    Jim Bacon

    Not Your Father’s…. I don’t pretend to have “definitive” judgment. And I certainly agree that you can’t turn around the problems in Southside and SW Virginia in 10 years.

    But, if we’re to trust the judgment of those leading the Tobacco Commission, I would like to seem some acknowledgment of the unpleasant realities that I noted: (a) the impact of high gasoline prices on dispersed development and (b) the “clustering force” that favors large metro areas over small towns and hamlets.

    If the Tobacco Commission strategy acknowledged those realities and said, here’s our plan to deal with them, I might have more confidence. But you can’t be successful if you refuse to recognize the existence of two key driving forces of the 21st-century economy.

  4. Rodger Provo Avatar
    Rodger Provo

    I do not think you understand to the extent of how
    labor cost in Asia has been the
    driving force resulting in the decline of the textile and furniture industries in this area.

    High energy costs may change the
    dynamics of this equation thus
    making it more attractive to have
    some manufacturing return to such
    regions in our country.

    Health issues relative to the use of tobacco has led to the decline
    of that segment of the economy in this region which has been a factor in Virginia’s economy for
    400 years.

    You discount some great success
    stories in this area resulting from
    efforts by many regional and state
    agencies such as the remarkable
    turn around of Danville.

    Nor do you acknowledge the stunning
    success of Abington and Floyd County in drawintg people to the area for the arts and outdoor

    I think you are selling the area
    short and those who are trying to help it.

  5. Anonymous Avatar

    I doubt that Danville, Bristol, and Martinsville are large enough to compete for human capital in high skill, high paying jobs. Though, to be fair, the leadership of Danville seems to be doing about as well as it can with the cards its been dealt. Are Roanoke and Lynchburg large enough is the question in my mind.


  6. Not your father's economic developer Avatar
    Not your father’s economic developer

    The Commission has some things in the pipeline on energy that will add up to something on the scale of IALR…in time.

    On your big themes, I wouldn’t deny the economic impact of clustering in metropolitan areas but there’s an equilibrium point in all these things. The diseconomies of scale are setting into some of our largest metropolitan areas, well beyond the ability of our current financial/political structures to address. And while gas prices may clobber our exurbs, the fuel crisis may open a window of opportunity for smaller metro areas. Increasing labor costs to in Asia were already changing the calculation in some industry’s with respect to outsourcing before the surge in energy prices.

  7. E M Risse Avatar
    E M Risse

    Not your father’s economic developer (perhaps your great, great grandfathers economic developer?)

    I think I know why you are having touble with Jim Bacons perspective.

    You are talking about “rural” development…

    You are so busy locating the best places for grist mills, helping locate roadways to upper hollows, organizing work parties to put down cordiroy in the swampy places, looking for a young preacher to start a meeting and teach young ones to read and write…

    With all that to do it is tough to keep up.

    There are equilibrium points and diseconomies of scale but that means the Austins, Research Triangles and the Boulders snip off some of the San Francisco Bay NUR and Boston NUR advantage but continue to grow more dominate.

    That is the macro settlement patter picture, Jim is also talking about the micro picture.

    Scattered acre subdivisions and 5 and 10 acre horse farms are unsustainable.

    Labor costs? When Asia is overpriced there is Africa.

    The bigger issue is that human have start consuming less, not finding cheaper was to consume more.


  8. E M Risse Avatar
    E M Risse

    Not your father’s economic developer:

    One other thing:

    If you help citizens define a Clear Edge between the Urbanside and the Countryside and work to create a Critical Mass with Balance inside the Clear Edge then you have a chance of attracting those who will help achieve prosperity.

    If that is not attractive to you, you may want to check out the new high tech grist mills and other technology to help subsistance farm Households get off grid.


  9. Jim Bacon Avatar
    Jim Bacon

    I'm posting this email communication from Tom McLaughlin with the News & Record in South Boston, with his permission. Jim Bacon

    Thanks for your excellent piece on the Tobacco Commission. While I disagree with some of your conclusions, generally I think you hit the mark more often than not.

    One of the problems that doesn’t really get its due in the Baliles report is the extent to which the Tobacco Commission uses its $1 billion bankroll to fund pork barrel projects, aided and abetted by the locals with their hands out for easy cash. The Baliles report is very good, however, on the subject of how best to reform the governing structure of the Commission; there are sections that basically constitute a plea for neutering the Commission’s political overlords. (If I had my druthers I’d kick them off entirely.)

    The problem for the Blue Ribbon Panel, of course, is that it’s up to the politicians who run the Commission to implement the suggested reforms. Good luck with that. But your piece, as well as others, ratchets up the pressure, which is the only thing that these guys will ever understand.

  10. Lyle Solla-Yates Avatar
    Lyle Solla-Yates

    My main take-away from Jim’s article is that there is no real strategy for revitalizing rural Virginia, except for a stop-loss program.
    The strategy of education makes some sense, but suffers from the flaw that if these educated young Virginians need jobs and things to do, they are likely to leave for NoVa and beyond. At least, judging from my former classmates at U.Va. this seems to be happening.
    I have seen two big ideas in economic development: top-down and bottom-up. Top-down is what we’re doing with all this tobacco and hospital money: throwing money at a problem and hoping it goes away. Bottom-up is actually going into communities, getting to know people, having get-togethers focused on entrepreneurship and investment, and getting those small and not-so-small businesses started. Ernesto Sirolli has a good book on it.
    I think the key is to use both top-down and bottom-up tactics. Sensible investments based on rational criteria with clear ROI and timetables can do enormous good.

    @Jim: I think Tom’s point is well-made. I’m not so sure about there being no hope though. For years, the U.S. was dominated by political patronage. It was critical to their campaigns that politicians be able to reward supporters with jobs. And it crippled government until people got so angry that it became the central political issue and testing began to ensure that people working government jobs could actually perform them. What we need is the same anger at pork barrel spending and the same objective testing for projects or all that money will continue to be frittered away.

  11. Jim Bacon Avatar
    Jim Bacon

    Rodger, For the record, I spent two years early in my journalistic career living and working in Martinsville (where I covered the apparel and furniture industries), four years covering the SW Virginia coal industry for the Roanoke Times, two years working for AMVEST Corporation, which was headquartered in Charlottesville but maintained mining operations in SW Virginia, and visited both regions frequently during my tenure with Virginia Business. I have paid close attention to the region’s economic development initiatives — often writing about them in Virginia Business — and I’ve paid close attention to the fortunes of apparel, furniture and coal. I still have many friends from both areas, and I have great memories from my time spent there.

    There are many promising initiatives occurring in both Southside and SW Virginia. I have written about a number of them for Bacon’s Rebellion, highlighting, for example, creative efforts in Danville and Patrick County.

    I am not selling the region short. I am saying that there are economic forces at work that I don’t see anyone acknowledging in the public debate over economic development in those regions. Until economic development efforts take these forces into account, you can achieve any number of small, tactical victories but you’ll never succeed in your strategic aims.

  12. Not your father's economic developer Avatar
    Not your father’s economic developer

    EM, You are so seriously putting me in the wrong box I had to pull myself up from the floor laughing. Looking past the tedious, unfunny, elitism and the overwhelming number of neologisms per sentence I barely know where to start.

    Infrastructure issues and political instability will see certain functions move back to the US before they ever head form Asia to Africa. (E.g. Indian outsourcing giant WiPro's recent investments in Georgia) The internal picture in the US is more complex but I think your approach to fitting all industrial functions and all places in a box is overly simplistic. Rurality/urbanity is relative just as the needs of industries are relative. Decentralization or reconcentration closer to key resources is just as logical an approach for certain industries as is concentration for others.

    On the more interesting point about strategy, while there are plenty of projects I wouldn't defend I would argue 1) get real about life in a democracy, and 2)let's see what's coming up from the TC on energy r&d. I think it will on balance show some thought went into them.

  13. Rodger Provo Avatar
    Rodger Provo

    Jim, I would say in response to comments in your last paragraph Southside and Southwest Virginia are struggling with economic challenges created by bad public policy in Washington, DC.

  14. E M Risse Avatar
    E M Risse

    NYGGGGF'SED said:

    "You are so seriously putting me in the wrong box…"

    You said you were involved in "rural" development. That is looking for Grist Mill sites and…

    "…I had to pull myself up from the floor laughing."

    We do stand-up on the side.

    "Looking past the tedious, unfunny, elitism and the overwhelming number of neologisms …"

    Not a singel neologism in the post — check out the GLOSSARY for this site.

    "Infrastructure issues and political instability will see certain functions move back to the US before they ever head form Asia to Africa."

    Just think how far fetched it seemed that Communist China would be a major trading partner — and own more dollars than Ft. Knox not long ago.

    If cheap labor is the topic — and it was — Africa has that and China is loosing that advantage because of citizen expectaions.

    "The internal picture in the US is more complex but I think your approach to fitting all industrial functions and all places in a box is overly simplistic."

    Where did you read that I though the internal picture in the US of A was not complex?

    And where did you read that we beleive that "all industrial functionals" and "all places" should or would fit in a box?

    "Rurality/urbanity is relative just as the needs of industries are relative."

    Now speaking of neologisms — "Rurality?" Is that Ruraliphia or something else? Recall there has been no "rural" since the end of WW II in VA.

    "Decentralization or reconcentration closer to key resources is just as logical an approach for certain industries as is concentration for others."

    Any way you cut it prosperity will require functional and sustainable settlement patterns and that mean Balance and Critial Mass.

    "On the more interesting point about strategy, while there are plenty of projects I wouldn't defend I would argue 1) get real about life in a democracy,…"

    We are with you there!

    "… and 2)let's see what's coming up from the TC on energy r&d. I think it will on balance show some thought went into them."

    Energy R&D is great but we have come to the end of cheap energy — we burned it up — and to burn up what is left — coal — will cost at both ends.

    R&Ded energy sources renewable or no are not cheap.

    The more important question is how to cut consumption, by say 50% over the next 10 years.


  15. Not your father's economic developer Avatar
    Not your father’s economic developer

    I can’t decide if the “grist mill” label is either a weak joke, an attack, or the sign of a limited horizon on your part.

    I also appreciate the desire for every “consultant” to brand their own lingo, but it sometimes feels like one of the biggest burdens around here is the need to refer to the glossary on a regular basis.

    If we were able to get past the terminology I think we probably agree on more than either of us knows but I’m just a guest in your house so I’ll play by the rules (or stay home).

  16. Anonymous Avatar

    Here is what Wikipedia has to say about neologisms, I think it s good policy and maybe Bacon’s Rebellion should adopt it. Just because EMR wrote a glossary of neologisms doesn’t change what they are.


    “The use of neologisms should be avoided in Wikipedia articles because they are not well understood, are not clearly definable, and will have different meanings to different people. Determining which meaning is the true meaning is not only impossible, it is original research as well—we don’t do that here at Wikipedia. Articles that use neologisms should be edited to ensure they conform with the core Wikipedia policies: no original research and verifiability.”

  17. Anonymous Avatar

    “Scattered acre subdivisions and 5 and 10 acre horse farms are unsustainable.”

    So is a lot of other stuff, including much of our urbanized areas. Why do you suppose that whenever there is some big calamity there is a mass exodus to get OUT of the cities? That evacuation plans are now accepted parts of urban culture?

    One definition of sustainable is that the activity use no more energy than falls on the area that it uses. That lets most apartments and most cities out of the sustainability equation.


  18. E M Risse Avatar
    E M Risse

    Lyle Solla-Yates said…

    “My main take-away from Jim’s article is that there is no real strategy for revitalizing rural Virginia, except for a stop-loss program.”

    Could not agree more, Lyle, except you put
    in an extra word: “rural.”

    Your statement applies to all of the Commonwealth and the all of the three New Urban Regions and two Urban Support Regions of which Virginia is part.

    There is no “rural” left, there was “rural” in the Commonwealth at one time but now there is:

    Scattered, low density urban,

    Not quite up to date urban,

    Not a place where you can get a good cappuccino urban, (One of the best cappuccinos I have enjoyed in the last decade — aside from the ones Linda makes here on Derby Way — was in a sandwich shop in a small town in Central Missouri, the owner broght back a used machine from Italia.)

    Check out Barnies wonderful profile of Bubba (7 July 2008 Rebellion). How the Household money is managed, where he works, where he gets his clothes, what he wears — all urban. He may think he is not urban but that is one of the results of people using confusing words.

    Those who insist on using words that are confusing and / or no longer have clear meanings is just an attempt to foster confusion and continue to ride the tiger for a few more miles.

    Check the GLOSSARY


  19. E M Risse Avatar
    E M Risse


    You said:

    “the overwhelming number of neologisms per sentence”

    We noted there were no nelogisms — new words.

    We hope you have taken time from witching for spring house sites and selecting potential grist mill locations — both important activites of “rural” development — to check your S. Johnson and find the definition of “neologims.”

    We avoid the use of “new words” for the reasons we spell out in “The Shape of the Future.”

    We Capitalize words and phrases to indicate that they mean something specific — each of the words alone or in phrases are used in one of the widely accepted meanings of the word, not new meanings.

    We provide a GLOSSARY so there is no confustion about what is meant by each word or phrase.

    We avoid use of words related to human settlement patterns for which there is well documented and widely accepted evidence that the words mean different things to different people.

    Do you have any other suggestions as to how we can make ourselves clear?

    As noted in the last post, insisting on the use of confusing words — we list seven Core Confusing Word — reinforces Geographic Illiteracy. (Note Capitals)

    You are right that we probably agree on many things.

    We have found when we get to the root of the “differences” there are few and they turn out to be matters of fiath, not fact or science.

    Have a good day.


  20. Danny L. NEwton Avatar
    Danny L. NEwton

    Any government economic development project should be made to stand for a performance audit on a regular basis to see if it really does have a return on investment. Most economic development programs are just variations on buying bingo cards. It is a little like a childless couple building on a couple of extra rooms in a home so that they will get more children. The more bingo cards you buy the more likely you are to “win”. The only problem is winning as defined in the economic development sense which means taking credit and winning in the accounting sense which means a positive return on investment.

    The government is a lousy vehicle for some kinds of economic development. The smaller the boundary of the government entity, the less it is likely to recover from the subsidies that are given. Subsidies can make economic activity happen sooner and maybe in different places but I don’t think it can make economic activity happen that would not have eventually happened anyway. The value of these subsidies is early delivery and proximity. As far as early delivery is concerned, does it really matter in the long run if you get paid on Friday or Thursday?

    For instance, if a town gives a subsidy for a Lowe’s to open a store, and then gives another subsidy to get a Home Depot, it is not likely that Home Depot will agree to any subsidy until it is sure that there is enough excess demand that it can sell its usual volume of products. Any government within a city, county or state boundary experiencing stable or declining population is going to have a weak demand for everything. The density of the population is a factor only with respect to efficiency of transport and delivery of services.
    It is yet to be proven in any reliable way that subsidies increase demand. The governor of Tennessee seems to think that giving a $500 million subsidy for a Volkswagen plant is going to make people buy more Volkswagens. If Volkswagen continues to have a market share of 3%, then only 2 out of 39 Volkswagens will ever be sold in Tennessee in the near future. The plant is located within driving distance of Georgia and Alabama so the employment impact is blunted by geometry, The outsourced parts are also likely to be scattered to other states and foreign countries to further blunt the effectiveness of the subsidy. Even if you could prove that subsidies increase demand to my satisfaction, it is difficult to prove that a government could survive the subsidy.
    Tennessee state and local governments only collect about 8.5% of all income in the state. This means that they have to recover the subsidy by taxing $5.88 billion. Ideally, that is $5.88 billion in new money, not the old money that it would be getting anyway. Also it is a requirement that all the new people in these jobs will be perfect citizens and require no government services since that money was already used to get them a job. Since about 20% to 25% of all VW sales ends up in Virginia at the VW headquarters as white collar salaries, and another 20 percent ends up at dealers scattered all over the nation, it is not likely that this deal will pay back with new dollars generated. Instead it will be colleted from existing businesses and personal paychecks.
    Economic development programs are mostly monkey-see-monkey-do. There are no patent rights on economic development programs If anyone was actually doing something that worked, it would be copied as soon as it was exposed in Site Selection Magazine. If you look at raw data from the Bureau of Economic Analysis the growth rates of states do not change very much over time. Mississippi has been giveng subsidies longer than any other state and getting nothing profound out of it, but it does not diminish the enthusiasm for manufacturing hope. It is easier to claim that a economic development formula works than to prove that it works.
    Tennessee has over one square mile of empty land, mostly farmland, for every 95 counties that is ready for the next auto plant. The state even helps procure the projects and the total spent every year is about $34 million dollars. Car plants however rarely locate within 100 miles of each other to avoid competition for workers. This means that there could probably be an upper limit of five car plants in Tennessee. A lot of folks are wasting their time with these mega sites and building infrastructure for these plants. But, since attracting Nissan’s headquarters from California, maybe we could get the headquarters of VW away from Herndon, Virginia? This interstate and intrastate economic development seems to be nothing but legalized bribery and piracy with the public purse.

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