Prosperity for Rhode Island

Recently the Rhode Island Economic Development Corporation (EDC)  has been highlighted as one of the key reasons RI has such a poor economic track record over the last 20 years, and especially in the current recession.  Mismanagement and incomnpetence seem to be the most conmmonly cited reasons for atttacking the EDC, though blame for high unemployment rates is often assigned to high taxation rates, strong labor unions, and our overly generous welfare system and perks for state workers in addition to the EDC.

Yes, the Rhode Island economy has grown more slowly than the national economy for most of the last 30 years.  The RI unemplyment rate has not been stellar.  State government has run into frequent budgetary crises.  The public debate about  what to do to improve economic performance has been a drum beat cacaphony, with lower taxes, more efficiency, less powerful unions, corporate give aways, the knowledge economy, and global trade being the remedy touted over and over again.  

Each recession and crisis the drum beat gets louder , with every politician parroting the corporate party line.  And still RI struggles in the competetive one upmanship of 21st century capitalism as if the policy setters have not done a good job of implementing the approved system. That if only they could get everything right and combine it with great management RI would be a land of milk and honey. This has lead some to recently crtiticize the Rhode Island Economic Development Corporation and to call for its abolition or transformation.  

I will have some to say about the EDC, but even more basic than the EDC, what is not getting looked at in all of the commotion is the possibility that the model that RI politicians, business leaders, and bureaucrats are touting as the way to a healthy economy may not actually work, and that no matter how good the EDC was at implementing the plan, if the plan is all wrong, if it does not actually describe the situation we find ourselves in, then the results are likely to be less than stellar.  

Lets begin with the unemployment rate, a measurement that nearly everyone in the US taxes to be a reasonable stand in for the health of the economy.  

According the the US Bureau of Labor statistics http://www.bls.gov/lau/ website citing March 2009 statistics as the latest available, thea national unemplyment rate is 8.9% while RI is one of eight states with an unemployment rate over 10%.  CA, IN, MI, NC, NV, OR, and SC join us in the dubious distinction.  DC, FL, KY, OH, and TN follow close behind at more than 9.5%.  Coming in below 5% unemployment are NE, ND, SD, AND WY.  Every state with unemployment below 7% , with the exception of VA and MD which depend highly on the recession countercyclical force, the spending power of the Federal Government,  is in the energy and corporate agriculture business. It seems the states with huge wind resources, fossil fuel extraction, a large corporate agriculture sector, and low population densities are currently reaping the rewards of that natural bounty.  As for the high unemployment states, they are a mixed bag.  MI stands out with the car industry down the tubes, probably permanently, and the rust belt, in which I include RI  with its former prowess in machine tools, as well as IN, MI, and OH,  clearly has a problem.  So do states  heavily reliant on housing speculation as the underpinning of their economy such as CA, FL, and NV.  I do want to focus a bit on the South, with KY, NC, SC, and TN cited here and several other states nearby also experiencing high unemployment rates such as AL at 9.0, GA at 9.2, and MS at 9.4.

I think the similarities in economic weakness between RI and the South require further mention.  RI is constantly criticized for high taxes, strong unions, being business unfriendly, and bad schools that cost too much because of strong teachers unions.   The south also has pretty bad schools, but the anti union legal framework, open for business attitude and low taxes stereotype of the south present a vast contrast to the stereotypical view of RI.  North Carolina has always been considered a model with the Research Triangle foster knowledge economy growth, while South Carolina is stereotyped as a low tax, poor service, open for business state  yet both places are suffering in the recession as much as RI.   The South and RI also seem to share the ideology that it is a good economic development strategy to give big businesses almost anything they want if they will locate facilities in their particular state.  (admittedly nearly every state seems to have that philosphy)  

Since both the RI system and the rust belt system in general (high taxes, lots of school spending, unions, corporate give aways, and pretending to join the knowledge economy) is working just about as well as the Southern system (low taxes, little school spending, corporate give aways, no unions, and pretending to join the knowledge economy)   we ought to at least consider that there is something wrong with the model and its goals rather than that the EDC is guilty only of poor execution.

Despite all of our attempts to ignore it, states with more robust rural natural resource based  economies have lower unemployment right now.   Could it be that for all of our high tech overlay, that we need to remember the importance of natural resources in determing our prosperity?    Backing this up might be some of the stateistics on Rhode Island agriculture, the only part of the RI economy that appears to be vibrant.  The number of farms has increased 42% over the last 10 years, the number of farmers markets has gone from 5 to 37.  

Now RI does not have oil wells or coal mines like Wyoming, but like North Dakota it has a stagnant population and lots of wind. Some would argue argue that the Wyoming example tells us to ignore environmental constraints, just go crazy, but our situation leads even more to the North Dakota model with more and more organic farming and windpower. Maybe healing our ecosytems, tapping natural flows, building our soil, forests and fisheries, taping the offshore winds and solar power, and going whole hog for mass transit is going to be much more important than anyone is predicting and ought to be the center of our economic strategy.  

I do know that leaders in the agricultural revolution in RI have tried to get agriculture on to the ageda of the EDC, but have gotten no where.  The EDC touts windpower, but only in the last 12 months has it invested in it.  Nowhere on the EDC agenda is rebuilding the fisheries to the point where they can feed us and support fishermen. Unfortunately the ecological transformation of our economy, the one tool we seem to have for prosperity in the new era of global warming, seems to be low on the economic agenda of everyone involved in state economic policy.  And it shows.

The EDC gets the blame, but they are just parroting the policy the big corporations are looking for, the economic activity that keeps politicians coffers full with special interest money.  In other words we get the best EDC money can buy, and that it works so poorly tells us their puppet masters are pulling thw wrong strings, not that all the people who work for the EDC are incapable of good work.   

A big part of the problem is that most communities are trying to use the medical industrial complex as an integral part of moving to a 21st century knowledge economy. The need to wring ever growing profits out of health care is what makes covering everybody more and more impossible. So our economic development strategy is a serious mismatch with our health care needs. Stop using health care as an economic growth strategy and much of the problem disappears.   5/14/09