Economic development games on Smith Hill

greg-gerritt-300x285In January 2017 the RI legislature will convene for the new session. Rhode Island faces a myriad of issues. The powers on Smith Hill will tell us fixing the economy is JOB 1. It is true that fixing the economy would be a great thing, but unfortunately the leadership on Smith Hill is using an outdated framework of development that is not supported by the data. And has never been shown to work.

The basic premise of economic development in Rhode Island is that the way to make the economy grow faster is to make the state more business friendly, business friendly being defined as following the prescriptions of right wing think tanks like the Heritage Foundation that spout a rhetoric that says the key to economic growth is to reduce regulation, cut taxes, and provide subsidies to millionaires to create jobs. The corporate media and the right wing think tanks have been beating this drum for so long that it has become an article of faith in political economics.

The election of 2016 has demonstrated ever more convincingly that America has become a fact free zone, in other words, actual facts do not make a difference. Ideology trumps facts for the electorate and for those who determine policy. But at least some portion of Americans are quite aware that policy that runs counter to actual facts rarely works.

It is in the spirit of helping my community align policies with facts that I offer this essay.

It is an article of faith that tax cuts and little regulation makes your economy grow faster and that states should always seek to align themselves with such policies. The problem is that no one has ever been able to definitively show that following these policies works. One would think since the idea is supported by the mainstream media and the think tanks that there would be study after study that demonstrates the efficacy of this program, and the before and after comparisons would be readily available. You would think that right wing think tank after right wing think tank would have a report lining up the business climate rankings with the economic growth rates of the states showing a wondrous correlation.

I have argued for many years that the model does not work, and have repeatedly asked my readers to show me reports that make the case using actual data. Given my interest, and my reading of a vast breadth of economic data and analysis, I would think that in 5 years of serious watching I would have seen more than a few reports demonstrating statistically significant correlations between economic growth rates in states and communities and their adherence to the policy prescriptions we are being offered daily by the leadership on Smith Hill, the Chamber of Commerce, and the think tanks. But I have NEVER seen one serious report that makes that case. Not a one.

Given the wealth and media connections of those who have a vested interest in maintaining this status quo and its policy offerings it is almost impossible to imagine that if the business climate indexes and the economic growth rates of the various states worked in lock step, or at least in pretty good approximation, that the message would be front page headlines time after time, that the data would be everywhere.

Ask yourself. When was the last time you saw a report that used actual data to make this case? You see the constant policy offerings touting this formula, but you never see reports that demonstrate that it actually worked. In some cases the lack of data proves nothing other than the research has not been fully done, but in a case like this, where the stakes are high and powerful interests could easily get the data into the hands of the public, one has to conclude that the article of faith is just plain wrong.

Interestingly there have been a few reasonably good studies looking at this issue. The most definitive was written several years ago by Kansas Inc, which was the economic development agency in Kansas, the equivalent of Commerce RI. I read the report on the web, but the report is no longer on the web. When Governor Brownback was elected in Kansas he went all in on tax cuts and deregulation. But instead of rapid growth what Kansas experienced was the worst economic performance of any state in the country, with a shrinking economy for several years. Results so bad that schools closed, and state agencies were closed due to lack of funds. Check this link and see what I mean. My speculation is that not only did Kansas go broke, but that the governor realized that his own state agency did actual research and proved decisively that his favorite policies were useless so he shut it down.

One of the best analyses of just how efficacious business climate indexes are was written by the Business Curmudgeon. He uses the Kansas Inc report as part of his case. Check this one out. After reading this see if you ever believe anything the Chamber of Commerce or the Koch brothers tout. And begin to understand just how little local and state tax rates actually mean to the growth rate. State and local taxes average 2 percent of the expenditures of businesses in the US. In a high tax rate state maybe 2.2 percent of expenditures goes to state and local taxes.

And then ponder this. If environmental regulations actually harmed economic performance you would easily find comparisons of growth rates and the strength of state environmental laws in the media. But you do not because it provides another inconvenient truth. What you would actually find a a relatively weak, but noticeable trend towards states with better performing economies having stronger environmental laws.

This is not to say correlation is causation, but if you can not even find a correlation, how can you claim causation.

The reality is that the history of a community, its natural resources, its population, the skills of the members of the community, and its location have a MUCH bigger effect on the economy than anything resembling the business climate. I saw a great example today. North Dakota ranks very high in every business climate index. In the last 5 years it has lead the US in growth rate several times.One year the North Dakota growth rate was 15.3 percent But as soon as the price of oil fell the state’s economy crashed and 2nd quarter of 2016 it shrank 5.6 percent on an annual basis.. In other words the realities on the ground were MUCH more important that the business climate.

So again I remind my RI colleagues, stick to the facts. Adopt policies that actually have been show to work rather than accepting the received wisdom that has a long track record of failure. We have a case in which if you keep telling a lie for long enough eventually people, especially people with a vested interest in believing it, start to believe it. But that still does not make it true, nor make it into good policy for our communities.

We are constantly told we need to be a data driven society, that science and innovation can help us solve problems. So I ask the folks in the media and on Smith Hill, how come this is different? How come the facts are ignored in this public debate? Does the ideology of capitalism trump facts? Is this why RI economic development policy has promised so much and delivered so little over the years? Is it possible that another model of development might suit us better? I think those on Smith Hill owe it to us, the people of Rhode Island, to start telling the truth about how their economic development strategy works. Or rather why it does not.

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Greg Gerritt is a long time activist on the ecology/economy interface and is associated with Friends of the Moshassuck, the Green Party, and

6 responses to “Economic development games on Smith Hill”

  1. cailin rua

    A lot of what you say is true but, typically, you ignore all the local elephants in the room. Sure the Kochs are the evil Kochs. They may even win the most evil award hands down but they’re not the only problem. What do you think about G E and Citibank, Jeff Immelt and Robert Rubin? Hands off them because they’re partnering on Deep Water? What about Steve Mnuchin’s relationship w/ George Soros? What about Indy Mac/ One Bank West, the foreclosure factory they BOTH ran with Michael Dell and John Paulson?

    The mantra goes on and on Trump, Trump, Trump. Mnuchin, Mnuchin, Mnuchin, Price, Price, Price . . .

    What about Sheldon Whitehouse who thinks it’s a “great thing for R I” that Michael Flynn was chosen for NSA chief and who spreads rumors about Bernie Sanders working with Karl Rove? What about all the influence his judge, Jack McConnell, has over a good portion of the non-profits around here and the way he bought his judgeship with tobacco money? What about the same names continually popping up on the boards of non profits which have grown exponentially as the social services in this state and country have gone into a steep decline? What about state treasurers who make us dependent on investments to companies dependent on offshoring, outsourcing and spiraling wage and benefit decline? What about teachers’ unions, who unlike Nurses United, throw their support for the neoliberal Democrat early on, who only consider their plight and show no concern for the general public whose living standards decline while theirs are maintained? What about the way the person most responsible for the current incarnation of the R I Democratic Party, Bruce Sundlun, saddled us with a mall, a convention center, a highway expansion, a private for profit prison, an airport expansion that benefits only a small portion of the citizenry, and left us with the bill while those who benefit from raiding the Port Authority and all kinds of tax breaks walk the money out of state and leave the capital city short of funding while many of these same people attempt to take over our schools and the rest of our public goods? What about operatives ensconced within the Democratic Party who run marriage equality campaigns while representing hedge fund managers trying to take over our schools? Most of these people are Sundlunistas who have launched their careers on the back of Curtis “bomb ’em into the stone age” LeMay’s partner, Bruce Sundlun.

    None of these people mentioned should be allowed point to the Kochs and call the kettle black.

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  2. Len Katzman

    This is the report Mr. Gerritt referred to in this article. I retrieved it by pasting the dead link that he posted here into the search box at the indispensable Wayback Machine —


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  3. Johnnie

    Greg: There are no solutions to the current globalized crisis of capitalism. How this will ultimately end is anyone’s guess— fascism, war, or hopefully, systemic change. Capitalism is in a death spiral, succumbing to its own internal and irreconcilable contradictions. But don’t wait for them to tell you that.

    Here are some excerpts from an article written for the European Financial Review:

    “The system cannot expand because the marginalisation of a significant portion of humanity from direct productive participation, the downward pressure on wages and popular consumption worldwide, and the polarisation of income, has reduced the ability of the world market to absorb world output.”

    “The system cannot meet the needs or assure the survival of millions of people, perhaps a majority of humanity. There are crises of state legitimacy and political authority, or of hegemony and domination. National states face spiraling crises of legitimacy as they fail to meet the social grievances of local working and popular classes experiencing downward mobility, unemployment, heightened insecurity and greater hardships. The legitimacy of the system has increasingly been called into question by millions, perhaps even billions, of people around the world”

    “The system is fast reaching the ecological limits of its reproduction.  Global capitalism now couples human and natural history in such a way as to threaten to bring about what would be the sixth mass extinction”

    “The magnitude of the means of violence and social control is unprecedented, as is the concentration of the means of global communication and symbolic production and circulation in the hands of a very few powerful groups.”

    “Capitalism is reaching apparent limits to its extensive expansion. There are no longer any new territories of significance that can be integrated into world capitalism. Capitalism must continually expand or collapse. How or where will it now expand?”

    “There is the rise of a vast surplus population inhabiting a “planet of slums,”4 alienated from the productive economy, thrown into the margins, and subject to sophisticated systems of social control and to destruction – to a mortal cycle of dispossession-exploitation-exclusion. This includes prison-industrial and immigrant-detention complexes, omnipresent policing, militarised gentrification, and so on”

    “Transnational state apparatuses are incipient and have not been able to play the role of what social scientists refer to as a “hegemon,” or a leading nation-state that has enough power and authority to organise and stabilise the system.”

    “The need for dominant groups around the world to secure widespread, organised mass social control of the world’s surplus population and rebellious forces from below gives a powerful impulse to projects of 21st century fascism.”

    “The only viable solution to the crisis of global capitalism is a massive redistribution of wealth and power downward towards the poor majority of humanity along the lines of a 21st century democratic socialism, in which humanity is no longer at war with itself and with nature.”

    When Professor William Robinson, the author of this article, speaks about “democratic socialism” he doesn’t mean what Bernie Sanders has proposed (whatever that is). He means common (state) ownership of the means of production and distribution and a dismantling the economic system of capitalism as a way of organizing society and reproducing the material needs to make life.

    The author wrote this article for those with an understanding of how capitalism works. If this is difficult for anyone to comprehend, you can find much more by doing a Google search.

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  4. Johnnie

    Greg: I hope my post doesn’t infer that all is lost. It’s not. We all do what we can with whatever strengths we have.
    My point is we need to struggle with an eye to and orientation towards systemic change. The Green party can’t and won’t save the great mass of humanity — or the planet.

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  5. cailin rua

    ‘if you would include more corporate criminals than I did in this one essay, you are most welcome to name names.”

    As things stand, I’d have to say I may have overdone it but probably not. R I is an intimate little place. I forget that sometimes but what if a non-profit forms and owns an external, unrelated venture, solely to generate funds for its core mission? Suppose a food bank starts a walk-in passport office solely to generate funds for its core mission? Or, maybe a Community Development Corporation establishes a Rental Management Company? Or, maybe a mill renovator in search of brown field funds and tax amnesties, zoning variances, etc. representing a for profit wants to start a non profit?

    I don’t want to name names, either but . . . who is it that wants to overturn an election in Ward 3? Where did the money for those production companies come that did the documentary on the way the EPA worked out their Lead Copper Rule in the Summit Neighborhood just before the election, the same election a certain faction wants overturned? What was the effect on the property values in that neighborhood after that?

    For more names, I would direct you to the board of directors at engageri(all lower case) but last time I checked all that information had been scrubbed from the internet.

    I think if you read Phil West’s serial installments at GoLocal you could come up with a lot more names. I am not thinking of the usual suspects and local villains, I’m thinking more about Phil’s “clean government” posse which seemed to have been dispatched to counter the Bloodless Revolution here.

    There are huge territorial issues going on in Providence. The local landlords are vilified. Huge real estate interests wait in the wings until they can get the deals they want. Bob Whitcomb disses Buff Chace over Hope Point or whatever it’s called now and inadvertently reveals what’s at stake by implying Chace’s gripe over Hope Point is more about 1,000 units that will compete with his, rather than esthetics and appropriate scale. We hear so much Jane Jacobs but it’s way more about Warren Buffet and Donald Trump. Then there is the GrowSmart coalition and people who think they have the world bamboozled by coming up with stupid remodeled names for the same Chamber of Commerce/Urban Renewal groups written in Pascal Case that come with talking points that seem as though they could have been written by the producers of the Ginsu Knife late night t v ads.

    I could go on but I’m dog tired right now. The media, the advertising agencies, the “communications” companies, tax lawyers and accountants . . . they all have names. The R I Foundation was formed almost simultaneously w/ the enactment of the Federal Income Tax. I don’t think the “truth” is available on Sunday morning local t v news shows but a lot of people have a lot of money on convincing the public it is the only one there is. It’s springtime for “Wing Men”, I guess.

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