Response to interesting article on development

I do not know where I fit into this categorization. I work alone under the name of, which is my blog. Sometimes I think I am a writer, writing about why economic development does not work very well in my community, but I am also in the trenches, attending tons of hearings, influencing policy makers, and helping to create new industries in my community (compost).

Most of my work really focuses on helping the developers, private and public, understand that their plans are totally unrealistic and that their ideas ar3e based on an economy that no longer exists. All of their work assumes that if we get the business climate right we can have an economic growth rate over 3%. I constantly remind them that Rhode Island, as an old industrial place with limited natural resources is going to have a growth rate below the national average, probably in the 2% range in a good year, and that our growth rate has nothing to do with our business climate. The materials I read from C2ER are an important part of my understanding of the economy and how that relates to my community. I think everyone should read the Kansas Inc study that showed that business climates have a miniscule effect on the economy, but the people who think up the crazy economic development policies in Rhode Island think that fast growth is just around the corner if we could only get rid of the poor and let the rich do whatever they want. of course they have thought this for 50 years and have been wrong forever.

I would like to see more from you on how communities ought to be much more honest about the slowing of global growth and where their community fits into this, but the politicians are completely in denial about what growth rates are possible. And always seduced by what the Chamber of Commerce and the Koch brothers tell them they could have if they would cut taxes and throw more inner city kids out of school.

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A letter to Governor Raimondo on economic development

Dear Governor Raimondo, I am writing about several different, but connected, topics relating to the Rhode Island economy.

The trigger for this letter is the effort by the new owners to move the Pawtucket Red Sox to the Providence waterfront. Personally I think it is a very bad idea, and that seems to be the statewide consensus based on letters to the paper and comments sent to the Summit neighborhood email list as well as conversations I have had. My request on this is that there be public hearings on this before anything happens. My guess is that if there are public hearings the outcry will be overwhelming and no board that had any public consciousness would give a permit. Then there is the issue of the richest men in the state asking for a subsidy for their hobby. Please publicly state that before anything happens you would like to see a full public airing of this topic. I have talked to various agencies in RI and the CRMC, the I-195 Commission, and the City of Providence all agreed that public hearings seemed a good thing, though all were constrained by the lack of any formal proposal in front of them. You do not need to be so constrained, and calling for a public airing at a time when another politician has admitted corruption around real estate development, would feed into a move towards better ethics legislation. A full public discussion sooner rather than later helps us all figure this out, one way or the other, at an earlier time with less overall cost.

Given the recent record of the political leadership of Rhode Island on major economic development projects, and Rhode Islanders well founded fear and dislike of the inside baseball politics of economic development, the proposal to move the Paw Sox just seems so Rhode Island. You and I are both familiar with the disaster of 38 Studios, a disaster that likely would not have happened if the decisions had been made after public hearings. You may not be as familiar with the public discussion of the proposed container port at Quonset. I was a stakeholder and participated in every public meeting from a seat at the table. If the governor and the legislature had had their way, 38 Studios would look like a child sized disaster compared to the billion dollar price tag of a port that would have opened as the recession hit. It was the public outcry and resolve that finally allowed the outing of the con men who had conned the leaders of the State with visions of dollar signs dancing in their heads.

I will come back to this last point shortly but first I want to flag the issue of what is the appropriate use of the land in the knowledge district given our current placing of meds and eds at the heart of our economic development strategy.

The evidence is pretty clear that baseball stadiums are not big economy boosters. Building a baseball stadium on the waterfront, in addition to depriving the public of waterfront access (which in and of itself is a major issue with large financial implications for the taxpayers)) brings into question the entire meds and eds strategy as it relates to the use of the I-195 land. Devoting that much land to baseball and parking, especially on the waterfront, is probably not a smart move. Baseball creates few well paying jobs, few full time jobs.

I have serious problems with the strategy of placing meds and eds at the heart of economic development. Both industries are at about the limits of what the American public can pay for, and are leading causes of bankruptcies and stunted asset acquisition, but that is a discussion for another day. The question today is does the baseball stadium fit in with the best way to use the land to enhance the city? If we are betting on a Knowledge District, then this is not the way to do it.

Beyond the immediate question of a baseball stadium, economic development strategy in RI needs to be better adapted to the changing world economy, but not in the ways most folks talk about. What Rhode Island needs to adapt to is slowing growth rates globally and an understanding that our growth rate is going to be generally below average. Our growth rate will be below average not because of our business climate (though the inside baseball audacity of Mr. Skeffinton astounds, and these types of subsidies do not reflect well in the rankings) but primarily because most of the economic growth that does occur globally and in the US will end up in the few places that are global financial centers, the places that are rapidly industrializing low wage countries with rural populations to urbanize, and places with short lived natural resource booms. Rhode Island has none of these advantages and our growth rate is therefore going to be slightly below the slowing global and US growth rates even if we were the perfect business climate groupie.

Many people question the idea that growth is slowing, and politicians are extremely reluctant to even think about it, but more and more reputable experts are recognizing it. Even the global consulting firm McKinsey sent out a recent report noting that it is going to be very difficult to maintain current growth rates in the medium to long term due to changes in the economy and in planetary ecosystems. Planning for a slower growth rate, and understanding how to achieve maximum prosperity with slow growth, does not appear to be on the agenda, but it ought to be along with Full Cost Accounting. The current political climate calls for a “good business climate” despite the fact that business climates are remarkably persistent over time despite years of political rhetoric and legislative action, that business climates have very little overall effect on state economies (less than 5% of the growth rate is attributable to tax rates and transparency of bureaucracies) , and that it is clear that a good business climate creates greater inequality and that greater inequality is one of the things that hold back economies. Again a much larger discussion but one I would be willing to have with you and your advisers at your convenience.

In summation, I do not know if we can convince the new ownership of the Triple A Red Sox to return to Pawtucket, but we can make sure that any attempt to move to Providence gets a full public hearing. You should insist on the public hearing and then turn attention to what all of this reveals about the new world of economic development in post industrial Rhode Island.


Greg Gerritt Research Director

Business climates mean nothing

In the March 3, 2015 Providence Journal there was an article “RI 42nd in business climate”. I looked at the most recent available data from the Bureau of Economic Analysis and RI was 33rd in rate of growth. Disparities like this are common, and more and more it is obvious that the business climate has little to do with actual economic performance.

Business climate rankings are an ideological test, not a ranking that has anything to do with real world performance. They are put together by people with a preference for the power of the rich rather than the welfare of the community. According to Kansas Inc no more than 5% of a state’s economic growth rate is determined by factors taken into account by business climate rankings. In other words if Rhode Island followed the prescriptions of the business climate rankers our growth rate might go from 2.2% to 2.3% while damaging our ecosystems and increasing inequality. It is time that Rhode Island, and especially Rhode Island politicians, stopped paying any attention to the business climate rankings.

Greg Gerritt