ECONOMIC DEVELOPMENT

Economic development should be among the top priorities of any state government. Jobs are the best public welfare policy. Employment opportunity keeps the state vibrant and keeps the citizens in competition for higher wages.

But, economic development requires heavy lifting. For years, Rhode Island has taken the course of least resistance in terms of economic development. Token efforts and trendy policies have helped to avoid the real issue.

Rhode Island, like most of the northeast, lost much of its manufacturing base over the last forty to fifty years. Instead of attempting to fill that void with similar industry, Rhode Island took the course of increased public sector employment, reliance on tourism and gaming, and the courtship of transient employment such as jobs in the financial sector. This, coupled with a uncertain plan to grant tax breaks without measurable goals and outcomes and specific tax credits, all led to the current lack-luster business climate.

First and foremost, we must understand that public sector employment is nice, but it doesn’t really grow the economy. By using tax dollars to pay people who then pay taxes to the state is not growth but a mere circulation of currency.

It is far easier for the legislature to create regulations and thereby creating a need for more personnel to enforce the regulations than to sit down and seriously consider what Rhode Island would require to compete for private sector employment opportunities. And so the system starts its downward spiral.

By putting a reliance on tourism and gambling to sustain the operating budget instead of using these types of revenues for one time expenditures, the system is put further at risk. A downturn in the economy means that fewer people will travel. A slump in disposable income and greater competition for gaming dollars makes reliance on this simply silly.

Finally, the use of tax breaks without a reasoned approach is merely a rewarding of some and not others. This is a great policy for those seeking political contributions, but it is a slow death to economic prosperity. When business is not given a proper environment and a level playing field, business looks elsewhere. The only business that then comes is a business that is not out of the long term benefit of the state but out to make its bottom line look good until it is ready to exploit some other stupidly organized state.

It is hard work to grow an economy, but it is not brain surgery. Businesses can be made to understand the benefits of stability, but they need to know that they are being considered. To ignore the existing businesses in hopes of attracting a new one is a recipe for disaster.

Therefore, the first step in any economic development plan is to understand and respond to the needs of local business. The next step is to make a climate that is attractive to long term business commitment. This is followed by utilizing the education system to work in conjunction with the economic plan, and if there is no economic plan, one should be devised pronto.

Rhode Island is a beautiful state, but that is only secondary in analysis of where to locate a business. The investment driven world doesn’t really care that there are beaches when they are producing widgets. These businesses are interested in maximizing profits and therefore must be shown a reasonable and predictable taxation system, a population educated to meet the employment needs, a sound infrastructure, and a government that is largely free of corruption and scandal.

Until Rhode Island is ready to pick up the gauntlet the state will remain among the highest personally taxed states. Rhode Island will continue to attract non-skilled labor. Rhode Island will continue to see a mass exodus of its best and its brightest. In short, Rhode Island will ride its downward spiral to its conclusion.

When I spoke of education in an earlier blog, I noted the need to match education with economic development. When I spoke of gaming, I indicated the problems associated with operating budgets being reliant on such revenue. And when speaking of taxation I noted that the over-reliance on property taxation was a burden to economic development.

Politicians can talk themselves blue about what needs to be done. Everyone is mouthing the words of “structural reform” yet few have set forth any consolidated plan. In times of budgetary crisis, there is the same old lame talk, protectionism, and the lack of any real courage to initiate a bold alternative to the status quo.

In the future discussions on this topic, I hope to be able to further explore the needs of attracting solid businesses, the need to have an extended five and ten year plan or statement of state objectives, the need to coordinate our taxing policy with both our education and economic development needs, and to generally speak to how Rhode Island could begin to accomplish these goals.