As the dust slowly settles on the carcass of 38 Studios,
plenty of questions remain, and you can bet the entrails will be picked over
thoroughly. Some of the most entertaining questions are about how the debacle
happened, since it’s such a delicious tale of arrogant insiders getting their
comeuppance. (Of course it would be more delicious if we weren’t on the hook to
pay for it.) But there are also dull questions about important matters:
what to do with the state’s economic development apparatus, the Rhode Island
Economic Development Corporation.
RIEDC was formed under
the Almond administration, when the Department of Economic Development was
closed and those responsibilities moved over to the Port Authority, which was
renamed.
The Port Authority was chosen because of its unlimited bonding authority, a fluke of legislative drafting when that agency was originally created. As of 1995, when this happened, the only other agency with this kind of authority, the Public Building Authority, was discredited by DiPrete-era abuses and on the way out. In other words EDC was born with extraordinary powers and has used them extensively, which is partly why the state’s debt nearly doubled during the Carcieri administration.
In the 17 years since then, RIEDC has been through more
directors than I can count. Some have been widely admired, and some just looked
good. Keith Stokes, the currentmost recent director has, I believe, set a
longevity record by lasting three years, though I welcome reader corrections to
my director timetable. He is widely held in high regard, but the agency has a
vague and difficult set of goals, so no one should be surprised when the
failures are legion and the successes short-lived.
The 38 Studios debacle
reminds longtime observers of previous ones, like Alpha-Beta, and the Wyatt
jail in Central Falls. And just as the debacles recur, so do the ensuing
reports. We’re all looking forward now to a report from the RI Public
Expenditure Council about how to shake up EDC. But that’s nothing new,
either.
Three years ago there was a report about
EDC from a panel of worthies headed by Al Verrecchia, chairman and former CEO
of Hasbro. The panel suggested that EDC needed shaking up, but their report
ultimately contained precious little of use about how to do that.
For example, the report said the agency was without focus
and alternately complained they didn’t spend enough time working with
already-existing local companies and that they didn’t have a good marketing
approach to attract companies from elsewhere.
Both might be true, but was the report’s suggestion that
EDC concentrate on both really the best way to improve the focus? The
report was too easily interpreted as an endorsement of what EDC was already
doing. Essentially, the message was “keep it up, but do it better,” even if
some of the report text struggled to say something else.
What to do
It’s possible to see
the agency’s discredit as an advantage. Might it be possible to dream that we
can discard the destructive and expensive things the agency does and replace
them with activities that actually help the economy? My vote for what’s really
needed around here? Information.
EDC could usefully
refashion itself into a research agency. If agency staff actually spent
significant time studying the economy and the local markets in an
intellectually honest and rigorous way, some practically useful recommendations
for action would be bound to arise from that work. This is the kind of thing
that no individual company can take on, but an agency like EDC could produce
information vital to all of them.
Perusing the EDC web site, there is a lot of information available, but
it’s all the kind of thing you can get from the PBN book of lists or from
Census Department or BLS web sites. They provide a handy list of tax incentives
and programs, but what do they provide to help people make business
decisions? That is, beyond “what government program should I apply for?”
On the EDC web site, I
can learn which are the top employers in the state, and I can learn which
economic sectors employ the most people, but there is precious little one might
use to make important decisions. Where can I learn whether there is a shortage
of machinists? Who do I ask about unmet credit demand? Is it banks
or family and friends who finance most new RI businesses? What proportion
of venture-backed businesses survive five years? What stage businesses
have the most trouble getting credit? What are the important barriers to
export markets for RI businesses?
Who needs this
information? Someone who aspires to be a machinist would, of course.
Someone who wants to start a business, or a bank interested in expanding its
business lending portfolio, might also find it useful. A business contemplating
expansion, perhaps.
Oh, and General
Assembly members who routinely assert that this or that would be good for the
economy without any idea whether it’s really true could benefit. But most of
all, the people who craft economic development policy would find real
information vital. Or they should.
EDC is in a unique
position that could allow it to gather — and analyze — useful data about the
local economy. They could be doing business surveys, worker surveys, surveys of
bankers and investors, analyses of credit markets, classifying foreclosures.
They could be hosting
conferences of academics to present research about these topics, or offering
research fellowships at Brown or URI for economists willing to spend time
looking at the RI economy.
They could present a
public lecture series on the subjects important to the state’s economy, modeled
after the Geek Dinners (that a previous EDC director helped begin). In short,
they could actually present valuable information to help people make important
economic decisions. Would it be expensive? Not compared to the
status quo.
Research doesn’t just
mean accumulating information in a single place, even if that’s a handy
service. It means analysis: counting things, classifying them, and coming to
conclusions about them. It means tracking events and interpreting them.
It means finding
information that isn’t already available and creating the tools necessary to
anticipate events and follow trends. It means cultivating a staff able to do
these analyses and with the intellectual confidence to follow where the data
lead, and whomever they offend.
This, of course, is
not the path we’ve taken. What we have now is an agency that does some good
service and quite a bit of harm. We have some important programs housed in an
agency that frequently acts like nothing so much as a state-funded corporate
lobbyist. Our state deserves better and wouldn’t it be nice to have an agency
that tells us all what’s going on around us instead of hiding it?
Tom Sgouros is a freelance engineer,
policy analyst, and writer. Reach him at ripr@whatcheer.net. Buy his book,
"Ten Things You Don't Know About Rhode Island" at whatcheer.net
