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Diversifying Central-Appalachia’s Economy
*I initially wrote this piece back in 2017 and put it on LinkedIn and Facebook. It still rings just as true today as it did back then. J.C. Schweingrouber
Appalachia is a place of majestic beauty and wonder. It’s also a place of tradition, hard work, and legend. From the time of Daniel Boone leading and blazing a trail west through the Cumberland Gap, to today where a region fuels a nation’s economy and keeps the lights on for Americans from coast to coast. Appalachia is known for its grit, its work ethic. From the time of the earliest settlers in these mountains, one thing still remains true. Appalachia is home to the same people with that pioneer spirit. Appalachia is full of pioneers.
The economic problems found in Appalachia can be solved by these very same pioneers. There are three things that could absolutely help escalate the economic growth of parts of our region that is in dire need.
For the cultural stereotypes to die!
- A more aggressive network of venture capital and angel investors.
- For those with the means and the capital to share that same pioneer spirit.
Sure, there are places in Appalachia that are doing just fine in terms of economic growth and diversification. Some pockets are actually very robust! The Tri-Cities in East Tennessee is an example. Urban areas such as Pittsburgh are thriving. However, there are still a large part of the counties in Appalachia that are underdeveloped or considered distressed. Of the 420 counties that make up Appalachia, 199 are considered to either be at-risk or distressed. Let that sink in! https://www.arc.gov/research/MapsofAppalachia.asp?MAP_ID=137
However, the places that need the economic investment the most are the places (as you’ll see in the map I linked above) like Central Appalachia. The stereotype of our region has been, and still is, a place where people don’t have shoes and are poorly educated. Most of the folks piling onto this stereotype have likely never been to the region, never experienced the hospitality and work ethic of those still here. That isn’t Appalachia. Sure, you can find some places in these hills that would have even me scratching my head, but Appalachia is a different place than what the vast majority of people think it is.
Let me give you an example. I live in Tazewell County, VA. That’s one of the counties showing as in transition in the map cited. I read an article online from the Roanoke Times about Silicon Valley coming to the rescue of Appalachia, bringing some jobs here and extensive training to begin a transition to more high tech opportunities. I can think of a dozen places where this would work! Wythe or Pulaski Counties in Virginia, for example. There are major universities in the region and a pool of young workers to draw from.
I made a comment as to how Appalachia is ripe for opportunities like this. No sooner than I made that comment, a lady from Roanoke posted a snarky reply about how we “hill folks” in Appalachia wouldn’t be able to handle the opportunity. With good jobs comes new people into the communities along with lifestyle changes we couldn’t handle. We’d have to stop growing crops in our yards and couldn’t let our goats and chickens run free. We’d have to clean up our properties, and our way of life would change in a way not suiting to us. That’s my summary of her comments. She really said that about the goats and chickens! What are we? A bunch of nomads living off the land without shoes, no clue about hygiene or how to read? I was insulted, to say the least. My cordial response, for some reason, was deleted by the kind folks running the web site and monitoring that article. Roanoke is only a stones’ throw away from being in Appalachia. We’re neighbors. And even right here in our own neck of the woods some choose to look down their noses and pile on to the stereotype. I wonder if the lady that made the comment had ever visited Bristol, Virginia or Johnson City, Tennessee. Or Knoxville? What about Blacksburg and Radford, just down the road from Roanoke?
We have a lot to offer in regards to economic growth for potential investors in our region. These attitudes and stereotypes actually hurt. Sometimes I wonder if those who cast judgement and have never even visited realize that. Maybe they don’t. Somewhere there are jobs that weren’t created, families that had to move away from home because of this stereotype. This attitude needs to die a quick death.
For those that follow the issue of the economic struggle of the region, the Appalachian Regional Commission (ARC) does a great job leading the discussion and moving the needle. However, it is not their job to manage a regional economy or to act as a bank for lending or giving subsidies for business expansion and growth. In the regions considered at risk and distressed, banks don’t have the assets to lend for new business growth. Nor do they have anywhere near the assets and leverage to take on such a risk, no matter how much they’d love to try. This is where a much larger network of Angel Investors and Venture Capital is needed in Appalachia.
After a web search I found more than a few Angel Investor Networks located in Appalachia. The problem is that they are focused in areas that have more economic opportunity where they have a greater likelihood for return on investment. Places like Knoxville and Ashville (NC). These are places that have very diversified and thriving economies. Investing in new entrepreneurs makes more sense than investing in a start up in a county of less than 40,000 that has developed a pattern of population loss and lacks any economic diversification because of the intense focus on coal and other natural resources keep the money flowing. And in times when coal is in a down cycle (which is more often than not, these days) we all know that job opportunities are limited or almost nonexistent.
Angel Investor Networks seldom, if ever, consider most places in Central Appalachia, those towns and counties that need jobs and economic diversification the most. The incentive isn’t there. Most of those investors, upon closer inspection of what kind of investments they are looking for, have a greater focus on backing companies that focus on technological advancement and/or healthcare. Even if they wanted to invest in a tech company in poor counties, there aren’t the brain resources in those counties to support it. Not many rocket scientists or medical researchers live in Tazewell County. We can’t expect those companies to start up and develop in these areas because it would be next to impossible to find the personnel willing to move here. Sometimes location is a barrier for people that aren’t from the area. It would be a tough sell to hire someone with a doctorate that is doing cutting edge research in a suburb of a city to move to the middle of the mountains where they don’t have the adequate school choices for their kids and you have to drive at least an hour away for a night out on the town with the family.
Convincing Venture Capital groups from outside of the region to come in is even a tougher sell. They have thriving local economies from all over the country/world to consider. The risks for them far outweigh the returns. Angel Networks and Venture Capital groups focus on many kinds of businesses, but small time manufacturing (that would help in expanding local and regional employment) in Appalachia isn’t anywhere near the top of their list. I get that. Most of the folks working in state and county/city governments, especially economic and tourism developers, know this better than most.
However, my experience from my time since being a founding member of the Foundation For Appalachian Advancement, I have met people from all across Central Appalachia that are anxious and have a sense of urgency to help solve these economic problems. I have met a growing number of people who share the same pioneering spirit that has been alive and kicking in these mountains since families first settled here. They are entrepreneurs in waiting!
Another thing we need is for the development of Angel Investor Networks that share this same pioneering spirit, that understand the risks of investing here but share the greater vision…one building block at a time. The ARC (according to their website) tried to establish such a network in 2012. My research didn’t come up with anything showing if this attempt was successful or not. My email to enquire about this hasn’t been returned yet (as of this writing).
We have obstacles to economic growth and development in Central Appalachia and those aren’t going to go away soon, or solve themselves. And, just like history has taught us here in these mountains, it is up to us to help ourselves, dig our own way out. We thrive or fail based on our own efforts in the long run. I wager a guess that there isn’t a county or town official anywhere in Central Appalachia that would argue against that.
The question that has been looming over us for as long as we can remember still looms large. How do we attract that capital to help us begin the long process of economic growth and diversification, and stick with us through the ups and downs and the learning curves that come along with it? The U.S. economy as a whole is in a sweet spot right now. Our own coal industry has seen some resurgence. That has helped. But will we squander away another good period of economic upswing? Now is the time to make the investments that are needed. We know that the coal industry is always boom and bust. The coal industry isn’t close to being what it used to be, making many areas very wealthy during boom times, and leaving them in dire straits when times are bad. A real sense of urgency is needed from everyone concerned with this issue. Potential investors and entrepreneurs, county and town officials that know they need to see economic growth for their very own long term survival, and from politicians at the state and federal level. We need a pioneering spirit to match ours with the urgency and will to make a change. Otherwise, during the next economic downturn we’ll be looking back wondering what if. What if we made a few more investments? What if we provided great business incentives to even the smallest of manufacturers moving their businesses back from Mexico and China and made a real pitch to bring those jobs to Appalachia? What if…? I hate hearing those words. They are synonymous with regret.
What if politicians at the state, local and federal level got together and took the long term economic viability of this entire region more seriously? What if they opened up a layered form of incentives for direct investment into the region? The counties considered at risk and distressed offering the greatest incentives for investors. What if all of Appalachia was designated an economic enterprise zone? If not all of Appalachia, why not Central Appalachia? *(I know there has long been a raging debate about enterprise zones, but I’ll leave that up to you to research on your own. However, let’s just say I’m extremely open to the idea!)
Appalachia has seen more than its fair share of failures in keeping up with national averages in economic diversification, high school and college graduation rates, and a host of other measures that you can dig up online. The people of Appalachia aren’t afraid of failure. They aren’t intimidated by playing from behind, so to speak. What people fear most is not having the resources and capital available to try.
Appalachia…home to a pioneer spirit, people willing to swing for the fences, and opportunities waiting around every mountain. What if…?
Appalachia is an experience and a destination!
Protecting Our Environment
More to come on this.
Wanted: An Appalachian Success Story
The Case For An Enterprise Zone
*Originally written in 2016
President, Foundation For Appalachian Advancement
It seems like all my life I’ve heard politicians (local, state, and federal) talk about helping raise the economic standard of living and bringing in more jobs for the folks in the poorest counties of Appalachia. Seems like? Hell, it has been all my life. People twice my age can make the same claim and probably their kin folks before them. Hearing politicians promising economic changes and not delivering in Appalachia seems to be a tradition by now. We never get regular visits from Governors or Senators in many parts of Appalachia until it’s time to ask for a vote. (*Let’s exclude West Virginia from that statement since the entire state is in Appalachia.)
The Appalachian Regional Commissions (ARC) provides a lot of great research about the various statistics of Appalachia. One in particular is a color coded map of County Economic Status. Here’s the link: https://www.arc.gov/research/MapsofAppalachia.asp?MAP_ID=137
They break down the level of economic development into five categories. Those are:
Our goal should be to see all 420 counties in the region reach the level of either competitive or attainment. Now, click on the link and look at the map. Only 13 counties in the region have reached those levels. Thirteen! That leaves 407 counties that have not seen an adequate level of economic growth and diversification. There are 199 counties that are either distressed or considered at-risk. If I’m a politician running in these parts I’d certainly not bring up the track record of success too much! This isn’t a new problem. This has been going on for decades.
I’m not throwing politicians under the bus, don’t misunderstand where I’m coming from. There are many reasons why the region hasn’t seen economic success. One of the biggest reasons these small distressed and at-risk counties aren’t moving the economic needle is because it’s almost impossible to attract outside investment into the region for businesses that don’t involve coal, natural gas or timber. I don’t care how good a salesmen he/she is, no Governor is going to convince Ford to move a plant back from Mexico and put it in Letcher County, Kentucky or McDowell County, West Virginia. It’s just not happening.
One potential solution for politicians at the federal level is to declare the distressed and at-risk counties of Appalachia as one large economic enterprise zone. Those counties should receive a specific tax structure that can help kick start business investment, expansion and development. For example, distressed and at-risk counties in Appalachia should have a flat individual and business tax rate of 5%. That would allow families to keep more of their income for personal spending (a boost for local economies) and provide a huge incentive for businesses to open, expand, and relocate to parts of Appalachia that are a good fit for their needs. This is especially helpful for counties in parts of West Virginia, and the eastern parts of Kentucky and Tennessee that have a well developed infrastructure for shipping and transportation.
Why not reach out to manufacturing and textile companies moving back from China to relocate in Southwest Virginia or some of the hard hit counties of eastern Ohio? The tax incentives at the federal level could spur a long term trend of economic growth and diversification in areas that need it the most. I’d suggest keeping the personal federal tax rates for individuals and businesses at that flat rate until they reach the measure of competitive as defined by the Appalachian Regional Commission.
Aside from letting people keep more of their money and allowing the free market to work, there are several points that need to be made here.
*Counties and towns do not have to change their tax rates unless they choose to. We all know how strapped many of these counties are. Economic growth in these counties can mean more tax revenue that can be used for the school system, law enforcement, and much needed public works.
*A rising tide lifts all boats. With economic growth in these areas, the long term benefits may include a significant decrease in the amount of welfare payments made by local, state and federal governments. If more people are working and have health insurance through their jobs that’s less people needing taxpayer assistance from the state for medical needs. In the long term, welfare payments across the entire region could drop drastically and actually save money for the government.
*Economic diversification could be attained in a couple of decades for many of these places if we work hard enough and smart enough. Families wouldn’t have to face poverty when one industry is affected by economic downturn or by excessive regulation.
Detractors of such an idea usually lead in with the problem of falling tax revenues for government, especially in times when it is needed most. My response to this is simple. I don’t care what elected officials say when it comes to deficit spending anymore. I do care about deficits and debt. Don’t get me wrong. Our nation is at a dangerous level of debt right now. However, economic growth (coupled with responsible spending) goes a long way to solving that problem. When I hear elected officials complain about debt in 2018 I have to roll my eyes. These are the same folks that have run up a $20 TRILLION debt that has been thrown on the back of the average American already working too hard for their money. I don’t think any reasonable person actually believes that any of our elected officials care about debt unless it is time for re-election or it makes for a good sound bite on the evening news. Besides, the past few years tax revenues have reach all time highs and yet the government still runs trillion dollar annual deficits. They don’t care.
This idea is certainly worthy of debate among our elected officials and the folks of Appalachia certainly deserve the chance to create opportunities for themselves. This is about the long term viability of a region that has given a lot back to the national economy and received much back much less in return. The only way to predict our future in Appalachia is to create. You know what will happen if we don’t at least try something like this? Nothing. That’s what. And that would be very telling about the very people we elect, that they refuse to provide as much as an opportunity for Appalachians to have a bigger part of building a better future.
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