Will Regionalism Succeed this Time?

Here we go again. There is yet another attempt to pull the Tri-Cities region together. At last there is movement towards the consolidation of the external industrial recruiting programs. We have even re-named ourselves the “Appalachian Highlands” in an attempt to brand ourselves as a more coherent region.

Past attempts have been largely unsuccessful, with few exceptions. Is there cause for optimism this time? Perhaps, but there are two significant factors that have mitigated against consolidation and cooperation.

The first is the result of our State’s site-based tax system. If retail sales or property tax are involved, the revenue accrues to the locality in which the property is situated. Location matters! Fundamentally there is nothing we can do about this situation. It drives parochialism and each government fights against the others to get their share. This is a rational approach but it undermines the incentive to act together.

If regionalism is ever to take hold, we must honestly accept that there will always be areas of conflict and competition. Our political leaders ought to have to the courage to look their local counterpart in the eye and say, “When it comes to retail, I will fight you tooth and nail to get the deal. I will not cooperate, period…Now that we have that out of the way, where can we work together?”

This leads us to the second factor that has dulled the previous efforts at regionalism. We view opportunities as monolithic. Because of the nature of our current economic recruiting efforts, we see the prospects as a single “thing.” Business looking to locate here, or prospects dribbled down from the State, are a “one of a kind” proposition. I don’t think there is a case in which a business wanted to open multiple locations simultaneously. That would truly be manna from heaven.

The problem with this paradigm is that regional cooperation would entail carving up the benefit in some way that is palatable to everyone involved. We have to “split the baby.” When faced with this proposition, most of the political entities have balked. This is understandable. Someone will always feel slighted and therefore unwilling to play the game.

This has resulted in insincere agreements to cooperate. Everyone seems to say, “Yea. Ok. We will work on cooperation.” But they know full well that because of site-based tax issues and the difficulty in carving up the spoils, they really will be looking out for their own interests (even at the expense of the whole). Consequently, regionalism has faltered.

We must find a new paradigm, one that breaks from the traditional industrial recruiting model. Rather than carving up one baby, we must find ways to give birth to twins or triplets.

It starts with recognizing that each part of our region has unique characteristics and that those attributes drive the desirability of that location. For example: Kingsport is a center of manufacturing; Johnson City has a critical mass of medical-related activity; and Bristol is developing as a center of retail and entertainment.

These are descriptions of relative strengths, what is known as “comparative advantage.” Economic theory postulates that for maximum overall benefit, each entity should focus on what it is better at relative to the its competitors, even if the others have similar capabilities or characteristics. This seems self-evident, but we are reluctant admit that someone else may be better at something than we are. We need to nurture and enhance these differences rather than try to homogenize ourselves.

In addition to our individual strengths, we have other positive characteristics like a beautiful natural environment and all manner of outdoor recreation. We also have assets that other regions do not enjoy. Our housing prices and taxes are reasonable, and traffic is manageable. We also have inexpensive and reliable power. We have a good sales pitch.

We also have some challenges. Health issues like the rate of pre-diabetes and opioid abuse are problematic. We have also built significant education and training capacity, but without a growing population, these are underutilized.

The question is how to find a way to capitalize on the positive characteristics, overcome our challenges and put our diversity to practical use in a way that creates mutually reinforcing benefits.

The answer is “entrepreneurship.” Even the State has recognized this as a potential driver for jobs in outlying rural areas. However, no one has been able to break the code to make it happen.

We can become a leader, but we must build the entrepreneurial ecosystem to make ourselves attractive. To do this, we must build the components incrementally in each community and highlight each of their various strengths.  We must be unique (and we are).

There will also need to be an overarching program (independent of any local government or municipality) to tie these disparate pieces together. This will require the participation of the private sector (businesses and individuals). This has the potential to recruit and nurture targeted startup/early-stage companies to our region. This likewise applies to local startups as well as existing small business. However, the focus must be on “scalability” (in simple terms-the ability to grow significantly).

This will be a trying process and we will have failures. It is the nature of entrepreneurship. However, over the course of time, we can build a reputation. Imagine seeing Kingsport as the Center of Advanced Manufacturing or Johnson City as the Hub of Rural Health Innovation. Both are realistic possibilities.

The real issue for our region is whether we are willing to step away from the time-worn (out) programs and embrace a new and innovative approach. Entrepreneurs don’t want to make incremental changes, rather they want to disrupt the status quo, to transform their world. If we are willing to adopt that outlook, perhaps we can make regionalism work this time. If not, the rest of the state and country will continue to prosper and pass us by.

 

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2 Responses

  1. Bob Plummer says:

    Excellent commentary!!!

  2. John Cannon says:

    Dave, Thoughtful article. I agree! I find our current recruiting efforts bring in an occasional business to take advantage of our low wages, not to fix our low wages. With entrepreneurship, I believe we need Capital to help these companies get started and grow, Coaching so they spend the money wisely, and Customers to build long term viable companies.