Avoiding Detroit in Rhode Island


Detroit’s condition has lessons that Rhode Islanders really should consider.  The whole of Kevin Williamson’s recent essay on the topic is worth a read (it’s not that long), but this paragraph contains a few key points:

Like wicked old Samuel Ratchett on the Orient Express, Detroit had a dozen murderers. And an important one — important in that there is in it a lesson for us today — was a defective relationship between capital and politics. Just as short-sightedness leaves Arab oil emirates poorly prepared to weather declines in oil prices, civic and corporate myopia left Detroit dependent upon a handful of firms whose production undergirded the entire economic ecosystem of Detroit. A combination of factors deformed the economic foundations of Detroit, from governmental protectionism (which made managements thick and lazy) to union rapacity (which diverted potential investment capital into inflated pay and benefits, creating a lot of multimillionaire union bosses) to our national unwillingness to deal with the fact that Germany and Japan — smoking ruins at the end of World War II — would eventually rejoin the modern industrial economy. Rather than finding its way to its best uses through Schumpeterian creative destruction, capital was locked up in poorly performing enterprises such as Chrysler (executive hipster Lee Iacocca was into bailouts before bailouts were cool) and in malinvestments such as unsustainable pension funds.

Think of all the money that goes to well-paid union organizers who lobby the government and sit on various boards, directing resources to favored industries (including family members).  Think of the disproportion between government pay and private-sector pay and the huge pension liability.  Think of the demand that government pick industries rather than back off and let the people of Rhode Island find the hidden opportunities for themselves and their state.

Watching Ken Block debate various people on Twitter over legislation that would force every business in Rhode Island to follow an arduous scheduling plan and limit their ability to reward the most dedicated employees, I spotted one supporter of the legislation suggesting that a business that couldn’t accommodate such a law wasn’t a very good business.  In other words, this person is perfectly fine with limiting Rhode Island’s economy just to those businesses that are able to thrive in the nation’s worst business climate.  Smaller businesses (some of which would grow into hyper-innovative bigger businesses) and those that are trying to accomplish things at the edge of what’s easy need not apply.

The insider attitude that protects established players while tripping up new ones is economic lunacy.  We’ve been doing things very wrong for a very long time, and it won’t end well.

  • 13citizen13

    How about less government intrusion? Fewer regulations? Let companies be run by the private sector without interference. If they fail, they fail. A mandated minimum wage kills business. 0bamacare (fully endorsed in RI) kills business. Being a sanctuary state kills business. The state of RI has become a total political pit. Rhode Islanders keep electing people who dig this pit deeper and deeper – they never learn.