Political Entrepreneurs

The Economic Engine of Political Change

Dear Asheville: Embrace Your Growing Economy

January 10th, 2019 by Edward Lopez

In the past three years I have focused heavily on launching and directing a new center at my university. The downside has been less scholarly output. The upside has been new opportunities to analyze and comment on the regional economy in Western North Carolina (WNC). As a case in point, take a look at the new issue of Capital at Play, an impressive new magazine that focuses on entrepreneurs and economics in greater Asheville and WNC.

This issue’s lead story is a profile of manufacturing in WNC. While the region enjoys a stellar reputation as a tourist destination and maker of craft and artisanal goods (anyone care for a tasty beverage?), lots of folks will be surprised to learn how heavily the region depends on manufacturing. This surprise comes from everyone knowing that the days of big textile and big furniture are long gone. Is anything “being made in” WNC anymore?

In a word, heck yeah. In fact, manufacturing output is still the leading sector in the Western counties ($5.7 billion, or 21.0% of total WNC output), as it is statewide ($103 billion, or 19.8% of state output). And after almost all sectors declined badly during the Great Recession, manufacturing has been the fastest growing sector in WNC over the last decade, now matching pre-Great Recession levels in Buncombe County (Asheville). Taking all 13 Western counties together, manufacturing growth has been much faster (39% since Great Recession) than it has been statewide (22.7% over the last decade). Total compensation to manufacturing workers has increased 21% over than same period. This is happening as the number of jobs in manufacturing has declined. So, while the WNC manufacturing economy is small (about 5%) compared to the rest of the state, it’s been growing faster than in the rest of the state and is the biggest part of the WNC economy.

Again, it is perhaps easy to overlook how important manufacturing is to the WNC economy. Headlines focus on the decline of manufacturing jobs and abandoned union buildings. This is understandable. But equally importantly, although perhaps not as newsworthy, is the reality that WNC manufacturers have been producing a lot more value in recent years, and they’ve been doing so with fewer workers.

Along with this tale comes other realities. The fact is, manufacturing in WNC is becoming more globally competitive, environmentally cleaner, more technology-driven, and more knowledge-based. Asheville denizens, who are prone to bicker about outsiders and anything large in scale, should embrace our growing economy. We should embrace our role as an increasingly globally-connected economy. And we should embrace our role as the economic hub for the greater WNC region. Asheville sits at the cross of two important interstate highways, and as the entry point from lower elevations to the south and east, it is the main connector between the Charlotte-Atlanta corridor and populations to the north and west of the Southern Appalachians. Tourism and craft? Heck yeah. But manufacturing and trade, heck yeah too.

A closing thought. It’s tempting to think that manufacturing jobs simply go where labor costs are the lowest. Ross Perot nearly won the U.S. presidency on this misconception (remember his “giant sucking sound”?), Donald Trump actually did (along with other peddled misconceptions), and politicians of all stripes continue wielding it to rattle the public’s cautionary stance toward foreign trade. But manufacturing jobs are increasingly high-skilled jobs, and companies want to locate near high-skilled work forces. They’re also willing to match those high skills with high pay. So rather than close ourselves off in xenophobic fret, we should embrace the challenge of remaining economically competitive. This has been the trend in WNC, as elsewhere. It is not without its downsides. But it has many, many upsides that deserve better than the neglect of the public’s cautionary attention.

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.189, ch.7)

The most successful entrepreneurs know what they do well, they know the market and the opportunities within it, and they choose those activities that create the most value. This is true in economic as well as political markets.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.178, ch.7)

[W]hen the right elements come together at the right time and place and overwhelm the status quo, it is because special people make it happen. We call them political entrepreneurs.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.176. ch.7)

While we started this book with Danny Biasone saving basketball, we end it with Norman Borlaug saving a billion lives. These stories are not that different. Both faced vested interests, which were reinforced by popular beliefs that things should be a certain way—that is, until a better idea came along.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.174, ch.6)

Because there was a general belief that homeownership was a good thing, politicians found the public with open arms.... Everybody was winning—except Alfred Marshall, whose supply and demand curves were difficult to see through the haze of excitement at the time, and except Friedrich Hayek, whose competition as a discovery procedure was befuddled... In short, once politicians started getting credit for homeownership rates, the housing market was doomed.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.166, ch.6)

Everyone responded rationally to the incentives before them. In short, the rules that guided homeownership changed over time, which in turn changed the incentives of these actors. And bad things happened.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.153, ch.6)

They understood the economics. The ideas had already won in ... the regulatory agency itself. All that remained to be overcome were some vested interests and a handful of madmen in authority.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.146, ch.6)

If the idea for auctions of spectrum use rights had been part of the public debate since at least 1959, why didn’t the relevant institutions change sooner? What interests stood in the way?

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.121, ch.5)

When an academic scribbler comes up with a new idea, it has to resonate well with widely shared beliefs, which in turn must overcome the vested interests at the table. Many forces come together to explain political change, even though it may seem like coincidence of time and place.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.120, ch.5)

It’s the rules of the political game that deserve our focus, not politicians’ personalities or party affiliations.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.119, ch.5)

In short, ideas are a type of higher-order capital in society. Like a society that is poor in capital and therefore produces little consumer value, a society that is poor in ideas and institutions will have bad incentives and therefore few of the desirable outcomes that people want.

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