Rhody makeover: Focus on 21st-century industries

I’ve enjoyed listening to you regale me with our rich history, Old Rhody. Birthed more than 350 years ago as a “lively experiment” in religious freedom? You owned it! You were a “rocker” 300 years before the rocker phenomenon. That’s what makes this so difficult.
You’ve nurtured new ideas and spread the wealth in the doing but your success overwhelmed you. You created shipping ports, textile industries and jewelry empires. You were THE jewelry empire! The “times they were a changing” even as you enjoyed world renown. And the “300-year-old rocker” didn’t see it coming. The ‘lively business experiment’ was ending and you curried favor with every faction. You weren’t true to your heritage.
Barron’s says we’re one of the most highly leveraged states and Morningstar says we’re the home of ‘unfunded liabilities.’ You borrowed against our future. You made commitments you could only honor in the best scenario. Even hardened gamblers know better.
In our early days the best-case scenario did work! But we no longer have open lands or the natural resources you had in your prime. Where does that leave us? While the Rhode Island Retirement Security Act of 2011 slowed the bleeding, we are still bleeding.
The Pew Charitable Trust says our tax revenue is still weaker in 2014 than it was seven years ago and we employ fewer people now than we did in 2007. Yet our expenditures remain the same. You cannot spend your way out of debt. Ever.
You made grand commitments and they’re haunting us. Our pension systems are only 59 percent funded and we have $4.5 billion in state debt. In short, each citizen owes roughly $8,500 in ‘future liabilities’ to make us whole. Where are we going to find those funds? The liabilities will come due. Punting isn’t an option.
Your advisers would politely say you’ve got ‘problem areas.’ You’re too heavy for your small frame and your infrastructure is 300-years-worth of brittle. You shaped yourself for an earlier era and you made concessions. Time to change. Let’s start by respecting ourselves: We are an imaginative and adaptive state. Recognize our history but don’t let it rule us. Keep our principles but focus. We’ll need to lose our regulatory paunch. And when it’s done let’s celebrate the retirement of those outdated regulations without a post-retirement pension or a 6 percent, lifetime cost-of-living adjustments.
Let’s lighten the burden on our existing revenue streams, increasing economic circulation. Old regulations weren’t meant to stay forever. Do taxi, barber and extermination services REALLY need to be regulated so heavily? Why do we still designate leather inspectors in Providence and Newport?
Must we collect $500 from every newly registered state startup even when they’ve yet to open for business? Some of these rules are simply old, as in 1896 old, but others are economically wrong. Get rid of impediments to our state’s success.
Costly and difficult regulatory processes discourage competition and economic vitality. Let’s make our processes less costly and redesign our business-registration systems to improve efficiency.
We have a fridge-full of regulatory and legal leftovers, all past their use-by dates and all taking up expensive shelf space. New House rule: Before we bring a new regulation into the House, let’s get the leftovers out of the House. Why? Because the Kaufmann Foundation’s 2014 Small Business Friendliness Survey didn’t pull any punches. Kaufmann found we failed miserably on business friendliness but our most notable was New Business friendliness. We will do better.
We need a friendlier path for new and existing enterprise. What industries are we attracting and how are we going about it? We need a new plan and we need it 50 years ago! First, let’s adopt the physician’s credo: “Do no harm.” Make it easier for existing enterprise to stay by taking your foot off their collective neck. When they catch their breath, they’ll thank you for it. Regulatory simplification and system redesigns serve all, but especially existing enterprise.
Second, adopt a Da Vinci-like focus on a small number of initiatives. This century is different from the last so let’s direct our energy. We will not be all things to all industries. Every time our state loses $90 million, we’re losing $90 per citizen. If New York loses $90 million its only $4.50 per citizen – 20 times less. Someone wisely said, “No venture ever did well promising to be all things to all people.”
Let’s own our past – both wins and loses – but let’s focus on the future. Our beautiful, rich ‘lively experiment’ lingered too long in the smooth patch that was the last century. We’ll have to make hard choices and not everyone will love us. If we focus on the ‘Design & Develop’ aspects of our state, we’ll be a showcase for first-rate medical, high- tech, government, construction and high-margin metals enterprises. Design is the beauty of any well-designed process that keeps the citizen in mind – from traffic patterns to buildings & bridges, to the DMV.
We will soon have a new governor and a new capital-city mayor. Our times are exciting. Remember, start with Thoreau’s advice: “Simplify, Simplify, Simplify” then answer the question “Hey, how do you get to be a strong, small state?” The answer is “Focus, focus, focus.”
Signed,
Future of Rhode Island •


M. Cary Collins is a finance professor and director of the Business Education Innovation Center at Providence College.

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