Jefferson Policy Journal

Richmond's Economic Changes Over The Past 30 years

Posted on June 9, 2016 by matt ohern

Share this article on:

Thirty years ago this month, the first issue of Metro Business was published. Times were certainly different back then.
The region is now larger geographically and by the number of people employed. And the type of firms driving the economy has changed dramatically in the past 30 years.
In 1986, the Metropolitan Statistical Area contained nine counties and four cities. It was called the Richmond-Petersburg MSA.
Three decennial censuses later, Petersburg was dropped from the name of the metro area because its economy shrunk relative to the other localities in the area. Four counties were added to the MSA: Amelia, Caroline, King William and Sussex.
A little over 400,000 people were employed in the metro area in 1986, according to the Quarterly Census of Employment and Wages. Thirty years later, 623,923 people worked in the area in the first quarter of 2016, based on Chmura Economics & Analytics’ estimate of employment from the Quarterly Census of Employment and Wages reports.
The firms and industries that drive the economy in the Richmond area also have changed a lot over the past three decades.
Philip Morris USA was the No. 1 private sector employer in 1986 with 11,500 people in the metro area. Today, Altria Group Inc., the parent company of Philip Morris, employs the equivalent of 3,800 full-time workers in the area at its manufacturing plant in South Richmond, at the corporate headquarters in Henrico County and at a research center in downtown.
Of the other top largest private employers in the metro area in 1986, three remain as large local employers in 2016.
Virginia Electric and Power Co., which the utility was called then, employed 4,969 people in 1986. Dominion Resources Inc., the parent company of Dominion Virginia Power, now is the region’s sixth-largest private employer with 5,433 full-time equivalent workers.
DuPont employed 3,200 in 1986 and has 2,376 full-time equivalent employees this year.
C&P Telephone of Virginia employed 3,476 people 30 years ago. Verizon Communications, created after the mergers of companies including what had been C&P Telephone, had 1,700 full-time equivalent workers this year.
But three other large employers in 1986 don’t exist today. Thalhimer Bros. Inc. department stores chain, which had 2,829 employees at area stores and its downtown corporate offices, was acquired, and the stores changed its name to Hecht’s and later to Macy’s.
Reynolds Metals Co. had 4,200 local workers, but the company was acquired by rival Alcoa Inc. in 2000. Alcoa still employs some local workers through its Reynolds Packaging Group.
AT&T Technologies, which later became Lucent Technologies and then Viasystems Technologies, closed its plant in eastern Henrico. In 1986, it employed 2,583 people.
In 1986, the finance, insurance and real estate sectors were growing at a rapid pace. Richmond was becoming a financial center. I can remember walking down Cary Street about 25 years ago with an associate from Crestar Bank who looked up at the skyline with the Crestar, Signet and Central Fidelity headquarters buildings in clear view. He asked whether I thought those banks would be operating as headquarters in Richmond 10 years into the future. I don’t recall my answer. But none of those names occupies the skyline today, as larger competitors bought those banks.
Although banking is not as important in the Richmond economy today as it was 25 years ago, Signet spawned Capital One Financial Corp., which is now the region’s largest employer with 11,262 full-time equivalent employees.
And several large banks such as SunTrust, Wells Fargo and Bank of America maintain a large presence in the region.
The old strength in manufacturing has given way to health care and education. VCU Health System, HCA Virginia Health System and Bon Secours Richmond Health System round out the list of top four largest employers in the region, employing 24,077 full-time equivalent workers.
The Richmond area is changing, and the latest employment figures show that it is growing faster than the nation. The next 30 years undoubtedly will see some surprising changes that I wouldn’t even attempt to forecast.
(This article first ran in the Richmond Times Dispatch on June 6, 2016)
Email this author

Posted in Economy, Latest | Comments Off

Justices Question EPA and Army Corps of Engineers

Posted on June 9, 2016 by matt ohern

Share this article on:

The Clean Water Act (CWA) “…continues to raise troubling questions regarding the Government’s power to cast doubt on the full use and enjoyment of private property throughout the Nation.”
Justices Kennedy, Thomas, and Alito made this point in a Supreme Court decision on May 31 about the overreach of the Corps of Engineers (Corps) and EPA’s administration of the CWA. They went on to say “…based on the Government’s representations in this case, the reach and systemic consequences of the Clean Water Act remain a cause for concern. [Moreover] the Act’s reach is ‘notoriously unclear’ and the consequences to landowners even for inadvertent violations can be crushing.”
The justices also blasted EPA for saying it was not bound by memorandums of agreement with the Corps to which the three justices indicated if EPA were correct, EPA’s “…ominous reach would be unchecked by the limited relief the Court allows today.”
In a truly extraordinary set of opinions in the case of US Army Corps of Engineers v. Hawkes Co. great lawyers for the defense struck a blow against overreaching voracious regulators from the Corps and EPA. The U.S. Supreme Court opinion suggests it found the Corps and EPA’s actions to be incredulous.
The case turned on a narrow legal point of whether a revised jurisdictional determination on what is a wetland was a final agency action. Justice Roberts’ opinion focused on whether or not conditions were met under the Administrative Procedures Act (APA). The APA guarantees an individual certain rights which I will not go into.
Fascinating facts
The facts of the case are fascinating. Hawkes Co. and other parties in the case are mining companies in Marshall County, Minnesota, where peat is mined. Peat is an organic material generally found in waterlogged grounds such as wetlands and bogs. It can be used for soil improvement purposes and burned as fuel. Justice Roberts, in a humorous aside, said peat can be used to provide structural support and moisture to smooth out and stabilize golf greens ‘…that leave golfers with no one to blame but themselves for errant putts.” Chief Justice Roberts also noted peat mining can have significant environmental and ecological effects. Hawkes Co. and its partners own 530 acres of land near existing mining operations and wanted to mine high quality peat for use on golf greens. In December 2010, Hawkes met with the Corps and was told a CWA application and permit would take many years and cost over $100,000. The Corps demanded Hawkes undertake studies involving a hydrogeologic assessment of the “rich fen system”, study mineral-nutrient composition and pH of the groundwater, ground flows spatially and vertically and on and on and on.
In 2012, the Corps concluded after all of these studies that the peat land contained “water of the United States” and that the peat wetlands had a “significant nexus” to the Red River which was located 120 miles away. Hawkes appealed the Corps’ jurisdictional determination and the Corps on revisiting the issue reaffirmed its conclusion that the peat land was a wetland and a water of the United States. Hawkes and the other companies appealed this decision and it was this decision which was heard by a U.S. District Court and the U.S. Court of Appeals for the 8th Circuit.
The Corps contended that the jurisdictional determination was a not a final agency action and was not subject to a challenge in court. The U.S. Supreme Court found that determination to be laughable. It gets worse! The government declared that even if the Corps determination was final, EPA did have to abide by the jurisdictional determination.
Finding this set of facts unacceptable the Supreme Court sent a message to both agencies, saying “…the Court is right to construe [jurisdictional determination] as binding in light of the fact that in many instances it will have a significant bearing on whether the Clean Water Act comports with due process.”The Justices of the Supreme Court suggested there are some due process Constitutional issues related to the Clean Water Act. Whether the CWA is constitutional is for another case to decide but what is clear is the unacceptable administration of the CWA by the U.S. EPA and the Corps of Engineers. These agencies’ continuing abuse of private property is reflected in the Court saying their actions raise “troubling questions” regarding a private citizen’s use of his/her property.
(Reprinted from Farm Futures on June 6, 2016)
Email this author

Posted in Environment, Latest | Comments Off

Time for Road Tunnels

Posted on June 9, 2016 by matt ohern

Share this article on:

The Wall Street Journal‘s recent special report, “The Future of Cities,” included an article on large road tunnels (“Boring Has Never Been So Exciting,” by Daniel Michaels). It celebrated the great improvement in cost-effective tunneling made possible by the invention and perfection of the tunnel boring machine (TBM). These amazing machines, now available in diameters exceeding 50 feet, have a massive rotating cutting head at the front, followed by a control cab and a whole train of support vehicles. Each TBM is custom built for that job, and many include the ability to install pre-cast concrete panels as the TBM moves forward, so the machine not only excavates but actually constructs the tunnel as it progresses.

I first learned about TBMs over a decade ago, via a video documentary on the building of the SMART Tunnel in Kuala Lumpur. That 6-mile tunnel used a 43 ft. diameter TBM. Its name stands for Stormwater Management And Road Tunnel, and that is exactly what it is. Most of the time, the tunnel handles road traffic on two decks, one for each direction of travel. When severe flooding is threatened, road service is suspended, and the tunnel becomes a massive flood-relief channel. Begun in 2003, it opened to traffic in 2007 at a cost of $515 million. It was financed via toll revenues, which it obtains via all-electronic tolling TBMs are being used in the United States, but mostly for water and subway tunnels. The only two roadway tunnels I’m aware of are the Port of Miami Tunnel and the Alaskan Way Tunnel in Seattle. The former was a big success, tunneling underneath a shipping channel in difficult soil conditions to link the port with the metro area’s expressway network. Procured as a design-build-finance-operate-maintain P3 concession, it was finished on-budget and nearly on time. Its purpose is mainly to shift large trucks and buses for cruise ship passengers off downtown Miami streets. Alas, the Seattle tunnel has been delayed nearly two years by a broken TBM cutter head, and only recently resumed tunneling. That sort of problem is an exception to the generally very good track record of TBM tunneling.

TBMs were pioneered by German and Japanese companies in the 1970s. Today’s leading TBM provider is Germany’s, which told the Journal reporter that it is providing TBMs for as many as 100 projects annually, up from about 20 projects a year 15 years ago. These machines permit tunneling to proceed up to 10 times as fast as traditional digging and blasting methods.

Major road tunnels are under way around the world, with the largest number of projects in China. One of the most dramatic projects is the Bosphorus Road Tunnel, connecting the two halves of Istanbul. TBM tunneling under the Bosphorus Strait was completed last August, and the double-deck roadway and other systems are currently being constructed, with opening to traffic set for early 2017. The $1.25 billion project is a toll-financed DBFOM P3 concession. The tunnel will cut the current car and mini-bus travel time from 1.5 hours to just 15 minutes. Other current road tunnel projects include the following:

Twinning of the existing El Melon tunnel in Santiago, Chile, being done as a toll concession;

Malaysia’s $1.55 billion bridge and tunnel to link Panang Island to the mainland; Hong Kong’s $1.9 billion Tseung-Lam Tunnel; and, The $1.5 billion, 8.7-mile Agua Negra Tunnel linking Chile and Argentina.

I’m aware of only two U.S. highway mega-tunnel projects in the planning stages, both in Los Angeles. One would fill in the long-missing link in the Long Beach Freeway (I-710) via a tunnel beneath South Pasadena. The other is a proposed tunnel beneath highly congested I-405 in the Sepulveda Pass, estimated to cost between $7 billion and $9 billion. It would accommodate both toll lanes and a rail transit line.

Even with TBMs, tunnels are costly propositions. But given the difficulty of adding missing links to existing expressway systems in dense urban environments, such tunnels may well be the only realistic way to add much-needed capacity. People expect to pay tolls to use major bridges and tunnels, so much of the cost can be covered by toll revenues, which also make it possible to finance tunnel projects up-front. If such tunnels can now be built even in high water table areas like South Florida, they should be part of transportation planners’ tool kits in all major metro areas.

(Reprinted from the May 2016 issue of Surface Transportation Innovations)

Posted in Latest, Transportation | Comments Off

How The West Got Wealthy and Prosperous

Posted on June 9, 2016 by matt ohern

Share this article on:

Several years ago, physician, statistician, sword swallower and vibrant lecturer Hans Rosling produced a fascinating 4-minute video that presented 120,000 data points and showcased how mostly western nations became healthy and prosperous in just 200 years – after countless millennia of malnutrition, disease, wretched poverty and early death.
More recently, professor of history and economics Deidre McCloskey provided some clues as to why and how this happened. In a Wall Street Journal article outlining “how the West (and the rest) got rich,” she notes that it wasn’t just Karl Marx’s “exploited workers” or Adam Smith’s “virtuously saved capital, nor was it only Hernando DeSoto and Douglas North’s essential property rights and other legal institutions.
Perhaps the most vital ingredient was that over those two centuries “ideas started having sex,” as author Matt Ridley described the process in The Rational Optimist. It enabled innovators to make discoveries and devise technological wonders, often through coincidental Connections that historian James Burke found among seemingly unrelated earlier inventions, to bring us television, computers and other marvels.
Why did ideas suddenly start having sex? McCloskey asks. One reason was the printing press, which enabled more people to read and share ideas. However, she cites two other principal developments: liberty and equality. Liberated people are ingenious, she observes – free to pursue happiness, and ideas; free to try and fail, and try again; free to pursue their own self-interests, and thereby better mankind.
Equality of social dignity and before the law emboldened people to invest, invent and take risks. Once accidents of parentage, titles, inherited wealth or formal education no longer controlled destinies or opportunities, the innate inspiration, perspiration and perseverance of a Franklin, Bell, Edison, Wright, Kettering, Steinmetz, Ford, Benz, Borlaug and countless others could be unleashed. “Supposedly inferior races and classes and ethnicities proved not to be so,” McCloskey says. “Ordinary men and women didn’t need to be directed from above and, when honored and left alone, became immensely creative.”
That’s an important message in the splendid British television series Downton Abbey, as well: when societal restrictions are relaxed, many can rise to new callings and heights.
Many other factors played key roles in this incredible progress. Two are especially important.
The scientific method begins with an hypothesis about how some component of the natural world works, and a calculation or forecast of what would happen if the concept is correct. Scientists then subject the hypothesis and prediction to experiment. If confirmed by data and observations, we have a new theory or law of nature; if not, the hypothesis is wrong.
This process brought wondrous advances – often through long, laborious tinkering and testing, and often amid heated, acrimonious debate about which hypothesis was correct (the miasma or germ theory of disease), which system was better (direct or alternating current), and countless other investigations.
Abundant, reliable, affordable energy – the vast majority of it fossil fuels – made all this and much more possible. It carried us from human and animal muscle, wood, dung and water wheels, to densely packed energy that could reliably power factories, laboratories, schools, hospitals, homes and offices. Those fuels also run equipment that removes harmful pollutants from our air and water, and they ended our unsustainable reliance on whale oil, saving those magnificent mammals from extinction.
Today, coal, oil and natural gas still provide 80% of America’s and the world’s energy, for transportation, communication, refrigeration, heat, lights, manufacturing, entertainment and every other component of modern life. Together, the scientific method and industrial-grade energy enable our Ultimate Resource – the human mind – to create more new ideas, institutions and technologies that make life for poor people in wealthier countries better, healthier, fuller and longer than even royalty enjoyed a mere century ago.
Medical research discovered why people died from wounds; the true causes of malaria, smallpox, cholera and other diseases; antibiotics, vaccinations, insecticides and pharmaceuticals to combat disease and improve our overall well-being; anesthesia and surgical techniques that permit life-saving operations and organ transplants; sanitation (toilets, soap, trash removal) and water purification; and countless other advances that raised the average American’s life expectancy from 46 in 1900 to 76 today for men and 81 for women.
Internal combustion engines replaced horses for plows and transportation, and rid city streets of manure, urine and carcasses, while creating new problems that later generations toiled to address. Today we can travel the world in hours and ship produce, clothing and other products to the globe’s farthest corners.
Mechanized agriculture – coupled with modern fertilizers, hybrid and GMO seeds, drip irrigation and other advances – produce bumper crops that feed billions, using less land, water and insecticides.
Houses and other buildings are built better and stronger, to keep out the cold and heat and disease-carrying insects, better survive hurricanes and earthquakes, and connect their inhabitants with entertainment and information centers from all over the planet, and beyond.
Modern mining techniques and technologies find, extract and process the incredible variety of metals and other raw materials required to make the mechanized equipment and factories required to produce the energy we need and grow or make everything we eat, wear or use.
If energy is the Master Resource that makes all of this possible, electricity is the king of modern energy. Imagine your life without electricity – generated by coal, natural gas, nuclear, hydro, wind or solar facilities, or batteries. Imagine life before electricity, or before the internet and cell phones put the fullness of human knowledge and entertainment instantly in the palm of your hand.
At least one more factor helped to unleash this sudden surge of invention, progress, health and prosperity. A relatively new legal entity, the corporation, organized, harnessed and directed people, money and other resources toward common purposes. A growing private sector – free enterprises and entrepreneurs – put corporate and other ideas, labor and investors’ money on the line, assisted by evolving financial and investment systems and practices, while legal and government institutions provided the ethical and regulatory frameworks within which these entities are expected to operate.
Numerous “invisible hands” worked together across continents and oceans, often without even knowing their counterparts exist, to bring us products as simple as a pencil or as complex as a cell phone.
So we are left with a profound question. Amid all this health, prosperity and longevity for so many – why do so many still struggle on the edge of survival? Why do two billion still have minimal electricity and another 1.3 people still have none at all? Why do two billion still exist on $3 per day? Why do a half-million still die every year from malaria? five million more from respiratory and intestinal diseases?
The formula for health and prosperity is no secret. It is readily available on your cell phone. Indeed, says Leon Louw, the real “economic miracle” today is not found in South Korea, Singapore or Botswana – but in North Korea, Venezuela and most of Africa.
What should fascinate us is the miracle of poverty – the way inept, corrupt, greedy, centrally planned, hyper-regulated governments have prevented prosperity from happening. What should outrage us is that callous UN bodies, NGOs and activists have imposed their eco-imperialist agendas, and prevented countries from acquiring the property rights and technologies that made so many nations healthy and rich.
What should concern us is that many forces are conspiring to roll back thefree enterprise, free speech,scientific method,and reliable, affordable energy that make modern living standards possible. Having them now does not guarantee them tomorrow. Failure to safeguard these essential foundations could take us on the path to joining the ranks of the “miracles of poverty” and FRCs: Formerly Rich Countries.

Email this author

Posted in Economy, Latest | Comments Off

Economic Growth Misses Virginia

Posted on May 25, 2016 by matt ohern

Share this article on:

Not only has job creation and new business formation been weak in the current business cycle, it has been more concentrated geographically than in the past. Unfortunately for the Old Dominion, between 2010 and 2014 that concentration did not occur here.
This analysis points to very different futures for American communities, suggesting that the gains from growth have and will continue to consolidate in the largest and most dynamic counties and leave other areas searching for their place in the new economy,” writes the Economic Innovation Group in a new publication, “The New Map of Economic Growth and Recovery.”
The report buttresses an argument familiar to Bacon’s Rebellion readers: that larger metropolitan areas enjoy a significant competitive advantage in the Knowledge Economy. Skilled and educated employees seek large labor markets that provide a diversity of employment opportunities, while corporations seek larger, deeper labor markets that provide access to a diversity of skilled and educated employees. The dynamics of labor markets outweigh factors that confer competitive advantage in the old industrial economy such as access to transportation and natural resources, lower labor costs, low taxes and a low cost of doing business.
In summary: Large metros enjoy a major competitive advantage, smaller metros are teetering on a knife’s edge, and rural areas and small towns are hosed.
“The U.S. economy is becoming far more reliant on a small number of super-performing counties to generate new businesses,” EIG says. “A mere 20 counties accounting for only 17 percent of the U.S. population were responsible for half of the net national increase in business establishments from 2010 to 2014.”
The report does not speculate whether the trend is the result of temporary economic or political factors or is an irreversible long-term trend.

Graphic credit: EGI
Two trends contribute to the sharp decline in the number of businesses: a higher rate of firm deaths (more companies getting acquired or going out of business) and a collapse in new business formation, as can be seen below.

What could account for these trends? One logical possibility: In a blast of creative destruction associated with the digital economy, a relatively small number of new companies are displacing many established businesses. Another possibility: A wave of economic regulation in recent years has hobbled large swaths of the economy — the banking industry, the Internet, health care, energy, and so on — and has created new economies of scale that favor large, established corporations, encourages mergers and consolidations, and throws up barriers to entry to new firms. Most likely, both are at work.
Weakness in the national economy means that everyone is swimming upstream. Only a small number of metropolitan areas are strong enough to make any progress swimming against the current. Mega-trends favor the mega-metros.
But mega-trends won’t tell the whole story. Some large metros bungle their opportunities though corruption, business-hostile policies and mal-investment of public resources. Some smaller communities buck the broader trends by building defensible economic niches. The news from the EIG report is discouraging, but short-term trends need not dictate our long-term destiny.
(This article first ran in Bacon’s Rebellion on May 24, 2016)