In Tennessee, innovation and corruption seem to go hand-in-hand

Recent visits from two notable figures, AOL co-founder Steve Case and Salon writer David Sirota, rendered two different takes on how we spend our money in Tennessee. Mr. Sirota cited a study that indicates that the Volunteer State is one of the more politically corrupt due to how it spends most of its revenues: on construction and police protection instead of on education, health, and welfare. The writer also mentioned Nashville's penchant for throwing our tax revenues at private corporations, which don't appear to find our city itself enough of a lure to decline to payola to stay put:

“Cities and counties in states with troubled political cultures demonstrate the greatest willingness to offer business development incentives.” And again, comparing Tennessee’s corruption with its economic development policies seems to confirm this.

According to the watchdog group Good Jobs First, Tennessee is at the top of the list of states offering so-called “megadeal” subsidies to corporations. Likewise, the Nashville City Paper reports that in the name of economic development, the city has been dramatically increasing its subsidies to corporations, including a $65 million outlay for a minor league baseball stadium.

During last December's ballpark debate when suggestions were made that Metro lessen the moral hazard of handing Nashville Sounds owners our revenues by making them more obligated for spending the money responsibly, the Mayor's minions on the Metro Council called it a "poison pill" that would kill the deal. I would add such false provocation to Mr. Sirota's list of indicators of political corruption in Tennessee.

The city's legislative branch expressed shaky ethics in defending Mayor Karl Dean (who has turned private subsidies into an art form) with its outrageous slurs about entirely reasonable requests concerning how public money is spent.

One council member defended the ballpark funding scheme by insinuating that she might retaliate in any future projects in other districts:

Erica Gilmore

If you think about the way I have supported you in the past, your different projects so that your particular districts can thrive and survive. And I think I've been good at doing that. So, I ask that you would support my district tonight, my community, not just for me but for Nashville. We have to make sure things are equal. We have to make sure all communities work, and before I have never stood up on big projects and talked about fiduciary responsibility, taxpayers money. We just trusted it in the past and now we have a question with it.

It is the height of councilmanic privilege to hold future votes over the heads of other CMs in order to push through a ballpark plan despite questions on how public money will be spent. It must have worked, because she did it again last February regarding a different proposal in her district:

Please know that in order for us to work together you have to support me, because if you bring something for your constituents you expect me to support you and you can't support me I can't do it as well.

For his part Mayor Karl Dean acts like it a badge of honor that Metro is making no money off the lucrative ballpark naming deal with First Tennessee Bank and that the only big ticket item Sounds owners are paying for without government assistance is the guitar-shaped scoreboard. No wonder that Hizzoner wanted to push it through with as little public input as possible; Nashville ends up on the short end of the financial stick at almost every point.

Mr. Sirota is on to something in our state. His observations also provide the political backdrop for Steve Case's visit and comments about Nashville's startup businesses. Discussions about startups in Nashville seem to occur in echo chambers at the expense of evidence that the startup industry is contracting. So, Mr. Case's appearance may be an attempt to shore things up.

The Nashville Business Journal reported:

Looking forward, Case said, that entrepreneurial spirit will be needed to continue growing, competing globally and creating jobs.

“If we’re going to create jobs, we have to back our startups,” Case said.

And those startups can’t just be emerging from Silicon Valley, he added. As technology enters its “third wave” and focuses on integrating the Internet into myriad processes – health care, transportation, etc. – other regions of the country with experience in those sectors should emerge as leaders.

For Nashville, Case said, that will mean seizing the opportunity to remain the biggest innovator in the world of health care.

NBJ did not elaborate on what Mr. Case meant by "we have to back our startups". What that has meant in Nashville under Mayor Dean is kicking in corporate welfare for private businesses, even as public services suffer under his budget knife.

I worry about Mr. Case's exhortation to fund disruptive innovation in health care. Tennessee already flirts with corruption in that it spends less public revenue on access to health care than on subsidizing private business. Encouraging technological expansion in health care is not the same as investing public dollars to expand broader access. Dumping money unregulated into the health care industry simply translates to writing executives blank checks to do anything they want. Startup businesses are not beholden to anyone but themselves and the corporations to whom they may or may not eventually sell out to.

Unchecked innovation will only encourage more corruption in Tennessee regardless of how redundantly stylish it has become for techies to claim they "make the world a better place".

Mr. Sirota deftly rebuffed claims that on-the-dole innovation leads to greater economic development:

Do those subsidies result in job-creating technology and innovation hubs? While many locales ramping up their subsidies certainly hope so, the jury is still out — and that’s being generous. Indeed, there’s plenty of evidence that subsidies do not create the economic development their boosters promise, and instead they merely cannibalize already-existing economies. Meanwhile, a lot of those subsidies end up being awarded to politically connected firms, calling into question whether they are really designed with any kind of coherent economic development plan in mind.

So, the growth that happens here is not caused by the disruptions prompted by government redistribution. The growth would have happened somewhere. All the corporate subsidies do is favor some industries over others and cement political influence and cronyism.

A paycheck

One more note of irony to close this out: Mr. Case's visit was hosted by Nashville's Entrepreneur Center, which is housed in the refurbished Trolley Barns on Rolling Mill Hill. Those Trolley Barns are publicly owned (by MDHA, which bought the property for $10 from the county in 2006). The barns were built as part of the Works Progress Administration, the largest New Deal program that pulled our country out of the Great Depression, not by privatizing and outsourcing the work, but by the government directly hiring and paying people to build. Whenever governments promote job creation nowadays, they come across as a faint shadow of the bold New Deal. Likewise, Mr. Case's chatter about startups providing jobs is a negligible projection of what the government could actually do free from the networks of crony capitalism that fund so many political campaigns.

The political corruption that we see rampant in Tennessee and in Nashville with the giveaways is neither necessary nor inevitable, but until there is tectonic shift in political culture here, the corruption will continue.