by JARED PAUL and RANDALL ROSE
originally featured in
June 4, 2012
Once again, the people of Rhode Island have suffered from an insider
deal marketed as “economic development.” The Rhode Island Economic
Development Corporation awarded $75 million in loan guarantees to a
video-game company that has now apparently collapsed.
It’s not enough to dump the blame on 38 Studios and Curt Schilling, the
company’s well-connected but inexperienced founder. Most Rhode Islanders
are aware that the problem goes wider than that.
To finance the Curt Schilling deal, the EDC helped secure $75 million
in loans from Wall Street. It was not listed as a taxpayer bond, but state
leaders have now promised that the taxpayers will pay if the financial
firms can’t get their money any other way. We at Occupy Providence believe
that job-creation projects shouldn’t end with a bailout.
This deal never made economic sense. Curt Schilling’s company promised
to create 450 jobs in Rhode Island. It never had more than 300. But even if
Schilling’s company had kept its promise, the cost would still have been
over $100,000 per job created. That’s more than double what most Rhode
Islanders make in a year.
A deal that pays that much per job isn’t about job creation. Instead,
it’s at the level that’s normally considered corporate welfare.
For that much money, you could have given jobs to more people than
Schilling promised to employ, and they could have been jobs that left a
lasting benefit for the whole state in fixing roads or helping the schools.
Even if this deal had worked out and didn’t leave taxpayers on the hook
for repaying Wall Street with interest, spending $100,000-plus per job
still amounts to a bogus form of economic development.
Occupy Providence sees this latest scandal as only one example of a
much wider problem: the power of insiders in Rhode Island. When Curt
Schilling got his great deal, he was an insider. He was a prominent
supporter of then-Gov. Donald Carcieri’s Republican Party, and Carcieri
chaired the EDC, which arranged the $75 million loan guarantee.
It’s not just the Republicans, of course. Both parties have given
plenty of examples of how they’re ready to abuse whatever amount of power
they have. And the power of insiders goes beyond political parties. Dan
Doyle’s Institute for International Sport at the University of Rhode Island
seems to have used his insider position to evade financial controls at URI.
Wall Street firms are able to use their insider status to increase
their wealth and make us cover their losses with money from the real
economy. In the Schilling deal, Wall Street firms didn’t only lend the
money; some of them took a share of the proceeds to facilitate the deal.
Occupy Providence promotes the voice of the 99 percent of the
population because Rhode Islanders continue to suffer from insider deals.
If the 99 percent had been consulted about the Schilling deal, it wouldn’t
have happened. Only 28 percent of Rhode Islanders favored it at the time.
The vast majority of the population would have done many other things
It was insiders who made a deal with Achievement First to run schools
in Rhode Island, even though Achievement First’s questionable record led
many residents to oppose it. The EDC, a board of business, labor government
and nonprofit-group leaders appointed by the governor, is great at
promoting their deals.
One year it’s Curt Schilling, other years it’s been a biotech firm like
Alpha Beta (another flop) or the troubled Wyatt jail that was supposed to
help save Central Falls. Meanwhile, the EDC engages in what economists call
a “race to the bottom” — competing with other states to give tax breaks to
big business, and borrowing money from Wall Street to fund whatever deals
the insiders like. They call it economic development, because it’s true
that economic development requires spending money.
But when we leave it up to the 1 percent to spend that money, we don’t
get any more real prosperity than a mediocre video game. We in Occupy
Providence believe that economic progress comes from cutting out the
insiders. We keep hearing that there’s no more money for the concerns of
the 99 percent, such as education and transit, but these are the things
that bring real economic development. Once we work together to put the 99
percent’s concerns into practice, Rhode Island will have a brighter future.
Jared Paul and Randall Rose represent Occupy Providence.