Selling the State Economic Development Policy in Kentucky By Timothy Collins With a Foreword by Bill Bishop Copyright © 2015 By Timothy Collins Permission to download this e-book is granted for educational and nonprofit use only. Quotations shall be made with appropriate citation that includes credit to the author and the Illinois Institute for Rural Affairs, Western Illinois University. Published by the Illinois Institute for Rural Affairs, Western Illinois University in cooperation with Then and Now Media, Bushnell, IL Illinois Institute for Rural Affairs Stipes Hall 518 Western Illinois University 1 University Circle Macomb, IL 61455-1390 www.iira.org Then and Now Media 976 Washington Blvd. Bushnell IL, 61422 www.thenandnowmedia.com ISBN – 978-0-9977873-0-6 Cover Photos Army uniform trouser manufacture. Kane Manufacturing Company, Louisville, Kentucky (1941). Farm Security Administration - Office of War Information Photograph Collection (Library of Congress). http://www.loc.gov/pictures/item/oem2002000967/PP/ Coal breaker, Pike County, Kentucky. Arthur Rothstein (1938). Farm Security Administration - Office of War Information Photograph Collection (Library of Congress). http://www.loc.gov/pictures/item/ fsa1997009623/PP/ Group of boys gathering tobacco on farm of Daniel Barrett, Spottsville, Ky., Star Route. Lewis W. Hine (1916). Photographs from the records of the National Child Labor Committee (Library of Congress). http://www.loc.gov/pictures/resource/nclc.00511/ To Shannon, friends forever, and Daniel, whose promising future is unfolding so well TABLE OF CONTENTS Abbreviations vii Preface ix Foreword xi Acknowledgements xiii 1 Kentucky’s Economic Development Policy in Context 1 2 Multiple Crises and the Genesis of Economic Development Policy 19 3 Peripatetic Populist: Albert B. ‘Happy’ Chandler, 1955-1959 35 4 Echoes of the New Deal: Bert T. Combs, 1959-1963 47 5 Growth and Conflict: Edward T. Breathitt, 1963-1967 65 6 Republican Interlude: Louie B. Nunn, 1967-1971 81 7 Pragmatic Politics: Wendell H. Ford, 1971-1974 101 8 A “Wannabe” Liberal: Julian M. Carroll, 1974-1979 119 9 Selling the State: John Y. Brown, 1979-1983 145 10 Global Imperatives: Martha Layne Collins, 1983-1987 165 11 Un-Commonwealth: Wallace G. Wilkinson, 1987-1991 179 12 Mixed Results: Some Impacts of Kentucky’s Policies 195 13 Back to Context: Liberal Project Twisted to Sell the State 207 Appendix: Legislation and Governors’ Policies, 1958-1989 223 Bibliography 243 vii ABBREVIATIONS A&IDB Agricultural and Industrial Development Board ARC Appalachian Regional Commission BEA Bureau of Economic Analysis CME Group Inc. Chicago Mercantile Exchange HB House Bill HCR House Concurrent Resolution (requires approval by both chambers and governor’s signature) HR House Resolution INK Incentives for a New Kentucky KDFA Kentucky Development Finance Authority KERA Kentucky Education Reform Act of 1990 KIDFA Kentucky Industrial Finance Authority KRS Kentucky Revised Statues LRC Legislative Research Commission OPEC Organization of Petroleum Exporting Countries PR public relations Partnership Board Kentucky Economic Development Partnership RFC Reconstruction Finance Authority SB Senate Bill SCR Senate Concurrent Resolution (requires approval by both chambers and governor’s signature) SR Senate Resolution T VA Tennessee Valley Authority UK University of Kentucky viii ix PREFACE Based on comments from reviewers, it is possible Selling the State could be controversial in academia and possibly in the larger world where politics and economics are intertwined every day. If so, I will be glad. My intention, from the start of my dissertation research in 1987-1988, was to develop a body of work that drew on my background in journalism, agricultural economics, and sociology. I wanted a truly in-depth, long-term case study of de- velopment policies in my then-home state of Kentucky. With all due apologies to the late C. Wright Mills, the writing and research for this book are an exercise in stretching the “sociological imagination.” Some will say this book is not sociological. I am fine with that. My disserta- tion committee, as I learned later, debated this issue after my too-wordy response to a question about what made my work sociological. Frankly, I didn’t care if my dissertation was or wasn’t sociological, and I said so then in phrases that raised doubts about my orthodoxy. Sociology, coupled with knowledge from my other disciplines, provided critical tools for a deep investigation into the evolution of Kentucky’s economic development and education policies. This book emphasizes the evolution of Kentucky’s economic development policies with references to education. So, it is historical, but not necessarily history. Selling the State is not political science, either. But it is about state-level politics, a field researched all too rarely. It is based on hundreds and hundreds of pages of government documents, including governors’ speeches; documents from the legislature and state agencies; and newspaper reports and books. Nor is this book an economics text, although it is laced with interpretations of economic philosophy. The underlying assumption is that capitalist economics is far more than marketplace activities. Economics is characterized by different modes of thought that determine how market activities are viewed, and what, if any role government should play in the economy. If capitalism is an ideology, a sometimes fragmented one at that, then the term “Keynesian activism” is a le- gitimate way of describing Kentucky’s efforts to attract new capital by “pump- priming” the Commonwealth’s economy with business tax breaks and incentives to create jobs that boost consumption. Probably the first (or last) straw for many readers will be the book’s critical theoretical lens based on the heritage of Karl Marx, Antonio Gramsci, and Enzo Mingione, among others. These philosophers/activists/academics and others like them provide incisive tools for understanding how economy, politics, and culture are inextricably interwoven in a capitalist sociocultural system that is at once unified and divided, declining and rising. In other words, it is dynamic. The tools are not overly popular in many circles across the United States, perhaps because they dig a little bit too deeply under the nation’s fragile mythologies of free mar- kets and pluralistic government that are said to promote equality of opportunity, growth, and progress. x Preface Many government and economic leaders—especially in Kentucky—are not going to be happy with this book. It unravels myths surrounding a welfare state dedicated to supporting business profitability while staking a claim on job cre- ation for the masses. The system runs on regressive taxes that hit workers hardest. In addition, job creation coming out of the 2007 has been weak by all historic measures, despite pervasive corporate tax breaks. Over the past two generations, job creation using incentives of one sort or another has become a central function of government at all levels. Critics will question the analytical tools I use. They will disagree with my interpretations. They will question the facts I use. Such is the fun of different viewpoints, different ways of seeing and knowing, in civil debates. We need a good debate about the role of government in assisting businesses in the name of job creation. Much is at stake. I hope Selling the State—a pun if ever there was one—contributes to the discussion in some way. xi FOREWARD On the next to last page of her essential book on development, The Economy of Cities, Jane Jacobs imagines that some day a flying saucer will appear from another solar system. Earthlings will be agog at the gizmos the visitors will carry and the vehicles that brought them from so far away. We will be eager to ask how all this new machinery works. Jacobs says that questions about technology, however, are not the first we should ask. She writes: The important question … would be something quite different: What kinds of governments had they invented which had succeeded in keeping open the op- portunities for economic and technological development instead of closing them off? Without helpful advice from outer space, this remains one of the most press- ing and least regarded problems. While covering economic development policy in Kentucky during the 1990s for the Lexington Herald-Leader, I often thought it would take intervention from another planet (if not the Divine) for the government to develop policies that would give my woebegone state a chance at prosperity. Kentucky and its governors seemed to have an instinct for poverty. The one thing that is clear from the history of economic development, how- ever, is that nobody has a very good recipe for turning poverty into prosperity. Yes, there are charts and books and reports enough to fill a boxcar, but when you get right down to it, nobody has the answer. Nobody can say with any certainty that a combination of X (or Y) factors will result in a poor place becoming rich. Most places are poor, after all, and have been since the beginning of time. If there were a sure-fire road to riches, somebody would have told by now. Economic development is one of those do-it-yourself occupations. You either do it yourself or it doesn’t get done. As a consequence, development becomes a reflection of the state of mind of those developing the policy. Want to know what a group of elected leaders think of their people and their future? Look at their development policies. Those will tell you a lot. That’s why Timothy Collins has written an important book. Selling the State is about how a southern state’s people in the 20th century thought of their state and themselves. It’s a story of Kentucky, yes, but it is also very much a chapter in the larger history of the United States. If Jacobs’s flying saucer had landed in Kentucky (or much of the South) in the last century, the first thing most of the state’s governors—and all of its economic development officials—would do would be to offer the visitors from far away a tax break if they would open a saucer-building factory in the Commonwealth.