The Federal Government Has No Idea How to Spend Money in Appalachia

Via Wikimedia Commons.

A New York Times exposé recently recounted the failure of a nonprofit called Mined Minds to teach coal miners to code and create tech jobs in Appalachia. Though touted by journalists and state politicians, the organization’s leaders had little tech experience, a shoddy curriculum, and left with unfulfilled promises. Its failure left the students feeling bitter and betrayed, fated to start over again to make a better life for themselves.

Mined Minds started off with great fanfare. Sen. Joe Manchin (D-WV) wrote a glowing 2016 op-ed in the Charleston Gazette-Mail praising the group. And the founder of Mined Minds, Amanda Laucher, received a $700,000 grant from the Appalachian Regional Commission to fund the training program in Beckley, West Virginia.*

Despite the political boosterism, the nonprofit’s training was a bust. Several students have filed a lawsuit against Mined Minds. But the nonprofit isn’t unusual: State and federal governments have a long history of throwing piles of money at people who promise to boost the Appalachian economy, then squander the subsidies.

Mined Minds checked every box of failed economic development in the region. It was politically connected, promised too much, and risked public money instead of their own funds. When it failed, Laucher blamed the locals, telling the Times that progress is slow “with the current atmosphere in Appalachia, which is deeply interested in maintaining a ‘culture.’”

Nor was this computer training the first attempt to make Appalachia into “Silicon Holler.” It was a  foolish idea in 2017 when Reason covered a similar program, and Kentucky’s failing rural broadband plan is an exercise in futility. Until politicians and local leaders learn the lessons of the past, these grand schemes will predictably disappoint.

Don’t expect change to happen soon, though; government agencies like the Appalachian Regional Commission will keep funding similar boondoggles.

Spurring economic growth is not ARC’s specialty. It generally focuses on projects that train local leaders to start their own businesses and organizations. According to its theory of change as noted in a March 2019 report, ARC wants to “develop and support local leaders, and increase the community’s capacity to improve the local economy and infrastructure.”

Thankfully, ARC doesn’t dabble much in economic development. Mined Minds is a departure from the norm. From 2008 to 2015, its report noted, only 1 percent of its funded projects were for “education and workforce development” and 11 percent were for “business development.” Almost 80 percent of its grants were for “leadership and civic capacity” and “civic entrepreneurship.” It doled out about $14.4 million for 152 projects, the average grant being $50,000.

It’s hard to say, though, whether that money is used wisely. Essentially, ARC-funded projects get self-evaluated by project leaders. In the March 2019 report, the ARC claimed success based on online surveys completed by 117 projects, telephone interviews with 15 projects, onsite interviews with another 10 projects, and a review of “key project documentation.” Unsurprisingly, the vast majority of project leaders said they succeeded:

  • For improving communities, 91 percent of project teams reported meeting or exceeding expected outcomes;
  • For improving organizations, 89 percent of project teams reported meeting or exceeding expected outcomes; and
  • For the number of programs implemented, 82 percent of project teams reported meeting or exceeding expected outcomes.

For all that claimed success, it’s hard to see the effects on a local or regional level.

Part of the problem is that “success” is defined by professors and politicians. Nonprofits and government entities (especially colleges) were responsible for 76 percent of all ARC-funded projects.The federal government might accomplish more if it focused its efforts on the priorities of the general public and looked beyond Appalachia’s grant-writing class.

Maybe then it’d provide more money to, say, clean up mining lands and drinking water systems, or improve health care access. Governments in Appalachia struggle to provide basic government services at an adequate quality; thinking they could also create jobs and wealth is borderline utopian.

When states get involved in economic development, the results are predictable: They promise subsidies, favoritism, and other benefits to companies willing to relocate. Often, these schemes benefit businessmen at the expense of taxpayers. West Virginia, for example, gave Cabela’s $150 million in public subsidies in 2003 and a stamping plant (that sits idle) in Charleston $15 million in 2007. In North Carolina, a 2004 deal with Dell sent more than $200 million in public subsidies for the computer company to establish a plant in Winston-Salem. It then relocated production to Mexico in 2010.

None of those deals ever created the jobs supporters claimed they would.

Politicians are so desperate to take action that they’ll waste taxpayer money that could have been used to benefit the many, not the well-connected few.

A better strategy for economic growth would follow three rules:

  • Don’t give public money to private businesses
  • Teach the youth to be entrepreneurs, and
  • Let private actors take the risk in creating jobs

Doing so won’t create Silicon Holler, and for some places, it might not do much beyond helping them tread water. Not every small town can keep its young people around, after all, as the national economy changes and the desire to live elsewhere grows. But making sure businesses risk their own money, and elected officials use taxpayer money only as responsible public servants should, could help Appalachia grow as a region.

It’s hard to convince young entrepreneurs to stay where they grew up if their county government can’t fix potholes grant a business license, or stop favoring their business rivals.

Private initiatives, like the Rise of the Rest investment fund (affiliated with Hillbilly Elegy author J.D. Vance), have a better chance of boosting the Appalachian economy. Their investments are more in tune with local and regional economies, geographically concentrated for greater impact, and demand real-life results (profits).

Sending business capital to places like Pittsburgh, Columbus, Cincinnati, Louisville, and Chattanooga strengthens those regional economies and empowers local entrepreneurs who don’t have as many political connections or expertise in writing grants. State subsidy schemes won’t help Appalachia, but finding and mentoring young entrepreneurs might.

The line between would-be saviors and grifters is rarely so close as in stories of government-funded “economic development,” as Mined Minds reminds us. And more stories will pop up about the next government-funded economic grifters soon, judging by policymakers in Appalachia.

Instead of politicians admitting they don’t know how to create jobs, wealth, and long-term growth, they’ll make promises that “this time is different” to lure a business to town. And until locals wise up and vote out the bastards who promise the moon but can’t pave a road, the only beneficiaries will be politically connected businessmen.

 

*Note: The New York Times’ coverage implied Mined Minds received $1.5 million, but Nancy Eyl, assistant general counsel for ARC, clarified that they received about $700,000. The Washington Greene County Job Training Agency in Pennsylvania received a $1.5 million grant for workforce training, and passed along the funds to Mined Mines as a subgrantee.

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Anthony Hennen is a co-founder of expatalachians and writer/editor at the James G. Martin Center for Academic Renewal in Raleigh, North Carolina.