B-Problems & Solutions

Image by Brendan Biele via Flickr

The Problems

As I began researching why many local companies had closed or moved out of Spokane, I was surprised to uncover some ugly details:

• 1 in 3 high school kids drops out of school.
• The percent of students taking the SAT is way below the state average AND dropping.
• The poverty rate is worsening.
• The Spokane International Airport handled more passengers in 1996 than it does today – while other area airports have dramatically increased their passenger traffic. Airport passenger loads are a proxy for the local economy – that is, like airport passengers, the local economy is flat.
• The community suffers from chronic low wages – and has for decades.
• Thousands of high paying, high skilled jobs have been lost – mostly to off shoring.
• Since 1998, patent production, per 100,000 population, has dropped by 75%. This means the community’s innovation ability has collapsed.
• The Milken Institute ranks Spokane in nearly last place to run a tech business although the area ranks okay to start other types of businesses.
• In 2009, Forbes Magazine labeled Spokane as the “Scam and Fraud Capital of America”
• Property crime rate is 32% higher than the State average.
• Spokane is in the midst of a downward spiral since peaking in the 1998-2000 time frame.
• And more facts, which are detailed on this web site.

Spokane has declined in the past decade and has evolved a culture that seems to favor less ambition; ambitious people leave for the coastal cities. In a 21st century globalized economy, the only path to success is to compete on a world-class basis across a diverse spectrum of endeavors.

Spokane no longer provides a path of long term economic success with opportunities for high skilled ambitious people (except those working for the government/education or health care sectors).

I’ve read numerous agency reports on the Spokane area economy dating back to 1994. Nearly every year, one or more agencies publishes yet another study and report. I think they measure success by how many reports they write – not whether they have any useful impact on the world!

Sadly, after distilling out the key points, they all say much the same thing, year after year after year. None of their recommendations seem to be seriously acted upon.

Please see the History of Spokane Economic Plans links at the upper right of the main page.

Spokane’s Future

The area will become known as a place to retire to due to low costs of housing that enables wealth preservation, and access to an over-sized regional health care industry. (That claim is supported by the data and actual economic pronouncements about Spokane.)

Spokane will have a large service and retail industry on which to spend income mostly produced elsewhere from government pensions, Social Security, Medicare, other pensions, investments and home equity of homes sold elsewhere.

A proposed medical school will be established in Spokane – 5 to 10 years in the future – but the hoped for spin off of “biotech/bioscience” will not amount to much for reasons I will explain later.  Tech businesses here will primarily be small to mid-size niche market companies doing a good job at what they do – like US Motion, Next-IT, ReLion, and so on, many small companies, and one large technology manufacturer, Itron.

Spokane will not ride the wave of the 21st century innovation economy but will be more of a steady state, slow growth economy based on services, especially government, health care and education.This has important implications for those who live here, the types of people who might want to move here, and the types of businesses that are likely to start here or move to Spokane.

Months after I wrote the above, I see another critical factor – location, location, location. A decade ago, Spokane’s airport provided non-stop access to 16 cities; today it is down to 12. 80% of all flights go to 4 geographic locations. For a national level business, the lack of air travel options hinders their ability to reach customers, clients, vendors and industrial partners.  Airport representatives and local business representatives have said this is a problem for the area’s economy.

Since 9/11 there have been changes to air travel, not only due to 9/11 but also due to rising fuel costs, the overall economy and other factors. A consequence of these changes is that flying smaller planes (as Horizon, ExpressJet and Big Sky Airlines had done) is no longer profitable.  When smaller planes (5o to 70 seats) were profitable, they opened up access to smaller cities. Today, smaller planes are being phased out, leaving fewer options in both destinations and the frequency of flights in small communities like Spokane.

Spokane’s challenge comes down to “location, location, location”. And that means that a local economy based on government, health care, education, warehousing/distribution (trucking) and services for all those, plus some niche businesses, is possible the best outcome for the area.

When I originally wrote this I was instead thinking of the bigger picture and the need for an innovation based economy in the 21st century. I now have doubts that Spokane can meaningfully participate in the 21st century innovation economy as it no longer has the critical mass and critical infrastructure to support that.

The Solutions

This section is still be written and edited – and is fairly useless at this point.

1. Step one is to agree on whether these are problems and decide if we want to change. There is a group in the area – the Inland NW Community Foundation – that is seeking change and improvement. While made up of superb and outstanding citizens, the current group lacks direct participation from the business community. The INWCF has existed for decades and has $55 million in assets.
2. Don’t hide behind wishful claims about Spokane. Local promotional web sites are filled with out dated and false claims and just plain wishful thinking.
3. Identify a key set of achievable first steps. INWCF is starting with the high school drop out problem – a good choice – but by #4 on the list they are on to expanding access to health care, which the Federal government is addressing, and #5 is reducing dependence on the automobile ….  neither of which will have much impact on creating a growing economy with good paying jobs, certainly in the next 5 to 10 years.
4. Prioritize! Do we really need a government owned and operated motor speed way?  Do we need to invest another $2.8 million in a minor league baseball stadium that rents  for just $15,000 per year? And we do this while companies are leaving the area and 1 in 3 high school kids are dropping out of high school?  Local leaders seem oblivious to what is happening around them.
5. Please see the Recommendations linked from the front page.
6. To be continued – including topics about Littleton, CO and other locations, the need of innovation and an innovation economy, and a major cultural shift in Spokane if we are to break out of this rut. Why Littleton, CO? They came up with the term “economic gardening” – meaning that communities must grow their own businesses and not expect to recruit saviors from afar to move in and open up big companies in town. The harsh reality is that corporations care only about the return on investment – and if low costs are your competitive advantage, eventually somewhere else will be cheaper still and they will pack up and leave. We’ve certainly seen this in Spokane, which has been gutted in recent years of major manufacturing and technology businesses.