Bacon's Rebellion

Democracy Thrives in Sunlight

Rustbelt Richmond

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by

James A. Bacon
in

Earlier, I forecast a dire future for Hampton Roads. Now it’s time to issue a jeremiad about Richmond. The recession is battering the economy severely. When the wind and rain dies down, the corporate landscape will look very different than it does today.

LandAmerica, a Fortune 500 company that provides real estate-related financial services, is being acquired by a rival. Some observers expect the entire headquarters operation to pack up and leave for Jacksonville.

Electronics retailer Circuit City is on its death bed, shedding thousands of employees nationally and hundreds in the corporate headquarters. Bankruptcy appears all but inevitable.

Packaging company Chesapeake Corp., last time I checked, was on the verge of defaulting on its debt. The stock is trading for less than $1 per share.

Menswear retailer S&K Famous Brands is struggling to survive, with its stock trading barely above $1 per share. The most valuable asset it possesses may be the land where the company located its corporate headquarters years ago, at the junction of Interstate 64 and Broad Street.

CarMax and Media General are hurting big time, although their survival does not seem to be in question…. for the moment.

Pittston just spun off a major subsidiary; the headquarters will be located in Texas. Earlier this year, specialty chemical manufacturer Albemarle Corp. relocated its corporate headquarters to Baton Rouge. A year ago, Wachovia Securities decamped for St. Louis.

Change is inevitable. Along with capitalism comes creative destruction. The old makes way for the new. But where is the new? Where are Richmond’s up-and-coming growth companies — the “gazelles” that create most of the economy’s jobs and economic growth? I can’t think of many. The roster of businesses in the “Companies to Watch” shows that there are signs of entrepreneurial life, but Richmond scores low in national rankings of fast-growth companies like the Inc. 500.

Our community has done a poor job of cultivating the growth of home-grown, fast-growth companies. The Virginia Bioechnology Research Park may have reached a level of maturity that it can begin contributing to the regional economy in a significant way, and Virginia Commonwealth University has potential, but the overall outlook is grim.

It’s 8:07 a.m. and I’m already reaching for the bottle of bourbon.

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15 responses to “Rustbelt Richmond”

  1. HoopleGroup Avatar
    HoopleGroup

    So what would you suggest? All you’ve done is reiterate what everyone knows. How about some ideas?

  2. James Atticus Bowden Avatar
    James Atticus Bowden

    Adjust corporate taxes to how they use water, land and air – how much they pollute or alter environmentally for the worse.

    If a company does little in that regard – then tax them on their property and lower the corporate taxes to next to nothing.

  3. Anonymous Avatar
    Anonymous

    I’m sure that some smart people will find a way to pick NoVA’s pocket and the rummies we elect to public office in NoVA will provide the votes to pass the legislation.

    TMT

  4. Groveton Avatar
    Groveton

    Jim:

    I know of a company that has tried on numerous occasions to do busineess in Richmond. They even had an office in Richmond for a few years on a couple of occasions. However, all of these efforts went for naught. I can tell you what those who (briefly) lived and worked there told me. But, perhaps, first a short history.

    The first crew the company sent down to Richmond to work with some Richmond based firms was a fairly standard composite of their employee base. Since they were coming from the Northern Virginia office they represented the make-up of that office. There were more Virginians than any other state background but the Virginians were still a minority. All were Americans. But many originally hailed from New York, Pennsylvania, California, Florida, etc. This was the same base of people who had successfully started this company’s offices in Baltimore and Charlotte.

    They did some initial business but never could penetrate the business community in Richmond. When asked why they said only “native born” Virginians from outside of Northern Virginia would have a chance of success in Richmond.

    So, the company closed shop in Richmond. Meanwhile, the company enjoyed year after year after year of double digit revenue growth elsewhere.

    Then came round two.

    The company thought it had learned its lesson from the first try. So the second try involved opening an office staffed only with native Virginians with the vast majority reared south of Fredricksburg. It was like a UVA alumni party. They also got nowhere. When they returned they were asked why they failed. They said that being a native born Virginian raised south of Fredricksburg was not sufficient. You had to be a native born Richmonder who was raised in Richmond with a vast preference for graduates of the University of Richmond.

    The company decided that the grass was greener literally everywhere other than Richmond and never went back.

    That was 20 years ago.

    More recently, my son graduated from high school in Fairfax County. He is now attending a large, well respected southern university outside (and south of) Virginia. However, he and I had the usual father – son talks as he was making his post high school plans. He fancies himself something of a good ole boy and sings the praises of rural life and rural Virginia in particular. Despite the fact that he has never lived in a rural area, I don’t argue with him. He’ll see more of the world as he grows up and he can make informed decisons later. If he still wants to lead the rural life – good for him. However, there was one oddity – his view of Richmond. Now he has never been to Richmond. As far as I know, he doesn’t know anybody from Richmond. But his opinion is clear – Richmond sucks. When I asked him why he felt that way he simply answered that “everyone feels that way”. So, I asked him about Roanoke. He confirmed that it was “down by tech” and then allowed that it sounded like a pretty good place. My son has never paid any substantial amount of tax and does not equate Richmond with the state government. He is expressing the widely held belief among his classmates and friends that Richmond is a bad place where he’d never want to visit let alone live.

    I have very limited first hand knowledge of Richmond. I dated a girl from Richmond when I was in college. I stayed with her family and thought both her family and the city were nice. I have been to meetings with companies in Richmond but I usually drive down and back in the same day. I too have heard the anti-Richmond rhetoric all my life. A stunning number of reasonable people will get an edge of anger in their voice as they define Richmond as insular, inbred, racist and full of empty suits masquerading as scions of Virginia society. I have certainly lapsed into this mindset myself. The only other city where I have seen the same reaction is St Louis among mid-westerners.

    Now, I understand that many people have a very negative view of Washington and the surrounding suburbs. I think most of that has to do with the fact that US Government is based here. But I never hear the same visceral hatred of, say, Alexandria that I hear of Washington. Nor of Baltimore. So, I kind of shrug the anti-Wshington rhetoric off. Besides, it’s probably good that people have a somewhat jaded view of the seat of government. If they liked government more they’d want more of it – and that would be bad for the country.

    But Richmond is different. Why do people have such a negative view of that city? How has it become the only place in Virginia that my son thinks he’d never consider living? Maybe Richmond needs a marketing effort. It seems to be a relatively small southern city with a lot going for it. How do you take the edge off the way many people perceive it?

    You often write of the creative class. You extoll its importance and cite attracting the creative class as a pre-requisite for civic success. Have you ever considered the creative class’ view of Richmond as a place to work, play and live? From my experience in talking to people – you would not get a a good reaction. If I am wrong, I am wrong. But Richmond invokes and uniquely odd and uniquely bad reaction among many people I have met over the years. Why?

  5. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    I used to listen to a lot of AM radio stations back in the 60s. My least favorite of all was WRVA. Back then, music shows were all the rage, except in Richmond where they engaged in high brow talk. In my youthful ramblings around places like Covington, Roanoke, and Tidewater, I found that most people had the view that Richmond was a city that just happened to be in Virginia. A city more in tune to the old Grecian days of Athens than modern reality. I’ve wondered whether the Richmond mindset grew out of it’s constant sieges during the Civil War, a generational inheritance that continues to this day.

    Interesting. The word verification actually formed a real word for the first time.

    Cobbler. That seems to fit Richmond very well.

    A clumsy workman who just throws things together. That would be the GA.

    More positively Groveton, it could be a pie with a thick upper crust that must be penetrated to enjoy the fruit.

    A story of contrasts, that’s Richmond.

  6. Joel Avatar
    Joel

    The City paid $50 million+ to build & subsidize a performing arts center that might serve 1,000 elite folks a couple of times a week. Yet nothing to keep these big businesses from leaving town and screwing their numerous local suppliers and thousands of employees.

    Maybe a monorail would work. Yeah, that's the ticket to success.

  7. Groveton Avatar
    Groveton

    As a life-long resident of Virginia it does me no good to see Richmond struggle. Nor Roanoke, Fairfax, Front Royal or Tidewater. Hooplegroup asks the right questions – what to do?

    Darrell – I’ve noticed that the people who collect my toll as I drive to and from the occasional meeting in Richmond are very nice and polite. They stand in stark contrast to the almost malevolent glares that you get at toll boths up here. So, maybe you are right. Maybe there is some fruit under that crust. But, like a pie, it’s the crust that everybody first sees. And why buy a pie with a bad crust? If the next pie and the one after have better crusts don’t they too probably have fruit beneath the surface?

  8. Larry G Avatar
    Larry G

    I cannot honestly say I don’t know what Groveton is talking about as I’ve seen it in other places also.

    but heckfire… that attitude sure didn’t keep companies like WalMart and McDonalds.. Home Depot, etc.. from doing their thing….

    right?

    Now ..there ARE some smaller towns and cities .. yes.. in the South…where you’re gonna have a rough time if you don’t fit in .. even in towns were heavy inbreeding appears to be a requirement for fitting in.

  9. Anonymous Avatar
    Anonymous

    Jim,
    I knew a businesman originally from New York City who ran the Richmond office of a large Asian company for a while.
    He said he went to a Richmond Chamber meeting — thinking he should partake of public service. There, one of the supposed blue bloods from the West End opined that “too many Catholics” were coming down from the North.
    Unfortunately, there is a level of provincialism here that seems much stronger than any other Mid-Atlantic or Southern city I have dealt with. The retrograde local newspaper encourages this with a fetish towards “He’s a Virginian” and “Virginia This” and “Virginia That.” I don’t think I have ever lived in such a self-conscious state capital.
    Regarding Land America and Circuit City, however, the problems really have nothing to do with Richmond. The former is a real estate financial firm in the worst mortgage cut-backs in years. The latter is a victim of a self-inflicted wound.
    And also, plenty of towns have big, big problems with layoffs. Unemployment is above 6 percent in the Bush Recession. You shouldn’t be so surprised that Richmond is not immune.

    Peter Galuszka

  10. E M Risse Avatar
    E M Risse

    Groveton:

    EMR was involved in Enterprise activities in the Richmond New Urban Region at about the same time as your friends.

    What became obvious was that if you just wanted to do “business” it was a closed shop. The parties in power did not want to share their memberships, booze or women just for “business.” Cut them in on the deal and you got their attention.

    Those proclivities may stand the Richmond New Urban Region in good stead a decade from now when the key attributes will be strong REGIONAL banks, good REGIONAL education systems for all citizens and REGIONAL import replacement.

    On the other hand they may still think the top of the Ziggurat is the important part of the economic and social structure and there may not be enough resources left to make any difference.

    Interesting that Jim Bacon put “rustbelt” in the blog post title. The places that were most like Richmond were Bermingham and Cleveland.

    Raliegh (and the rest of the Central Carolina New Urban Region), Atlanta and Austin were in another world.

    So were Charleton, Savanah, Mobile and New Orleans but that is another story.

    EMR

  11. Larry G Avatar
    Larry G

    It’s an interesting thing in terms of the sustainability of a new urban region.

    Clearly – there is an implication in the use of the term “rustbelt” to denote a region that is declining in economic vitality… if it loses it’s ability to create products and services for sale to customers outside of it’s region.

    Thus… when a furniture or textile plant closes down in a community – it can become a shell of it’s former self if it cannot find a replacement industry for it’s people.

    Then the kids go elsewhere to find work…. unless they take one of the internal jobs like teacher, post office,

    So.. the interesting thing .if one thinks that a functional settlement pattern is (more or less) self sufficient – not dependent on selling stuff to other regions – and mostly able to create all the stuff it needs without importing it.

    It’s been said in BR – that economies are – zero-sum in nature with winners and losers… and that it is an endless competition to make sure that you, at least, get your fair share and not let it be taken away by others.. and if you’re gonna do that anyhow..why not get good at it and do some poaching also.. just to make sure you’re staying ahead of the game.

    So.. it would appear that Richmond is having it’s industry poached away by more successful competitors…

    After all.. it’s not like people stopped buying what the Rust Belt regions actually produced… no.. some other region got into the manufacture of the same products .. and took their markets….

    so .. a question…

    Is there a certain optimal size for say a region like Detroit and for all of these many years – it actually was bigger than was truly sustainable … and now that it is becoming a rust belt region – it is becoming more of the right size that it should have been all along?

  12. Groveton Avatar
    Groveton

    Economies are only zero sum in the aggregate when the national GDP is flat.

  13. Anonymous Avatar
    Anonymous

    Actually, “Rustbelt” Richmond is a bit of a misnomer.We are not talking about losing industries such as steel or some machine tooling that have gone through major transformations and upheavals that goes to their very core.
    Steel bit it when the old “integrated” steelmakers –that’s when you go to the very start and take coal, coke taconite or other ore and go through the whole process with blast furnaces — found they were out-produced and out-managed on cost by Asians or Brazilians. Instead, the U.S. went to electric rolling mills that melted down scrap and firms that do so can be very profitable such as Nucor or Steel Dynamics.
    In Richmond’s case, there’s nothing strategically unsound about providing financial services to real estate. It’s just that there was a bubble that popped in subprime lending. It will come back because people will always need houses.
    In the case of Circuit City, people will still need electroncis retailers. It’s just that Circuit City made some real bone-head plays such as firing its experienced sales staff which is like slitting its wrists. It couldn’t get its branding right and found itself extremely tight of cash right when commercial credit froze up.
    The only place the “Rustbelt” moniker fits is one that Jim didn’t mention. Qimonda, the German silicion chip maker, is laying off more than a thousand at its Henrico plant. Chip making is like steel (old fashioned version), textiles or furniture, too portable and not sustainable.

    PG

  14. Groveton Avatar
    Groveton

    PG:

    “Tear down that wall!”. This was an emotional short term victory for the US. But, perhaps, a longer term challenge. The was torn down. The various countries in the global economy became more and more homoginized. Now, chip making is an “offshorable” industry. I think that’s becasue the competitive gap between the US and the rest of the world has narrowed. It less that we’ve become uncompetitive and more that “they” have become competitive. Either way – we have issues. What industries would represent a sustainable point of employment for Richmond (or anywhwere else in the US for that matter)?

  15. Anonymous Avatar
    Anonymous

    Go back and read what groveton, Joel, and Peter wrote. These are the things that are holding Richmond back.

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