Denial in not a river in Portland, Oregon
The Oregonian recently published an editorial that talked about job creation by small business versus big business. In it they said that “Supporting small business is important. But an exclusive focus on small business risks overlooking some inconvenient truths.”[i] They went on to say that “Small businesses are more likely to fail.” I found such a comment refreshing in a state that is essentially anti-business. After all, we are the 38th worst state in terms of unemployment.[ii] We are far behind North Dakota which is at 3 percent. How sad is that?
This is a lesson that the state of Oregon and the city of Portland are in denial about. And denial is not just a river in Egypt – or Portland. It is a cultural phenomenon in Oregon. The state of Oregon and the city of Portland have created an economic environment that is driving small and big business – and jobs — out of Oregon. The state of Oregon is always the first into a recession and the last out.
And the city of Portland goes out of its way to drive business out of the city. That is why Columbia Sportswear, American Steel, Zim Integrated Shipping and Schumacher Furs left town. Only in the city of Portland would a thriving pizza business be charged $25,000 to cross the street to a new location.
The idea that small business is going to stop the recession and create jobs in Oregon is a myth. Politicians will tell you that 99 percent[iii] of all jobs are created by small businesses. What they don’t tell you is that 85 percent[iv] of them fail every year. Would you invest your retirement funds in a investment that went into bankruptcy 85 percent of the time? Of course not!
But the state of Oregon and the city of Portland do exactly that and more. They invest our tax dollars into what I would call high-risk, public policy misadventures, as in urban renewal that is a proven public policy failure. Government public investment in housing projects was a societal failure in the 1960s and 1970s. Think about it. Columbia Villa, in north Portland was a complete disaster. PSU magazine called it “the often maligned Columbia Villa project—site of Portland’s first drive-by shooting.”[v] So what does Portland do? They decide that the taxpayers will be forced to subsidize housing for affluent yuppies in Multnomah Village.[vi] Well, at least it cut down on the drive-by shootings.
Underwriting social-engineering business models to solve non-existent social, economic or environmental issues is a mistake that Portland and Oregon never learned. The Harvard Business Review said that “Environmental policies must be carefully structured and predictable if they are to enhance rather than undermine competitiveness. On this score the United States falls woefully short.”[vii] I am all for small and big business. Small businesses who are successful ones grow and become big businesses. But we don’t need to invest taxpayer dollars in any of them.
How deep does Oregon’s anti-business agenda run? Well, just read Oregon Business magazine. The managing editor said to a CEO leaving town, “Don’t let the door hit your butt on the way out.”[viii] And to spike the ball, the managing editor went on to note that “our scavenger-like neighbors in Clark County” are “welcoming Oregon businesses to move to greener pastures.” I am sure the managing editor did not get his unintentional pun. Greener as in dollars or eco-roofs?
But to call a metropolitan neighbor a “scavenger” is more than extreme. Are we not a region? Do I need to remind the editor of this magazine that 60,000 citizens cross an interstate bridge daily to work and pay taxes in Oregon? These “scavengers” pay over $100 million a year in income taxes to support the state of Oregon[ix] and to support Oregon’s failing economic development policies. Is this not taxation without representation? The citizens of Clark County cannot vote for the failing policies of Oregon. And yet Clark County makes up about 25 percent of the region’s population.
In the last recession, in the early 1980’s, I got a phone call. I was in my office in Salem, Oregon and I was working for Governor Victor Atiyeh. I was a Senior Policy Analyst in the Oregon Economic Development Department. And this guy started asking me about Oregon and about building a high-tech manufacturing plant there.
He said he was going to drive from Virginia to Oregon in his 1965 Corvette and he wanted to meet with me. So I told the director of the department about the call and he told me the guy was a crank and to just ignore him. But I don’t always do what I am told to do and I did some research. I used my professional association with a national economic development group and then ordered up a Dunn and Bradstreet report based on the information I had.
And found out that this person was the head of corporate real estate for NEC America. This was one of the largest high tech companies in the world. I was told to ignore their representative. When I went back to the director of the department and told him this he totally freaked out. And from that moment on I was NEC America’s contact in Oregon.
In my first meeting, the guy asked about buying 30 acres of land near Intel in Hillsboro. After a few weeks that grew to a request to 300 acres. Clearly he was on a mission to build one of the largest high tech facilities in America. And I was the guy he wanted to close the deal with.
And then I was told something else by my new friend. It turns out that NEC was really on a fishing expedition. They were the actually fronting for a big business consortium called the Keidandren. And this group wanted to repeal something called the unitary tax in the United States. And I explained this to Governor Atiyeh became the last Republican governor in Oregon.
And Governor Atiyeh convinced the state legislature to repeal the unitary tax in Oregon and then the dominoes started to fall nationally. A Wall Street Journal story later said that “Ko Muroga, president of NEC American, Inc., said he had been assured by Oregon officials that the state’s unitary tax won’t apply to the new operation.”[x]
Soon after that a man named Akio Morita, the CEO of Sony Corporation, decided to visit Oregon. I know because I ended in a helicopter with Akio Morita flying down the Willamette Valley in a driving rain. It was memorable because he had a Japanese helicopter license and asked to let him fly the helicopter. I said “no” because I didn’t want to die or be the man who killed Akio Morita.
What happened next was quite amazing. Not only did NEC America build a plant in the Portland-Vancouver metropolitan area, but Fujitsu built two plants, and then there was Epson, and then Kyocera. The 1984 investments alone came to $370 million and an estimated 7,425 jobs.[xi]
The moral of my tale is to never ignore all of your options because of political dogma. People care about getting a paycheck to pay their bills for their families. People do not care about a political agenda of someone who is out of touch with economic or social reality.
The state of Oregon and the city of Portland were and are clearly delusional about what employers want. They both believe you can tell businesses how to prosper. They are victims of the culture of “No” where you are told not you can’t do this or that. They are not advocates or activists for either small or big business.
Richard Carson was a Senior Policy Analyst during the administrations of Governors Victor Atiyeh, Neil Goldschmidt and Barbara Roberts. He is currently a doctorate student in organizational development in the public sector at Washington State University
[i] http://www.oregonlive.com/opinion/index.ssf/2012/04/finding_the_right_size_busines.html
[ii]http://www.bls.gov/web/laus/laumstrk.htm
[v] http://pdx.edu/magazine/news/a-new-way-home
[vi] http://www.oregonlive.com/portland/index.ssf/2011/12/headwaters_apartments_city-own.html
[vii]http://hbr.org/2012/03/green-rules-to-drive-innovation/ar/1
[viii] “Jobs Watch: The phantom exodus,” Oregon Business, March 24, 2010.
[ix]http://en.wikipedia.org/wiki/Portland_metropolitan_area#Metropolitan_statistical_area/seattletimes.nwsource.com/html/localnews/2002186444_oregontax22m.html
[x] “Japan’s NEC to Build $25 Million Facility on 210 Acres in Oregon,” The Wall Street Journal, May 23, 1984.
[xi] “A year later, tax repeal stands test,” The Business Journal, July 22, 1985.