State officials and nonprofit leaders often chatter about economic diversification and a just transition for Appalachia. But old habits die hard. Many still dream of large factories and firms returning to the region, bringing economic wealth — and tax revenue.
The divide between smokestack chasers and economic diversifiers has an extra urgency as the federal government directs more money into the region than they have in decades. But the diversification versus big business divide threatens to squander the money from federal legislation like the Infrastructure Investment and Jobs Act and the Inflation Reduction Act.
Swinging for the fences promises the revival of a golden era, when Appalachia was dotted with coal mines and factories. But this persistent belief in mega-projects coming back to the region has notched up few successes in recent years. It also undermines small and medium-sized businesses that already exist in the region and could lead diversification efforts. When leaders stay focused on a big employer, they make unforced errors.
Take Virginia, where the Buckhannon County Board of Supervisors has focused on building the Bluestone Regional Business and Technology Park. It’s pocketed $13 million from grants and Virginia’s Tobacco Commission to fund it.
But after years of the complex sitting empty, a machinery company was turned away when it wanted to open there. The board pigeonholed the park as being “tech-only,” said Amanda Killen, the new economy program coordinator for Appalachian Voices.
The 680-acre park was completed in 2011 but sat empty until getting its first tenant in 2021 — a bait manufacturer, helped by a $400,000 loan from the Virginia Coalfield Economic Development Authority.
Now locals are grumbling about Project Jonah, a salmon farm announced in 2013 as “the world’s largest vertically integrated indoor aquaculture facility.” State Delegate Will Morefield called it “the type of transformational project that we will use on an international level to attract other companies to Southwest Virginia.”
The $228 million project has received more than $6 million in federal and local grants. Another $10 million could come from the Virginia Coalfield Economic Development Authority if it hits hiring and investment benchmarks, on top of millions more in county loans to the company. Tazewell County would also need to spend $8 million for water system improvements.
“They’re always very proud to do a press release and say ‘hey, we’re doing this thing, here it comes,’” Killen said. “And then it doesn’t happen. That happens over and over.”
Officials have assured the public the Project Jonah lives, with an expected completion date of 2025 or 2026.
Project Jonah, it should be noted, grew out of a 2013 trip to Israel that Delegate Morefield took “to look for economic opportunities for Southwest Virginia,” according to the Bluefield Daily Telegraph.
For many officials, the temptation of a moonshot to revive the rural remains irresistible. The moonshot mindset, though, gets economic development backwards. Rural areas don’t need politico-economic gurus directing growth. What they need is the entrepreneurial spirit.
“So much of where I think conventional economic revitalization discussions have fallen short is they tend to be very top-down and they tend to exclude or not recognize the vital role that entrepreneurship plays,” said John Lettieri, president of the Economic Innovation Group.
EIG’s research focuses on economic dynamism and the roots of innovation. “Entrepreneurship is one of the signal indicators of economic potential in a community, and anything that is not fundamentally involving entrepreneurship as a path forward is not likely to succeed,” Lettieri said.
Gambling with taxpayer money is easy. As more federal cash flows into Appalachia’s overlooked hills, it may encourage hubris more than profit.
“There’s an incredible overconfidence among policymakers about how, by pushing this or that button, you can engineer outcomes that are hard to achieve,” Lettieri said. “There’s always this idea that through policy we’ll generate a big boost of entrepreneurship — and it’s a laudable goal — but so much of it is about creating the pre-conditions in which entrepreneurs can do the thing that they do without needing the government.”
Creating that environment for growth is much more abstract than luring in a new business with tax credits and subsidies — which is part of the problem. Politicians can’t resist a big project. But that effort crowds out an existing small business that needs legal barriers removed to grow. When it’s harder to start or grow a business at home, people leave.
Though rarely lauded as a business-friendly place now, Lettieri noted that one of the advantages California had in becoming a tech hub was that it doesn’t enforce non-compete agreements. Beyond a friendly business environment, the basics matter: good or decent schools, safe neighborhoods, reliable and fast internet service.
“People try to outsmart themselves on this stuff and they want to skip ahead to some boutique strategy,” Lettieri said. “If you haven’t attended to those local rules, regulations and infrastructure, what are you doing wasting your time thinking about economic strategies? You don’t even have the conditions for a functioning, thriving economy.”
But, even if rural Appalachia fixes the fundamentals, these communities might have a bigger problem that limits growth. Southern Appalachia may be all right, but for the north, structural forces are against them.
“The demographics in these places are already bad. Once something starts declining, this is America — it’s like, peace out, we’re gone,” Aaron Renn said.
Renn, a consultant and writer, produced a report for the Urban Reform Institute on Appalachia’s future and noticed a divergence between the region’s northern and southern parts, divided along the Kentucky-Virginia and Tennessee-North Carolina border.
Southern Appalachia, thanks to the Sun Belt boom, has gained population and jobs. Northern Appalachia has struggled.
“North Appalachia lost 17,131 people in total, while south Appalachia gained 127,585,” Renn wrote. “While the north posted positive net domestic in-migration of 22,563, the south tallied almost 300,000 — thirteen times as high. The story is similar for jobs, with the north losing 227,049 positions since the pre-pandemic year of 2019, while the south actually exceeded its pre-Covid levels by 66,377.”
The south has benefited from sprawl that’s sent residents from Atlanta, Charlotte and Knoxville into Appalachia, Renn noted, but the north is more remote from the metros.
The places that have gained the most from remote work seem to be the suburbs — and southern Appalachia has seen more gains from that pattern than the north. Perhaps rural areas need more competent governance rather than top-down economic planning.
“What’s notable about growth in south Appalachia is that it is happening organically — through market forces, not policy interventions,” Renn wrote. “Numerous attempts have been made to try to revive the northern Rust Belt, to little avail. That region’s fortunes seem to be deeply tied to structural forces not easily overcome.”
The leaders who would start businesses, run county government and lead volunteer projects may be more in tune to those shifts — and more willing to leave when decline hits.
The least entrepreneurial people are the ones who stay, Renn said.
“You start adding it up — I’m not predicting a great rural turnaround,” he said. “Again, there’s places that’ll do OK, but I think yeah, we’re gonna have declining rural populations, declining rural influence, et cetera. I don’t see how we turn that around.”
Fewer people, fewer entrepreneurs — at least state parks don’t fit in a U-Haul. Though some assets can’t leave, if big cities are too far away, fewer people will visit, too. Some rural parts have grown thanks to outdoor recreation, but its success can hinge on how easy the commute is from the nearest metropole. The magnificent views and charming towns may not bring economic benefits after all.
“They’re very, very dependent on these large urban population centers,” said Bynum Boley, director of the University of Georgia’s Tourism Research Lab. “If you look at who’s going on these vacations to national parks, it’s mostly people living in urban areas… I don’t think there’s any short-term fix for these big changes that are happening in these areas.”
Though policymakers can’t control the furies, these structural forces that favor the south and west over the north and east, some officials want to force a change in the status quo.
Leaders cloistered away in state capitals and DC can break many things by accident and create plenty of barriers. The track record of state and federal governments to turn around areas in decline isn’t exactly flawless.
And even when they try, the results are underwhelming.
The EPA, for instance, has a Recreation Economy for Rural Communities program to offer planning assistance for developing outdoor rec in small towns — but only thirty-five places have benefited since its creation in 2019. The impact may simply be too small, even if it spurs some economic or quality-of-life gains.
Similarly, a congressional bill to revitalize rurals areas would create a fund for outdoor rec and economic development — but it would have an annual budget of $50 million.
Competition for those small-scale federal grants might guide the attention of policymakers to places that have it together, but it might also obscure the promise of other places. A business that gets a state subsidy is not always an industry leader.
Renn, who warns of the structural challenges facing the region, is not advocating for desertion. “The prospects for Appalachia are far brighter than widely assumed,” he wrote. The region is filled with locals experimenting and pioneering for a better future.
It should also be noted that the data, aggregated by the Appalachian Regional Commission, show that poverty in Appalachia is falling, educational achievement is improving and median household income has gone up by 10 percent between 2012-2016 and 2017-2021. But revival will be uneven.
It’s tempting for legislators, ever campaigning for reelection, to look for a big win. Getting a big factory or distribution center gives them a way to claim they “created” thousands of jobs. But the hard work of revival is less flashy, hidden away in the details. Going deeper will mean accepting complexity.
What’s most needed are politicians who want to make life easier on small, existing businesses to grow organically, rather than looking for a hail-mary megaproject.
