Carving a New Economy

Kentucky officials have long boasted about their plans to boost the rural economy. But when columnist Bill Bishop of the Lexington Herald-Leader looked behind the headlines and self-serving pronouncements, he found a state pursuing rural development through a failed idea. In a dogged series of more than 45 columns, Bishop showed how the policy of luring industry with tax breaks had failed to bring economic progress. And he highlighted opportunities and successes largely ignored by the state.

 

Quicksand, Ky. — One day in early April 1993, a ragtag group of woodworkers proved what for 40 years had only been talk — that a fine-furniture industry could grow and thrive in the hardwood-covered hills of eastern Kentucky.

These weren’t giants of industry, nor were they living off some fat government grant. The woodworkers belonged to the Kentucky Wood Manufacturers Network, an organization of small companies that one member said resembled an industrial “guerrilla outfit.”

The physical proof of the group’s success is a rather large, dark-finished set of cabinets and bookshelves. It’s an imposing piece of furniture, fine enough to attract attention from buyers at the world’s largest wood-products trade show that took place recently in Germany.

The cabinet was assembled in Breathitt County. It was perhaps the first time advanced technologies have been used in eastern Kentucky to produce fine furniture. Yet the product was not as important as the process: In one day, these firms showed Kentucky the way to a new and more prosperous future.

The question now is whether anyone is willing to follow — or whether Kentucky will continue to stumble down a path of long-failed policies to a future of low individual incomes in rural counties and higher state budget shortfalls.

This tale — and the choices it presents — began three decades ago, when the federal government built a modem wood-manufacturing shop at Quicksand. The University of Kentucky taught classes there for two decades, with some success. Graduates of the Wood Utilization Center went on to careers in private business or government service.

The Quicksand center, however, never lived up to its billing. It never became the center of a more advanced wood industry in eastern Kentucky — something beyond the saw-and-ship business that now dominates the state’s wood industry. The university’s hierarchy never showed a full commitment to Quicksand. Money was gradually cut, and in 1983 even the classes stopped.

What didn’t stop was talk about wood products as an economic alternative for the mountains. That possibility has been discussed for decades and continues to be hashed over any time people talk about the future of the mountains.

The reason is obvious. Some of the world’s finest hardwoods grow in eastern Kentucky — and they grow in abundance. Kentucky is the nation’s fourth-largest exporter of wood.

Unfortunately, the wood is squandered. The wood industry is a $1billion business in Kentucky. Given the size of the state’s forests, Kentucky’s wood business should churn $3 billion in sales.

Sales are short because little of the resource is processed in Kentucky. Instead, high-wage, large-employment industries of secondary wood processing — furniture-making, for example — thrive in other states. Of the states neighboring Kentucky, only West Virginia lags the commonwealth in the number of secondary wood manufacturing firms.

Kentuckians have believed that because this state grows a bunch of wood, it also ought to have all the industries that make wood into doors, windows, flooring, and furniture. Unfortunately the economy doesn’t work that way. Just because you grow wheat doesn’t mean you bake bread. Or, in an example a bit closer to home, just because you mine coal doesn’t mean you make electricity or steel.

To make matters worse, the state has done next to nothing to help the wood industry develop. Albert Spencer, from Eastern Kentucky University, figured that wood industries received less than one percent of the more than $1 billion in tax incentives the state has ladled out in the last four years.

 

Another Task Force

In 1988, the legislature decided to try again to revive the state’s wood industry. It set aside money for a commission and a study. The results of this effort shouldn’t surprise those familiar with the circular-sailing route of the typical government task force. Everyone argued about who would get the money and nothing was accomplished.

Except . . .

At one meeting, the commission heard about new methods for building a thriving economy. The ideas came from Italy and Denmark, where small firms combined in flexible business networks. They shared jobs, technology, and training. Through networks, the small firms accomplished the scale of big business but kept the flexibility to change that comes with being small.

The presentation “just set me on fire,” remembers Andy Cowart, owner of Cowart and Co., a small wood-manufacturing outfit in Nicholasville. After the meeting, he talked to his competitors about forming a network to compete in larger markets.

When opportunity came, they were ready. In 1990, Cowart and three other members of what had become an informal network won a $2.5 million contract for a development at Disney World, a job none of the firms was large enough to fill alone.

Networking began to make hard money sense. Cowart and 16 other firms formed the Kentucky Wood Manufacturers Network. They asked the state Cabinet for Economic Development for a small grant. The network wanted to hire a technology specialist and a manager to coordinate the group’s joint ventures. It was an arrangement that had proved enormously successful in Europe.

The cabinet approved the scheme in 1991. The office of Governor Wallace Wilkinson wrote a draft news release announcing the grant. And then, nothing. The money never reached the network. Governor Brereton Jones came into office, and the entire project was put aside as the new administration concentrated on building the state’s economy by offering hundreds of millions of dollars in tax incentives to out-of-state firms.

Cowart had heard about the Quicksand facility during one of the task force’s meetings. He visited the plant and, like most who see the spread of $3 million in wood-manufacturing equipment, Cowart was in awe. He realized the original builders of Quicksand were right. It was a place where the state could begin to build a new industry.

It was also a place the University of Kentucky had forgotten. “After Quicksand got buried, the easy answer for accountability from UK was, ‘Well, it’s not supported by industry’; ‘well, it’s obsolete’; ‘well, it’s geographically dislocated,’” Cowart says. “UK had to have some believable reasons why they were sitting on it now.”

To Cowart’s mind, none of these reasons was credible. He and the network set out to dispel the justifications for Quicksand’s failure, reasons that had built up over 30 years in a thick crust.

The group devised a project. Cowart would design a new selection of furniture. Eight members of the network would build the components. The pieces would be assembled at Quicksand, and the resulting cabinet would be displayed at the trade show in Germany.

The university agreed to open Quicksand to the project. It also allowed Cowart to tap into its computer network so that designs could be transmitted from Nicholasville to the shop floor in Breathitt County. Finally, the state put up a small amount to send the cabinet and information about the Kentucky network to the German trade show.

 

Cooperating to Compete

On April 3, it all worked. By the end of the day, the cabinet was complete — and all the reasons why eastern Kentucky couldn’t be the center of a fine-furniture industry had been eliminated.

“The project showed it doesn’t matter where Quicksand is,” Cowart says. “We can kill that argument. At the same time, we can kill the argument that Quicksand has no function unless we put $10 million more into it. It is a functional facility. It can be used if there is a willing spirit to make that happen.”

The wood network demonstrated that and more. It showed that with computer technology, distance no longer prevents advanced manufacturing from flourishing in isolated eastern Kentucky. It showed that cooperation among wood firms can produce an economical product. Cowart figured his firm alone could build the cabinet for $6,000 to $8,000. With each business doing its specialty, the cost dropped by half.

It showed that eastern Kentucky can compete in the high-wage world of advanced wood manufacturing. It proved there is a place in the region where a new industry can be built. It demonstrated that the Kentucky wood industry can compete internationally.

And the world took notice. Cowart says there was some individual interest in the particular line of furniture created at Quicksand, particularly from Middle Eastern buyers. More important, however, Cowart said that German wood manufacturers talked to network representatives about farming out work to Kentucky woodworkers.

“We were promoting the fact that we could build what you want,” Cowart says. “We’re very flexible. You tell us what you want, and that’s what we’ll build. And that really set people off on their ear. We were there to promote a capability and not just a product. And that is something people were fascinated with.”

The response from the state since the April demonstration and the trade show in Germany has been exactly nothing. The wood network’s 1991 proposal still sits in some forgotten drawer in Frankfort. “There’s a lot of talk now,” Cowart says, “but I’m not at all certain that people are willing to make critical commitments on a scale large enough for it to make any kind of a difference. . . . I’m not at all confident that the decisionmakers in state government understand.”

Kentucky continues to hand out tax breaks — $700 million and counting — to a variety of companies with no plan as to how this will help build a new economy. Meanwhile, a way to bring prosperity to eastern Kentucky awaits that “willing spirit.”

 

SIDEBAR

Other Winners For investigative reporting in Division One (circulation over 100,000)

Second Prize to Denise Gamino of the Austin American-Statesman for her definitive and disturbing account of hundreds of disabled and chronically ill children confined to some of the worst nursing homes in Texas.

Third Prize to Dave Parks and Michael Brumas of The Birmingham News for calling attention to hundreds of suffering veterans exposed to toxic chemicals during the Gulf War — and for pressuring federal officials to investigate their diseases.

 

SIDEBAR

A Dream Deferred

More than $3 million in woodworking machinery stands idle nearby as two University of Kentucky employees methodically saw two-foot staves.

The scene is as sad as it is ludicrous. Here in this huge, well-lit room, the state owns one of the most complete woodworking plants in the commonwealth. Three decades ago, this shop was built as the center of a new wood industry in eastern Kentucky. Yet these two men are the only people in sight — and they are doing work that could be accomplished in a basement workshop.

As a result, eastern Kentucky is revisiting its past: Timber is being cut and shipped from the region at modern-day record rates, just as it was cut and shipped in enormous quantities 80 years ago. But the profits from the sale fall mainly outside the region. It’s cut-and-sell time in eastern Kentucky, the quicker the better.

The building at Quicksand was constructed to help eastern Kentucky develop a hardwood-manufacturing industry. Eastern Kentuckians were to be trained in advanced woodworking techniques. The university was to have shown how timber in the region could be managed over the long haul to build a local economy, not clear-cut for a one-time profit.

The Quicksand center, however, stands little used. And the exploitation for short-term gain continues in eastern Kentucky. More than 75 percent of the timber leaves the state without further processing. And that is where the jobs are. Oregon officials figure that sawmills provide three jobs for every million board feet of timber; every other step of woodworking, up to fine-furniture making, provides between 12 and 80 jobs for the same amount of wood.

Kentucky is becoming an expert at missing its chances to build a wood industry. Near the turn of the century, Quicksand was at the center of a short-lived industrial explosion. Men cut timber, built mills, and shipped lumber by river and rail. More than 500 people worked at E.O. Robinson’s timber operation, and between 1908 and 1922, they cut and shipped all the hardwoods on 15,000 acres.

It was an incredible boom. The city of Jackson saw its population jump fivefold in 20 years, to 2,300 in 1911. When the logs were gone, however, so were the people.

Robinson deeded his denuded 15,000 acres to the University of Kentucky, to see whether UK could bring the forests back. Robinson hoped the restored land would serve as a model for eastern Kentucky.

In the early 1960s, Robinson’s hopes met with the stirrings of what was to become the War on Poverty. John Kennedy’s first attempt at rural economic development could be found in the Area Redevelopment Act of 1961. The pet bill of Senator Paul Douglas of Illinois, the act was expected to pump federal money into the distressed regions that were flooding the cities with poor migrants. The purpose of the measure, Douglas said, was to “bring jobs to people, not people to jobs.”

The act dedicated $642,000 to a woodworking facility in Breathitt County. The wood industry had been the subject of great interest among the burgeoning economic development groups that sprang up in eastern Kentucky during the 1950s. By the time Lady Bird Johnson came to Quicksand in October 1963, a little less than a month before she was to become first lady, those hopes had taken physical form.

Today, however, there is no comprehensive program at Quicksand. There is no ongoing demonstration of wood manufacturing, no meaningful improvement in timber management, and no students.

The program died the death of a thousand cuts. Although the classes were successful — students learned their trade and went to work, often out of state — the university slowly nipped away at Quicksand’s budget. In 1983, it stopped offering wood-manufacturing courses. The program is still listed in university bulletins, officials say, but that listing is misleading. Money for the courses has been gone for more than a decade.

There are occasional seminars at the center, but the overall lack of activities at Quicksand has troubled university officials. Forestry department chairman Robert Muller wrote a proposal in 1991 to revitalize Quicksand. Similarly, Quicksand manager Carroll Fackler and forestry professor Don Graves have constantly proposed new programs for the facility. The proposals have all come to nothing.

Instead, there are just a few men cutting staves on equipment meant to build a new and stable industry for eastern Kentucky.