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Put Economic Development over Education and Culture, and Creative Class Leaves

...not that South Dakota Republicans will mind....

Nathan Johnson has a read-worthy article in Saturday's Yankton paper on brain drain, college grads in rural America, and rural economic development. Looking at data from the Center for Rural Strategies, Johnson finds that his Yankton neighbors include fewer college grads than the national average but more than the South Dakota average.

When Johnson asks Yankton economic development chief Mike Dellinger about strategies for retaining and attracting college grads, Dellinger kisses local grads goodbye and puts all of Yankton's eggs in the attraction basket:

I have always been of the perspective that we should expect our youth to fly the nest and gain life experience.... I am more interested in attracting talented, skilled workers and families to meet current need. Those who left, if willing, may return someday, but we need experience now. There is nothing better for attracting and retaining talent than creating an environment in which their prospective employers prosper and thrive.

...I believe that there are opportunities and that there is room for them to make opportunities for themselves.... Yankton has never shied away from an individual that strives to make something happen with their own talent and hard work, and our creative class continues to make gains in creating the environment in which the individual and entrepreneur can succeed [Mike Dellinger, quoted by Nathan Johnson, "Grad Rate Gradually Rising," Yankton Press & Dakotan, August 18, 2012].

Dellinger appears to tangle himself in a mild contradiction. He mentions the "creative class" and the importance of making things happen by one's own talent and effort. Yet he appears to prioritize creating a business environment for "prospective employers" to hire those people.

Maybe members of the "creative class" (my Yankton friend LK will likely go ape on this topic) aren't interested in moving to Yankton just because there are folks who will hire them. Maybe they are interested in moving to a community that clearly values education (Yankton is sending some bad signals on that count), that offers lots of opportunities for lively culture, recreation, and conversation. Send those signals to the creative class, and they'll perceive not just good quality of life for themselves in their off hours, but good market for the work they want to do working for themselves in their "on" hours.

But maybe the last thing South Dakota Republicans (hey, to what party does Mr. Dellinger belong?) want is to attract that creative class. Maybe Mr. Dellinger's focus on attracting employers first is a kissing cousin of the cultural bias against intellect that Dr. Newquist sees driving young Democrats away from South Dakota:

Students of talent and ambition found that the social and political climate in South Dakota discouraged intellectual work and lifestyles. Not until recent years did the regents acknowledge that fact and attempt to take measures for higher education that would be conducive to intellectual work. The conversion of the Homestake Goldmine into the Sanford Underground Laboratory was catalytic in the attempt to change the state's reputation for intellectual work and research.

Intellectual work thrives in a liberal climate, liberal in the sense that it is open to diversity, exploration, and innovation.

The state struggles to provide opportunities for the educated and ambitious. They generally trend toward Democratic political attitudes because of its support for equality in civil rights and educational opportunities which allow people to explore and choose lifestyles that the more staid citizenry is upset by. So, the outmigration of the young and talented continues [David Newquist, "Where Did All the Democrats Go?" Northern Valley Beacon, updated August 18, 2012].

Dr. Newquist suggests that even when South Dakota does lean toward investing in education and intellect, its business-über-alles mindset tangles things up. He cites the Homestake Lab, where he says the state's focus on the project as economic development has turned off "the National Science Foundation and all the scientists who had signed on in support of the original plans."

Maybe the Board of Regents is committing a similar error. Our Regents want to ask the Legislature to invest a million dollars in expanding research staff at South Dakota State University's Agriculture Experiment Station. It's not enough that the new researchers could do some really important science with practical benefits for farmers, ranchers, and society in general. The big sticking point the Regents see is the need to prove that the million-dollar investment will produce significantly more than a million-dollar return in grants and contracts. The Dean has to make that ROI point because the Regents have to ask for that money from the Legislature. The Legislature is controlled by Republicans. South Dakota Republicans have a hard time seeing science, education, and intellect as anything but a means to the end of business.

Life is short. The creative class doesn't have time to wrestle with such instrumentalist economic development attitudes. When you tell them, as both Mr. Dellinger and the state do, that immediate economic needs come first, you signal that their intellect and creativity may be tolerated but not really valued. In other words, you tell them, "Move elsewhere."


  1. Justin 2012.08.20

    In a way, I agree with Dellinger, but not in the way he is thinking.

    As one who has gone through the Ivy League/Wall Street path, there are exactly three things that have caused me to return and stay for the time being (in order):

    1. My family is here.
    2. It is a friendly environment for starting a business.
    3. Low cost of living.

    I have never sought a job here, as the jobs SD has to offer simply don't compare on an economic basis to what you can find on the coasts, Minneapolis, Chicago, Denver or even Omaha.

    The one notable exception is the high wages offered in our medical community. Or, I suppose, if you inherit a business or a mass of farm land (But that group is hardly incentivized to maximize their education).

    The riddle of how to attract skilled labor is a problem that I don't have any solutions for. There are myriad problems including low wages, lack of cultural attractions, regressive social attitude, and perception of hostility toward education. The lack of a top flight research university is also a big negative.

    The fact that the "American Dream" of a Tom Brokaw or a fictional Jay Gatsby (from ND, not SD) pulling his or her self up by the bootstraps and achieving great wealth and prosperity by moving to New York or California is bound to draw the most motivated youth out of the state, and that is just as unfortunate for SD as it is for MN, NE, IA or any other state.

    If the only people we attract to stay home are entrepreneurs, we have challenges as well. There are several issues working against entrepreneurs in SD including:
    A. Low unemployment
    B. An greatly increasing cost of living (as a state we are now 26th ranked for cost of living, a far cry from the not too distant past when Sioux Falls was considered the lowest cost small city to live in, driven in large part by medical costs and the recent thriving of the farm economy)
    C. Lack of skilled labor
    D. (Getting a little technical here) Antiquated Reg D legislation that technically only allows SD private companies to raise private funds from SD investors. I guess this could more broadly be described as lack of access to capital, which encompasses a bigger problem than the Reg D legislation.
    E. Despite the trends, we are a tiny economy on a relative basis.

    If anybody has the answers to our problems, I will vote for them for Governor, Senator, Dog Catcher or whatever they run for. Instead I see no inspiration from our leaders, rather arguments of who is the most beholden to an abstract party platform and the special interests that fund the "solid" majority's campaigns. Our Governor's big solution has been to throw huge amounts of money at outside interests in exchange for temporary construction jobs, which is hardly inspiring.

  2. Justin 2012.08.20

    Upon reading my comment again, I feel I didn't explain my opening comment sufficiently.

    I believe the primary motivation for those who have left the state to return has historically been entrepreneurial in nature. There is nothing else, other than perceived quality of life, inspiring anybody to return to SD. The wages Dellinger hopes to offer aren't in any way attractive and the cost of living has become much less of an attraction. Furthermore, my interest in staying here is almost completely entrepreneurial in nature, and my perception of the available opportunities has become increasingly negative.

  3. larry kurtz 2012.08.20

    Catch 22: leave tuition low and the state attracts the lowest common denominator. Jack up the rates and students will leave the state as an even more vast cultural wasteland.

    Rewild the West.

  4. larry kurtz 2012.08.20

    South Dakota: the illegitimate result of legitimate rape.

  5. Michael Black 2012.08.20

    We need to focus on the retention of our children. Locally, DSU should become a Madison student's FIRST choice. We need to invite DSU students to become part of the fabric of the community so they will stay on after graduation. We then can attract higher paying jobs to Madison because of the talented workforce.

    Cost in additional dollars: ZERO!

    All we need to do is to re-target some marketing efforts and personally welcome DSU students to come shop in our stores, eat in our restaurants, play at our lakes and parks and worship in our churches.

  6. larry kurtz 2012.08.20

    Mr. Black: expect to begin photographing more minority students and far fewer white kids.

  7. Troy Jones 2012.08.20

    Justin makes a great point. The Economic Development Director is referring to the need for primary employers and primary jobs. These jobs create wealth (economic term, not talking about rich people) in economic area (ie Yankton). In South Dakota, the principle sources of "primary" economic activity is agriculture, manufacturing, tourism and the bank card industry. This economic activity creates demand for secondary employers/jobs who support primary employers like fertilizer companies for the farmer. Secondary employers create demand for tertiary employers like retailers or the medical community (economic activity to support the primary and secondary activity). And, a sound diversified primary, secondary, tertiary activity creates demand (and capacity to affort) quality of life activity that supports the "creative class."

    There is a saying in business it all starts with a sale, without a sale nothing else matters. So it is in economic activity. No primary economic activity and there is only wealth depletion ultimately diminishing the capacity to support secondary, tertiary or quality of life activity.

    This entire focus on primary economic activity is because it has a multiplying effect (spins off other economic activity). On the other hand, retail/quality of life economic activity doesn't multiply anything. It is an allocation of the wealth created with the primary activity. For instance, I can choose to spend my income (static amount and only increases with more wealth generating economic activty) on Taco John's, Minerva's, or going to a concert.

    We can "focus" on retaining our people until we are blue in our face. But if there is insufficient primary economic activity occurring, there will be no opportunities for them. Increase the primary economic activity and opportunities will increase giving an outlet for our "focus" on retaining people.

  8. larry kurtz 2012.08.20

    Every white kid that I have interviewed in the last twenty years can't wait to flee South Dakota inviting minorities to fill the vacancies in the trades: that might be the only way to turn the state back into a Democratic stronghold.

    The service sector in Deadwood is increasingly non-white: the SEIU enjoys inroads.

  9. Michael Black 2012.08.20

    Larry, I was tortured because of my last name all through school. People are people. I have little tolerance for the intolerant.
    If you look back through history, you'll see wave after wave of immigrants into our country. They all contribute to our wide diversity.

  10. larry kurtz 2012.08.20

    Michael: I expect the US to continue thriving as a nation: South Dakota? Not so much in the short term: turning DSU, NSU, and BHSU into community colleges is long overdue.

  11. caheidelberger Post author | 2012.08.20

    Michael, to make DSU every Madison student's first choice, you'll need to restore DSU to its pre-Janklow status as a liberal arts college.

  12. caheidelberger Post author | 2012.08.20

    Justin, clarify for me your Reg D complaint: you're saying that the only investors SD private companies can get private funds from are SD investors, right? If I decide to expand the blog into a media empire, I can't ask friends in Wyoming or Minnesota to invest? What happens to me if I and non-SD investors violate Reg D? What is the motivation for such a regulation?

  13. Troy Jones 2012.08.20


    I'll let Justin explain it and I'm sure I'll agree with him.

    In some ways this is an antiquated consumer/investor protection from the days before the expansion of the ability to exchange electronic information and monitor scam artists. In the old days, the only way to protect Grandma was local monitoring of securities sales. Now, there are additional means to protect Grandma and find out who are reputable with regard to securities sales. (there is still a bit of a problem in that Grandma might not use a computer).

    This is part of the wisdom in the Obamacare exchanges*. We need a similar process with regard to small issue securities so you can sell securities to a friend in Wyoming or buy a security from Wyoming.

    We need a return to Glass-Steagal (which Ryan agrees with. Romney isn't there at least yet).

    Abolish Dodd-Frank and pull just a few components that do have merit.

    Abolish Sarbanes-Oxley which has done nothing to stop crooks but only puts excessive costs and regulation on the honest.

    And have a total rethink of insurance and securities with regard to the division of enforcement action and regulation between the states and feds (which I think the perfect solution is a robust (vs. the timid under Obamacare) exchanges for both insurance and securities. It respects the perogatives of state's to regulate what is sold in their state's but gives flexibility and opportunity to effieciently access products from other states.

    * I don't want to have a misinterpretation of this statement. Obamacare's exchanges are such skeletons of what is needed I don't think they will do what the objective of the exchanges is.

  14. Justin 2012.08.20

    I am experienced as a former securities dealer and not as a securities lawyer, but by my understanding Troy is correct that the intent was probably to protect mom and pop investors from outside snake oil salesmen. Each state has its own set of protections for their investors. But there is actually nothing that would keep you from investing in an out of state business so if that was the original intent, it doesn't seem to protect residents, it seems like a protection for non-residents which is bizzare.

    The interpretation I have gotten from counsel is that the application of the law hasn't been taken literally in recent years and if your investors "do business in SD" you are OK. As I understand it that means your investors have to come to at least one board meeting a year in state, and apparently they are auditing and enforcing this rule more strictly for some reason. So your neighbors in Wyoming and Montana would be easier to convince to do this than, say Californians and furriners. Chances are you will never be audited, but if for some reason one of your investors decides to sue you, it could be a path for them to say your Reg D offering was illegal so it is annoying.

    From my days of doing true public offerings and 144a offerings I don't recall the so called "blue sky" laws being unusual for SD, but it was never a stop on our roadshows. Needless to say I was surprised when the first lawyer I discussed it with (not a securities lawyer) read the law literally and told me I couldn't have non-resident investors.

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