Some people would have you believe that El Paso’s apogee was 1950, and we’ve been in steady decline ever since.
Here’s Woody Hunt, in an interview with ElPasoInc.com, talking about the effect of corruption on El Paso’s economy:
Q. What prompted you to start researching corruption?
My interest is really driven by economic development. In 1950, El Paso’s median family income was 14 percent higher than the state and was on par with the nation.
By 2000 the medium family income was 30 percent below the state and 35 percent below the country.
That long slide in our income indicated to me that we were not economically competitive and we are becoming less so.
So I began to ask, what can we do differently, first to stop the slide in income, then to turn things around and close the gap?
Mr. Hunt would have you believe that corruption crippled El Paso’s economy since 1950, but 1950s the represented a technological change, not just in El Paso but the entire United States .
Before 1950, El Paso’s success resulted from it’s role as a railroad hub.
From Out of the Desert, an El Paso history by Owen White, published in 1923:
In the beginning El Paso occupied a position on the frontier of the United States, whereas today it occupies a commanding situation as the central point within a circular frontier which is all its own. Stretching away from El Paso in every direction, north, east, south and west, for a distance of seven hundred miles, there is a vast territory over which it is El Paso’s logical destiny to dominate.
El Paso enjoyed its status as the Queen of the Desert because it was the hub for intersecting railway lines, east to west and north to south.
Railroads began to lose their unique value after World War II.
From Wikipedia:
After Dwight D. Eisenhower became president in 1953, his administration developed a proposal for an interstate highway system, eventually resulting in the enactment of the Federal-Aid Highway Act of 1956.
Thus began El Paso’s loss of status as a logistical hub. Over the following years, as the Interstate Highway System developed and improved, trucks supplanted rail as the principal means of transportation for goods and raw materials.
Ranchers from Abilene no longer had to deliver cattle to the railroads in El Paso for transport to meat packers and grocers throughout the United States. Feed lots no longer had to be located on railway lines. All they needed was a highway.
Of course, corruption has stifled El Paso’s economic growth, but not in all the ways that Mr. Hunt claims:
Q. How does reducing corruption help stop that slide?
Closing the income gap requires a multi-prong strategy, and trying to lower the levels of corruption is a part of it.
Scholarly work has shown that the higher the level of corruption the lower the growth rate, the lower the investment, the lower the gross city product. There is a very strong correlation there.
Q. How does corruption impact economic development?
If the procurement process is not driven by qualitative analysis of who is offering the most for the least, and it is based on relationships instead, then two things happen.
One, you reduce the level of competition. Those who are unwilling to compete on a relationship basis decide they are going to go somewhere else because, no matter how good they are, they are not going to be successful.
So the government entity is going to pay more for the product, which means the tax rates are going to be higher.
Two, where do you get high-skill, high-paying jobs? You find them in the headquarters of businesses that have become regionally, nationally and globally competitive.
And, if you want those kind of firms headquartered here, you have to have an environment that helps build them.
Becoming regionally, nationally and internationally competitive starts with being competitive in your own local market, which means you are producing the most for the best price.
If you have an environment where the procurement process is based on relationships, then the firms organize that way and, while they may have the ability to gain business within the local market, their ability to find business outside the local market is going to be impaired.
You also have a misallocation of resources. Corruption will cause government to spend in ways it would otherwise not.
In other words, they will find areas where the potential for corruption is higher, so they will buy goods and services that might have low value to the taxpayers but mean a transfer of compensation for them.
Those last two paragraphs are the real nut of the problem.
It’s the opportunity costs that cripple an economy. Money allocated to pet projects for the benefit of a few well-connected individuals is money that isn’t spent for the benefit of the community.
In El Paso, local governments have been captured by private interests. These private interests suck up the resources that could be better spent for the benefit of the community.
You don’t have to look very far to see it happening here. Local government has greatly improved since the latest iteration of City Council yanked the reins from the hands of Tommy Gonzalez. Tommy Gonzalez’ main concern was the financial well-being of city government. He wasn’t really interested in the well-being of the citizens. But we’re still feeling the effects of the self interests of the entitled class.
There’s another election coming up in November, with at least one member of the entitled class running for office. Let’s not keep repeating history.
Fascinating thesis, Rich. I have never heard anyone connect El Paso’s decline to the declining importance of railroads. It sounds very plausible. And yet – something is still amiss. Major coastal cities like New York, Boston, etc developed and grew because of their proximity to shipping routes. And yet they have all built thriving industries unrelated to shipping and logistics. El Paso has failed to do so. Perhaps this is where corruption plays a role?
The primary indicator of urban affluence is education, easily measured by the percent of the population holding a four-year degree or better, currently 27% here versus 34% nationally. Contrast Austin at 56%, Seattle at 66%. When I arrived here in 1996 it was about 15%.
Our median household income is $55,710 versus Austin $86,556 and Seattle $116, 068. Income follows education. It did not help that the city’s leadership promoted El Paso in the 70s as a low wage mecca to draw business here. They succeeded. You don’t need corruption to explain decline when stupid will do.
So what do you prescribe?
I’ve got a Photoshop and a printer. I’ll just make everyone a degree.
Problem solved.
Obviously El Paso’s current economic situation is the result of the confluence of several factors. As you alluded, ocean shipping routes are not as easily displaced as railroads. But it takes a base for economic development to flourish, and trucking ripped out our logistical advantage by the roots.
As I’ve said before (somewhere in the 3,626 posts compiled on this blog since 2012), Phoenix flourished because, starting in the 1950s, they courted the aerospace industry, and El Paso sought to exploit our abundant supply of cheap labor.
When you have a growing economic base, some of the players try to get themselves a bigger piece of the pie. But when the economic base is fairly stagnant, re-slicing the pie is a zero sum game. And that’s pretty much the situation that El Paso finds itself in now.
Phoenix is out of water. No water, no growth. They actually want to build a desal plant on the Cortez Sea at Puerto Penasco, something my Mexican colleagues are calling “water colonialism.” And that does not take into account the disastrous environmental effects of dumping the brine into the fish spawning areas of the Sea.
I’m okay with zero population growth. What I’m not okay with is the self-entitled class re-slicing the pie to benefit themselves and calling it economic development.
What I mean to say is that correlation is not causation.