Diversification’s unhappy history: Part I

Some of the state’s most powerful interests have long fought broadening Nevada’s job base

By Steven Miller
  • Wednesday, February 2, 2011

Among the classic fables attributed to the Greek storyteller Aesop is the one about the dog in the manger:

Looking for a soft bed, a dog jumped into the farm oxen's hay-filled manger (or feed-box) and began to nap. When an ox returned from its afternoon work and approached the manger, the dog awoke, jumped up and began growling and snapping at the ox.

After many attempts to approach the manger, the ox at last gave up. He trudged away, muttering, "What a selfish dog! He cannot eat the hay himself, and yet won't allow those who can to do so."  

In many ways, this is the hidden history of Nevada's economic-diversification challenge. Regularly praised in public, the goal of a significantly broader state job base has regularly been done-in, in the shadows, by politically powerful interests. Why? Because they perceive large new employers coming into the state as a threat to their dominance of it.

Twelve years ago, NPRI's magazine, Nevada Journal, spotlighted this stealth opposition in a cover story, "Gambling on Gambling." 

"Nevada, economically, is largely a one-trick pony," began the article. "And today that one trick — gaming — is looking more and more like a perilous base for the state's economy."

The story went on to review an aborted effort by then-governor Bob Miller to merge the state's small Commission on Economic Development (CED) and the much larger Commission on Tourism. Testifying for the legislation in Senate hearings, the then-director of the CED, Tim Carlson, delicately made the point that "what is missing [on Nevada's economic development front] is the total support of the state in relationship to its major industry," tourism.

Repeated questions by the then-chairman of the Senate Finance committee, Bill Raggio, implicitly made a similar point:

Senator Raggio repeated his question regarding the possible objection by the tourism industry to the diversion of marketing funds toward economic development efforts.... The senator said this is exactly his concern, that at some point tourism interests will begin complaining too much money is being expended on the promotion of economic development, to the detriment of tourism.

Sitting beside Carlson at the hearing was former lieutenant governor Bob Cashell. Active for many years in the casino-resort industry, he backed the proposed legislation and "expressed the opinion the consolidation of the two commissions will probably help educate people in the gaming and tourism industry that they need to put more emphasis on economic diversification and development...."

In his view, said Cashell,

... there has been a deficiency in this area, and the tourism industry must understand that for Nevada to be a viable state in the future, its economy must be diversified.... Mr. Cashell said the new commission must be very sensitive to the tourism efforts, but must also be strongly supportive of the economic development and diversification efforts. He maintained the gaming industry has not been sensitive in this regard and that combining the two agencies "will help focus."

When Nevada Journal asked various observers about Cashell's analysis of gaming-industry opinion, his views found widespread support.

"I think that is a very sophisticated and correct view, and enlightened," said University of Nevada, Reno, economics Professor Thomas Cargill. Another source — who requested anonymity — characterized Cashell on the issue as part of an intelligent minority in a gaming industry that's of two minds.

"There is a minority of the gaming industry that understands that it is not in their own best interest to be the only game in town," he said, and which understands "that economic diversification and creating new businesses and new companies in town is actually in their own vested interest, even though that means that they will have to compete for employees."

That is something, he said, they are normally loath to do.

Cargill agreed that the prospect of having to bid for employees has been a big reason why gamers have been reluctant to support diversification. He also noted that a more diversified labor force tends to be a more educated labor force — which means more opportunities to take other jobs.

"See, one of the problems with being in the casino industry is that these people don't really learn a lot of transferable skills," he said. "I mean, they can go from one casino to another, but they can't easily go to a non-gaming environment.

"And so, the more diversified the labor force, the more educated, the more skills it has, it's going to be more demanding. Not just in wages but in working conditions. The casino industry doesn't want that. No employer would."

But, observed Cargill, labor-force issues aren't the whole story for the casinos.

"I think that they would view any diversification as weakening their political position," he said.

After the Nevada Journal cover story was published, NPRI learned of additional evidence related to the professor's last point. We'll explore that in Part II of this series, which will be released next Wednesday, Feb. 9, 2011.

Steven Miller is vice president for policy at the Nevada Policy Research Institute. For more visit http://npri.org.

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