by James Estep May 30, 2020
While the shutdown has been necessary to fight against an escalating outbreak of the COVID-19 virus, it has been completely surreal. On several occasions, I’ve looked around in disbelief that this was really happening.
I’ve also been wondering what comes after we get past this or even what it means to “get past this.” I think the governor and his team have done a great job of keeping West Virginians safe, but I don’t envy the difficult decisions they have to make to get our economy going again.
On a positive note, the shutdown really hasn’t negatively impacted the technology or knowledge sector that much. “Knowledge work” has always been “location independent.” So, the knowledge sector hardly missed a beat working “remotely.”
In fact, thanks to advancements in cloud-based technologies, virtual collaboration tools and the expansion of broadband access, many companies are reporting increases in productivity. That’s not really a surprise. Increasing productivity has always been the purpose of these technologies. However, even in most knowledge-sector companies, they weren’t fully implemented. The reason was mostly cultural. However, the brute force of the shutdown pushed cultural inhibitors aside and out of necessity facilitated institutional adoption across virtually all sectors.
Interestingly, I’ve heard from several businesses from various sectors that have not only adapted quickly but have fully embraced these new technologies for the future. I anticipate that this experience, albeit forced, is going to be a catalyst for a fascinating transformation of business processes.
I should note that there are challenges to be addressed, specifically cybersecurity and the availability of broadband in rural areas, but it will be a transformational time.
My hopes are that West Virginia can take advantage of this transformational time to help diversify its economy. There truly is an incredible opportunity ahead of us. However, we must organize and execute to realize the potential.
Moreover, we must make sure that a stable economic basis exists in West Virginia post-pandemic to build upon. The viability of that economic basis is one of my biggest concerns.
Based upon conversations I’ve had with Governor Justice, I’m confident that this is and will be a top priority, but it will be a challenge, nonetheless.
I’m sure every governor and mayor in the United States has this concern, but West Virginia’s economy was uniquely precarious before the pandemic. Moreover, I believe the shutdown has undermined the work Governor Justice and President Trump have done to get West Virginia’s economy back on track.
For example, a couple of weeks ago a National Public Radio (NPR) article noted that, “coal demand this year is down between 35 and 40% from last year.” Currently, natural gas pipeline construction is held up in the courts slowing whatever positive impact this industry will have on the West Virginia economy.
If pipeline construction does continue soon, there is still uncertainty about what impact the dramatic drop in oil prices will have on the closely related natural gas sector.
Ultimately, there is uncertainty about what the sustained contribution of the natural gas industry will be to the state economy beyond severance tax revenues.
Fortunately, the operations of the state government should be stable for the next year or so thanks to the $1.2 billion provided by the federal government. Governor Justice is confident that these funds will be available to address the enormous current fiscal year budget shortfall caused by the shutdown.
It will likely be needed for the next fiscal year as well. However, I’m not confident it will be able to mitigate the almost certain damage the shutdown will have on the state’s fundamental economic basis.
Hundreds of businesses are shutting down despite federal stimulus support. This will not be helpful in reversing the historic unemployment the nation is experiencing.
This is a very concerning position for the state and nation as we emerge from the shutdown, but it doesn’t have to be catastrophic.
In fact, it can be an opportunity for West Virginia. To avoid catastrophe and make the crisis an opportunity, there must be a targeted state-federal partnership beyond the $1.2 billion to ensure West Virginia has a stable economic basis in the next two to three years to build upon.
This is in no way a “bail-out” because West Virginia, due to no fault of its own, has been damaged by the global and rapid decline in the use of coal.
That decline has, in part, been artificially accelerated by federal government policy in past years. In addition, federal participation is warranted considering a collapse would not only be devastating to West Virginia, but the entire Appalachian region.
The burden to support the aftermath of the collapse would fall upon the federal government, driving up debt and adding more pressure to federal social programs.