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December 18, 2014

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Coolican optimistic about Vegas’ future — or at least as optimistic as he ever is

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ASSOCIATED PRESS FILE

Three unemployed men start a fire for cooking in a vacant New York City lot, where they lived when not searching for work during the Great Depression in 1932.

J. Patrick Coolican

J. Patrick Coolican

We think of the Great Depression era as a time of hunger and darkness, when economic activity stopped and our grandparents learned to stuff money in the mattress. The reality is far more complex, suggesting that, despite the misery, important developments in government and the private sector during the 1930s made possible the long period of prosperity that followed.

This is hugely relevant to Las Vegas, as we can either use our hard times to set up the next period of growth and prosperity or sit around waiting for the good ol’ days to return, even though they never will.

As Tom Nicholas of the Harvard Business School noted in the McKinsey Quarterly business journal, many companies halted research and development spending in the 1930s, waiting out the Depression, as reflected by a sharp decrease in patent applications. Other companies pressed on. In 1930, DuPont created neoprene, aka synthetic rubber. Nicholas says DuPont’s sales fell roughly 15 percent that year, but the company increased R&D spending to commercialize the discovery. Same with nylon.

Government, meanwhile, was busy creating a regulatory structure that built a safer, more stable banking system and reined in the excesses of Wall Street. (This was in place until we dismantled it beginning in the 1980s, with disastrous results.) Government also recognized that brain-dead thinking on economics was an important contributing cause of the Depression and put in place programs such as Social Security and new laws strengthening the rights of workers that created the middle class.

Here in Nevada, as historian Michael Green notes, we legalized gambling and quickie divorces in the 1930s, welcomed federal dollars at Hoover Dam and sold our low tax burden to bring new business, paving the way for a period of rapid growth after World War II.

Likewise, Nevada’s last fallow period, from the 1970s to the opening of the Mirage in 1989, was “indeed a warm-up period for the later boom,” Green notes.

“Steve Wynn built up the Golden Nugget but went to Atlantic City — in a sense, to prepare for what he would do here. Kirk Kerkorian had to rebuild the MGM Grand after the fire, and building that hotel twice was a kind of preparation for what he would do in the 1990s. Building up UNLV and the community college (it opened here in 1971) certainly went on during the 1970s and 1980s,” he added.

Most important, the mob was cleared out of town, which legitimized Vegas and the gaming industry.

So, in a decade, will we look back at this current dark period and credit our smart moves with bringing about a renaissance?

I lean optimistic. Major casino companies have invested overseas and renovated properties here rather than letting them deteriorate. Cosmopolitan, Caesars Entertainment’s Project Linq and the development of smaller niche properties have diversified the product offering.

Then there’s dumb luck. We already were working on the Smith Center for the Performing Arts and Hoover Dam Bypass when the crash came. All the overbuilding means our real estate is a bargain. Those are crucial assets.

New Las Vegas City Hall

Mayor Carolyn Goodman, from right, stands with Thomas Perrigo, deputy director of administrative services for City Hall's sustainability office, Eric Louttit, vice president of real estate services for Forest City, Terry Murphy, a consultant for Forest City, and Michael Crowe with JMA Architecture Studios, during a tour of the new Las Vegas City Hall on Thursday, Feb. 16, 2012. Launch slideshow »

Some decisions seem smart, though we can’t be sure yet. The new city hall may be unnecessary, and the transaction putting Zappos in the old city hall seems like corporate welfare, but both moves could help revive downtown.

A focus on public worker health care and pension liabilities at the Legislature could prevent the kind of fiscal Armageddon that currently plagues California, though that work is just beginning.

Other decisions, like hiring Dwight Jones as superintendent of the Clark County School District, will hopefully be unqualified successes.

Finally, other recession-era decisions have been head scratchers, like slashing funding for higher education. The new reality is that we need innovators, which usually means people who are educated. And we haven’t reformed our backward tax code, which is regressive and too dependent on tourism.

Again, I lean optimistic about what’s happening because of a widespread understanding that the old way of doing things — build resorts, build houses — won’t cut it. Steve Hill, who is Gov. Brian Sandoval’s director of economic development but made his mark with a cement company, said as much recently. If a guy from the cement industry has had this epiphany, we’re on the right track.

Gregory Brown, UNLV history professor and president of the Nevada Faculty Alliance, points out that the Legislature made changes so that new hires won't be eligible for retiree health benefits from now on. It's also worth noting that higher education workers aren't in Public Employee Retirement System, but, rather, have a defined contribution plan like much of the private sector, albeit with a very healthy employer match. Finally, public workers point to restricted coverage and increasing premiums and question whether they really have good health care at all. Brown's right to point out my somewhat lazy formulation, though California should still serve as a cautionary tale.

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  1. "Nicholas says DuPont's sales fell roughly 15 percent that year, but the company increased R&D spending to commercialize the discovery. Same with nylon."

    Coolican -- another good article from you. Some research might show DuPont was also a driving force behind the criminalization of hemp along with marijuana. That in itself is a study in long term lawmaking stupidity.

    "The best hemp and the best tobacco grow on the same kind of soil." -- Thomas Jefferson (1743-1826)

  2. I have to disagree with the conclusion you have reached here J. Patrick......it was not forward thinking or government programs that brought us out of our economic doldrums, it was the US War machine. Manufacturing to support the war effort, what we did best, designed and built things, in factories on assembly lines. Men were overseas fighting, women were working in the factories. THAT is what put people back to work initially, THEN came the other programs riding the wave of prosperity.

  3. But, what about having enough water in 10 years?

  4. "Water" comments are appropriate to future planning.

    Start saving your pennies! Importing desalinized water might be one solution. Here are some other interesting options.

    http://science.howstuffworks.com/environ...

    We have a lot of space to manufacture solar energy and water, at a cost.

  5. Praising Social InSecurity as an innovation is just silly! It is nothing but a welfare program, designed, as are all of them, to create dependency. The so-called "trust fund" lasted about three years, then they simply spent the money as it came in. How is it right that somebody be taxed to pay for those currently retired? That is just theft using a middle-man. It is also a cruel trick, causing many people not to save enough, thinking that SS will take care of them.

    People need to save for themselves, just as they did all throughout history before Social InSecurity.

    It is also noteworthy that blacks (I'm not) have shorter lifespans, so pay more and get less. The SS tax harms those at the bottom of the economic scale the most, as they are deprived of 12.4% of the money an employer has available to pay them.