Archives: Reg Murphy Pubs

The entrepreneurial spirit of college students

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

Spring semester is coming to a close at College of Coastal Georgia, signaling the end of another academic year. This is also a time to reflect on what happened during the recent academic season. The most important thing for me was the reintroduction of MGMT 4100 — Entrepreneurship — to the regular schedule of classes.

For 42 years — yes, 42 — I taught all sorts of economics courses. All were fun. Economists think in a very unique way and it was a special challenge in those courses to see if I could get students to think in that way too.

But now it is time to do something different, and something that will make a difference. So, entrepreneurship is it. The interesting thing is that while economists teach about the importance of entrepreneurs to our market economy, economists have done little research into what entrepreneurs actually do. So, what was I to teach?

The first thing I wanted to get across was that entrepreneurship is not small business management. Clearly, entrepreneurs end up managing businesses or nonprofits. However, management is second. The entrepreneurial act is one of creativity, not management. What need or problem will I fill or solve and what will I create to fill or answer it? This is the creative heart of entrepreneur.

In addition to problem solving, virtually all entrepreneurs have personal stories as to why they have ended up being entrepreneurial. I refer you to the video testimonies of our local entrepreneurs at www.1millioncups.com/Brunswick. All are wonderful to hear.

So, how was the course designed? How was I going to teach entrepreneurship? I decided that I would teach entrepreneurship by simply treating students how entrepreneurs are treated and judged. If you think about it for a moment, strangers — customers, judge an entrepreneur every day. If they don’t solve a customer’s problem they will not be successful. An entrepreneur may think that they have found a problem that needs solving, but if it is not a problem for a stranger then the entrepreneur will not be successful.

So, students created self-selected three-to-four person teams. Each team then had to identify a problem that strangers needed solving. They did this by canvasing strangers. Do you have this problem? They actually talked to people.

Next, they had to create a solution. However, strangers needed to tell the students that the solution they created was in fact a solution to the stranger’s problem. Again, they needed to canvass strangers.

Each team had a mentor from the local community and each week a local entrepreneur would come to class to tell their personal story.

Once they had a problem and a solution the students created six-minute presentations for judges who themselves were strangers to the class.

The course grade was based on a total of 100 points. Over the 16-week semester, students accumulated 50 points toward their grade by doing things that I would simply record in my grading spreadsheet. The remaining 50 points were determined by their end-of-the-term 6-minute presentations to the judges/strangers at the Ritz Theater. So, strangers determined student grades. No book, no tests, few lectures, and minimal requirements. All they had to do was to satisfy strangers — all they had to do was to act like an entrepreneur.

What problems did the teams address? Boredom of college students, funding for third-world water projects, cleaning the environment, convenient mobile dog grooming, finding parking places, promoting small local businesses and how to compete with the College’s bookstore.

What were their solutions? A hookah bar, video arcade, social media videos, up-charging on water bills, a well-equipped van that was used on weekends, sensors and smartphone applications in parking lots and a bamboo toothbrush (that is now sold on Amazon under Nabi Effect).

We are off to a good start. Hopefully, new entrepreneurs are on the way. At the very least, there is now a greater appreciation of the power of strangers and the creativity of entrepreneurs.

  • Reg Murphy Center
  • Skip Mounts

Collaboration does and can exist in the federal bureacracy

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

Efficiency and collaboration are not words that most people associate with the federal bureaucracy. Many people tend to think about bureaucratic systems in the United States as obstructionist organizations designed to create roadblocks through red tape and bulky organizational structures. According to a 2015 Pew research study, only 32 percent of respondents indicated that they had a favorable view of the Federal Government versus 56 percent and 65 percent favorable ratings of state and local governments respectively.

Yet, there are interesting, effective, and truly collaborative programs that exist within this system, of which most of us are unaware. I had the pleasure of interacting with two such programs this semester through a service learning project in my course, “Managing State and Local Governments,” at College of Coastal Georgia.

The idea for this service learning class (a course designed to meet community needs while promoting student civic learning, academic enhancement and personal growth) developed from an email inquiry from the College/Underserved Community Partnership Program (CUPP) Program Manager and Senior Advisor to the EPA Regional Administrator, Michael Burns.

Michael explained that the CUPP program is designed to connect underserved communities (e.g. Brunswick) with colleges and universities (e.g. College of Coastal Georgia) to deliver technical assistance at no cost. In short, the program makes connections between the community and students to provide information, ideas and assistance. Not only does the community benefit from this assistance, but students have a unique opportunity to apply their academic knowledge to a practical issue.

Through the CUPP program, my students were able to interact directly with regional and federal organizations to gather information about the demographic, economic, and environmental status of McIntosh County, Glynn County and the City of Brunswick. They made connections with Camilla Warren from the EPA Region 4, Lupita McClenning and Allen Burns from the Regional Coastal ommission, and Gloria Huang from the Federal Economic Development Administration (EDA). These connections and the knowledge gained from these individuals are invaluable assets to budding civic leaders looking for career paths and networking opportunities.

We also learned through Ms. Huang at the EDA that as recently as 2016, her organization launched an economic development integration program. This program was formulated to create a bridge between federal agencies so that communities and nonprofits do not have to suffer from the “silo-syndrome” that is so common across agencies. The integration specialists throughout the U.S. provide grant seekers and community stakeholders with information on assistance available from all federal resources for economic development. They are attempting to create a “one-stop-shop” that will streamline the economic development process and generate high-impact projects in communities of need.

While the federal system is by no means perfect either structurally or administratively, programs like CUPP and the EDA integration specialists are helping to address a longtime issue within the federal bureaucracy: connection. The students in this class have learned that economic development issues are multifaceted issues that require collaboration among a variety of stakeholders. It is promising to see that agencies within the federal system are responding by creating bridges rather than silos.

  • Heather Farley
  • Reg Murphy Center

Democracy isn’t always ugly

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Last Wednesday I had a refreshing and uplifting experience. I attended a Brunswick City Commission meeting.

It was the first city commission meeting I’ve attended. In fact, it was the first political or governmental meeting of any sort that I’ve attended.

Politics makes me uncomfortable. Religion, too. Something about people boldly and aggressively proclaiming things that are unverifiable or for which there is little or no evidence rubs me the wrong way. Could be my problem, though. It often is.

I attended the city commission meeting to learn more about the conference center project in downtown Brunswick.

I have developed quite a fondness for downtown Brunswick. Downtown is quaint, pretty and unique. Friendly, too. It has the potential to be spectacular. One day it will realize its potential. Unless we mess up.

The conference center project scares me for a number of reasons. So I wanted more information. Hence, the city commission meeting.

Upon entering the commission meeting room in Old City Hall, I almost forgot why I was there. The room is simple Southern elegance. It’s old. The wood floors are beautifully worn and weathered. As are the wood benches. The ceiling must be twenty feet high. The windows appear narrow because they’re so tall. The walls are stately yet warm.

Almost everything in the meeting room creaks. The floor creaks. The benches creak. Most of the people in the room were about my age, so they creak.

I could sit in a room like that for hours. And did. I got there a little before the meeting started at 6 p.m and left at 9 p.m. The meeting wasn’t over, but I had told my wife I’d be home by 7:30 and so was already in trouble.

My hunch is that last Wednesday’s city commission meeting was quite routine. I’m sure in a couple of weeks I’ll have forgotten most of the issues that were discussed.

What I will never forget is the civility, respectfulness and good manners with which the mayor, city commissioners, other city officials and citizens in attendance addressed each other.

Politics has a way of bringing out the self-righteous blowhard in people. I am by no means immune. But I recognize that quickness to rant and quickness to denigrate are inclinations to subdue and correct, not indulge.

Civility, respectfulness and good manners are not masks that hide who we really are. They are not signs of insincerity or mendacity. They are signs of a mature person. They are signs of wisdom.

In particular, the wisdom is that it is much easier to destroy something good than build something good.

Civility, respectfulness and good manners ruled last Wednesday’s city commission meeting. There were spirited disagreements, to be sure — it’s democracy, after all. The Glynn Avenue zoning proposal is especially contentious.

But the city officials, as well as the citizens who object to the zoning proposal, never wavered in civility, respectfulness and good manners.

During that long city commission meeting, I thought of Alexis de Tocqueville’s “Democracy in America,” one of the greatest books on America ever written. Tocqueville argued that the strength of American democracy is found in towns and town government. For, he wrote, “the strength of free peoples resides in the local community.”

Democracy is always loud, usually rancorous and often ugly. But when its participants are civil and respectful, it’s nice to behold.

Well done, mayor, city commissioners and city officials and citizens in attendance. Tocqueville would be pleased. Me, too.

  • Don Mathews
  • Reg Murphy Center

Why the trade deficit isn’t bad

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Listening to certain politicians and their advisors, you might think that trade deficits are very bad for an economy.

You might also think that trade deficits are the consequence of bad trade deals, unfair trade practices or countries just not being nice to us.

But if you decided not to think such things, good for you. Because they’re wrong.

How international trade works is widely misunderstood. Most people who get international trade wrong simply start wrong. They begin with the notion that a country in the global economy is “just like” a company competing in the global marketplace.

If one thinks that a country is “just like” a company, then it’s only natural to think that exports are “just like” sales and imports are “just like” expenses. Thus, if exports (sales) exceed imports (expenses), hurray! But if imports exceed exports, oh no, we’re losing!

That, however, is all wrong.

The analogy is wrong. A country in the global economy is nothing like a company competing in the global marketplace.

A company has a bottom line. A company strives for profits, and if it suffers persistent losses, it goes out of business.

A country has no bottom line. For a country, there are no such things as profits or losses. And there’s no such thing as a country going out of business.

For a country, the whole point of international trade is not to export but to import. It’s to get goods that we don’t have and can get at less cost through trade than by making them ourselves.

That’s the point of any trade. Why do we go to the grocery store? To get goods we don’t have and can get at less cost by buying them at the grocery store than by making them ourselves.

Of course, the people we import from want something in return. That’s what exports are for. Exports pay for imports.

To repeat: The purpose of international trade is to import. The purpose of exports is to pay for the imports.

So, you ask, where does the U.S. trade deficit come from?

Foreigners really like our goods and services. In 2017, U.S. exports of goods and services totaled $2.2 trillion. The U.S. exported more goods and services in 2017 than all but seven countries in the world produced in 2017.

But foreigners also really like our financial assets, our stocks and bonds. They also like to build offices and factories here.

Much ado is made about American companies moving production abroad, but there’s much more foreign production that moves to the U.S. than U.S. production that moves abroad. The world’s leading destination of foreign direct investment is the U.S., by far.

Foreigners like our assets more than we like theirs. In 2017, foreigners bought $620 billion more of our assets than we bought of theirs.

How did foreigners pay for all those U.S. goods, services and assets? With exports of goods, services and assets of their own, of course.

But since they bought $620 billion more of our assets than we bought of theirs, they had to pay us $620 billion more of their goods and services than we paid them of our goods and services.

And that’s where the U.S. trade deficit comes from.

So, what’s the problem? There isn’t one.

  • Don Mathews
  • Reg Murphy Center

An idea to combat our local brain drain

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

I recently ran across an article on Cincinnati.com describing a new policy adopted in the town of Hamilton, Ohio, that will repay up to $5,000 of a recent college graduate’s student loan debt if that graduate will move to Hamilton. Hamilton is 35 miles north of Cincinnati and has adopted this policy to improve its competitiveness with the big city in attracting young talent. I have since read that other places in the U.S. are trying similar programs.

This article was of particular interest to me since, as my colleague Dr. Don Mathews wrote last week, a consistent complaint of businesses in our area is an inability to recruit talented and dependable workers. I agree with Dr. Mathews’ sound counsel that higher wages would correct this imbalance in the labor market.

I suggest, further, that we as a region could be more creative in our efforts to attract and retain talent.

Each year, high schools in our six-county region graduate many bright and capable young men and women. In 2015, for example, according to the Georgia Department of Education, each of our counties had a high school graduation rate at or above the state average. And 60 percent of those graduates enrolled in college by fall 2016. This means over half of our young people are graduating high school and going straight to college. But, in 2017, only 20 percent of residents of our region who were over 25 years old had a college degree.

Our problem is not that we do not have access to an educated and motivated workforce, but that we do not offer sufficient incentives for those workers to settle here. Many of our brightest students go away for college, and if they return, it’s to retire.

In developing countries, this pattern of behavior has a name — brain drain. Brain drain occurs when those best suited to help lead an area out of a developmental funk instead leave to pursue greater opportunity for personal gain elsewhere.

So, how do we reverse our local brain drain?

First, as Dr. Mathews wrote, local employers absolutely must offer wages worth working for. Second, I think an offer like that of Hamilton, Ohio, could be a simple, fairly inexpensive way to convince educated young people to settle in Southeast Georgia.

I know from personal experience that student loan debt cuts significantly into a new graduate’s take-home pay for several years and makes an otherwise attractive wage offer infeasible. Helping these individuals pay toward their loans is a short-term commitment on the part of the community or employer but could have significant long-term advantages if it encourages educated young men and women to live, work, and raise families in our region.

The Georgia Board for Physician Workforce has offered a similar loan repayment plan to physicians who practice in underserved areas of Georgia, and the board reports great success under the program. In 2016, 53 percent of graduates from Georgia’s medical schools reported they had intentions of practicing in underserved areas.

If it works for recruiting doctors, who have some of the largest student loan balances, I think it’s an interesting idea for recruiting educated workers in other fields as well. Hamilton may be onto something.

Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia and works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

  • Melissa Trussell
  • Reg Murphy Center

Emotion of humans is stabilizing force

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

Over the past few weeks stock markets have been very volatile. With the election of President Trump and continuing until the signing of tax reform, it seemed like the only direction that stock markets knew was up. Then, thousand point drops, large volumes and apparent instability. What is going on?

In economics, we teach that markets are places that process information and that market-determined prices reflect that information. Changes in information lead to changes in demand and/or supply and then, as the market seeks equilibrium, prices change. Another way to think of this is to consider that every market participant, whether buyer or seller, is pursuing their own unique interests using the information that they think matters most. More importantly, not everyone in the market uses or has the same set of information. In fact, it is safe to assume that everyone in a market has different sets of information that drive their actions. So, in a sense, the market knows everything while no one person in the market knows everything. In the end, market prices reflect all the information that is known.

For quite a long time, the financial market price generating process involved actual human beings interacting with other human beings. With a group of MBA students, I was privileged to watch the public outcry auction process where gasoline futures were priced. (This place no longer exists.) Here, buyers and sellers circled a pit hollering bids and asks at each other. Once a cry to sell was accepted by a cry to buy the traders would go over to another area of the arena and record the transaction on a paper card. This card was then tossed into the middle of the pit where another human caught it and formally recorded the trade. In the meantime, the traders would go back at it.

This trading was really fun to watch. Successful traders were risk loving, animated, emotional people. In the pit, circled by very large televisions loudly broadcasting business and news channels, there was plenty of screaming and flailing of arms. Few, if any, of these folks had more than a high school education. The price-making that occurred in the pit was done in a crazy and emotional pit that only humans could create. I met a trader who wore Depends because he did not want to go to the bathroom and miss a profitable transaction during the trading day that did not stop for lunch!

Yet not that long ago, smart people at Lehman Brothers, Goldman Sachs and other houses figured out a way to do away with the humans. Now programmed computers trade. See, human-based transactions took time. Time was money. More money could be made the faster that trades could occur and be recorded.

Fundamental to this was someone, or a group of people, had to write the algorithms that drove the actions of the computers. Memory banks now contain commands when to sell and when to buy based largely on price changes? However, when some machines start to sell, other machines see this and start to sell too. Prices drop which, within the algorithms, cause more selling. Prices fall even more. When prices drop enough a new equation kicks in and says buy. Price recovers which causes more computers to buy and prices raise rapidly. Thus, the swings we have observed recently are probably the result of over exuberant trading by computers and not new information of impending doom.

Price fluctuations have always been part of the landscape of financial markets. Yet, back in the day, if the volatility of the market became too great the humans could talk to each and simply stop trading and try to figure out where all the craziness was coming from. Emotional humans could stop the process by simply being human. By removing the emotion we have removed, what some think, is stabilizing information. We may have reached the point where we have to decide if we want fast trades or human trades. I love the crazy pit of public outcry exchange. The pit was great. I vote for the humans. Break out the Depends!

Dr. Skip Mounts is the Dean of the School of Business and Public Management at the College of Coastal Georgia. Dr. Mounts is also a professor of economics and an associate of the Reg Murphy Center for Economic and Policy Studies.

  • Reg Murphy Center
  • Skip Mounts

Can’t find good workers? Raise your wages

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

“There’s a shortage of good, skilled workers.”

I have heard this complaint from local employers for years. And not just local employers; it has been a common complaint among employers in places around the country for some time.

I don’t buy it.

Now, I’m a huge fan of our local businesses. I cheer for them every day. But this “shortage of good workers” complaint doesn’t fly.

Labor market statistics indicate that the percentage of skilled workers in the labor force is greater than ever. That’s true for the U.S., for Georgia and for Glynn County.

If you are an employer and you are having difficulty finding good workers, the problem is not a shortage of good workers. The problem is your wages are too low.

Not long ago a local employer said to me, “We’ve been looking for a skilled machinist for months, and we can’t find anybody.”

My question: “What’s the pay?”

Answer: “$12 an hour.”

$12 an hour for a skilled machinist and none have come knocking on your door? Is that a surprise?

If I’m a skilled machinist and I see a job posting for a skilled machinist paying $12 an hour, my response is: “Don’t insult me and don’t waste my time.” You’d never receive an application from me.

A common response to the suggestion “have you considered raising your wages?” is, “Look, this isn’t Jacksonville or Savannah or Atlanta. This is Brunswick.”

Wrong. On a map, this is Brunswick. But as far as the labor market is concerned, this is not Brunswick, nor is it Georgia or even the South. As far as the labor market is concerned, this is the U.S. of A.

Good workers — skilled, conscientious workers who take pride in what they do — are mobile workers. They’re like entrepreneurs: They search for the best opportunities, and when they find them, they seize them — wherever those opportunities may be.

My wife and I have a daughter who graduated from college last May. She majored in psychology so, knowing her job options would be limited, started her job search six months before she graduated.

She got a job offer from an outfit in Jacksonville. The job was decent, but the pay was lousy. She asked her mother for advice.

“Employers find job applicants who are currently working more attractive than applicants who are not. Take this job, work very hard, and in three months, start looking again.” Wise advice from Mom.

Our daughter did just that. She confined her job search to the United States. All 50 of them.

She soon had phone interviews with employers in Corvallis, Ore.; Anchorage, Ala.; Phoenix, Ariz.; and St. Paul, Minn. She now has a decent job for decent pay in Phoenix, Ariz.

That’s how good workers operate. Good workers are out there. But if you pay low wages, you won’t see them.

Employers want employees to care about the work they do. Right and good. But, dear employer, the wages you pay tell employees how much you care about the job they do. If you pay wages that suggest you don’t care very much, how much do you think employees will care?

What I’m talking about here is strictly business. In business, you get what you pay for. Pay good wages, you’ll get good workers. Pay lousy wages … well, what did you expect?

So, the point bears repeating: if you’re not finding good workers, your wages are too low. Raise them.

  • Don Mathews
  • Reg Murphy Center

Breaking the sex-trade market

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

Recently many of us crowded around televisions or streaming devices to watch as the Philadelphia Eagles topped the New England Patriots in one of our country’s most significant economic events of the year.

This year, NBC earned more than $400 million in ad revenue during the game. And, in a Jan. 29 New York Times article, sports economist Victor Matheson said the game generates between $30 million and $130 million in economic activity in its host city each year.

There is another, less familiar market that also experiences a significant boom that Sunday each year — the market for illicit sex trade. Super Bowl Sunday is the busiest day of the year for human sex trafficking in the U.S., but this only serves to emphasize a problem we face as a nation year-round.

Atlanta is one of the nation’s fastest growing hubs for human sex trafficking, and the market is not isolated to the city. According to sources within Glynn County’s Division of Children and Family services, sex trafficking, specifically of children, is a real problem here in Southeast Georgia. Our proximity to I-95 puts us along an intense trafficking corridor.

Since last month was Human Trafficking Awareness Month, I have been thinking about ways economic theory can inform our efforts to curb sex trade.

We currently have laws aimed at decreasing both supply of and demand for sex trafficking.

To reduce supply, law enforcement agencies are constantly working to find, arrest and prosecute pimps and others who organize trafficking networks. In addition, government and nonprofit agencies work to educate parents and children on reasons and ways to avoid being recruited or abducted into the sex industry. We have established hotlines and awareness campaigns aimed at helping those caught in these situations escape.

Efforts on the demand side of this market are not as prevalent, and mostly boil down to enforcement of laws against buying sex or engaging in nonconsensual sexual activity. A quick internet search reveals that many counselors offer services for those addicted to sex or pedophilia, but we do not see near the amount of public dollars spent on trying to keep would-be offenders out of the market as we do on trying to educate potential victims. This is something economics suggests we should reconsider.

The market for sex, like the market for any addictive substance, is characterized by highly inelastic demand. This means that folks in this market are willing to pay what it takes to get their fix, and so when prices rise, we do not see a sharp change in market activity. This is key to making informed policy choices if our goal is to reduce the number of transactions.

When we go after the supply side of the market, the result is an increase in price for illicit sex, but a relatively small decrease in the number of sex exchanges that occur. In fact, we may have just accomplished a goal opposite of our intentions by making human trafficking more lucrative for the suppliers who are left.

On the other hand, if we could decrease demand for human trafficking through appropriate education and therapy for potential sex buyers, we could simultaneously reduce the price of sex and the occurrence of trafficking.

Incidentally, this logic works for other relevant policy problems as well, such as our ongoing opioids epidemic. If we focus on addiction prevention and rehabilitation rather than on reducing the number of dealers or prescribers, we are likely to see more lasting results.

Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

  • Melissa Trussell
  • Reg Murphy Center

Welcome Richland Rum and Silver Bluff Brewing to downtown

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Kicking back and conversing with a friend or friends over a cold beer or cocktail is a simple, yet great joy. Doing so in the environs of the Golden Isles is an even greater joy.

Piling on even more joy, a distillery and a brewery are on their way to downtown Brunswick.

The Richland Distilling Company’s new rum distillery is in the final phases of construction on Newcastle Street. The distillery has already had a couple First Friday open houses.

On the other side of Newcastle will be Silver Bluff Brewing Co. Silver Bluff is in the early stages of construction. When it opens, perhaps this year, it will be a fully operational brewery with a beer garden and tap room.

The distillery industry is booming. According to the Bureau of Labor Statistics, the number of operating distilleries in the U.S. has increased from 145 in 2010 to 675 in 2016. Employment in the industry has increased from 7,252 workers in 2010 to 12,207 in 2016. And distilleries pay well: the average weekly wages of distillery workers in 2016 was $1,362.

The boom in the brewery industry has been even more impressive. In 2002, there were 365 breweries operating in the U.S. By 2010, there were 527. In 2016, there were 2,843. Employment in the brewery industry has increased from 24,864 in 2010 to 58,580 in 2016.

But there’s much more to the beer story than that. If you are an old and inveterate beer snob, as I am, the evolution of the beer industry in the U.S. since the 1970s is a small yet glorious episode in the history of American capitalism.

In the 1970s, the beer situation in the U.S. was grim. The country had only 40 breweries, and the industry was highly concentrated: the five largest beer manufacturers accounted for 75 percent of beer sales. Weak and wimpy lagers ruled the day. Beers with actual flavor were pricey and hard to find.

Big beer’s only innovation in the 1970s was to introduce light beer. Is there any beer worse than a weak and wimpy lager? There is: light beer. It is light beer, along with disco, bell bottoms and a disturbing enthusiasm for polyester that mark the 1970s as among western civilization’s lowest ebbs.

In capitalism, such situations are the mothers of entrepreneurship. And it was in just that situation in the 1970s that craft brewers were born. The increase in U.S. breweries from 40 in 1970 to 2,843 in 2016 is almost entirely attributable to craft brewers entering the market.

Compared to the 1970s, the variety and quality of beer available in the U.S. today is spectacular. The big brewers of the 1970s had to become entrepreneurial to survive, and most of them have, by offering much more variety and much better quality.

Now the booming distillery and brewery industries are making their way to downtown Brunswick in the form of Richland Distilling and Silver Bluff Brewing. This is great news for downtown Brunswick and an encouraging sign. Entrepreneurs don’t locate just anywhere. They locate where they see profitable opportunities.

And Richland and Silver Bluff are the sorts of businesses that can spark a boom in a small and pretty downtown. Downtown Brunswick has seen a rising wave of entrepreneurship over the past couple years. Richland and Silver Bluff could make the wave much bigger.

  • Don Mathews
  • Reg Murphy Center

When inequality is not good in capitalist economics

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

Last month, I wrote using data to shed light on the extent of the demographic and economic disparity between Brunswick and St. Simons Island. Then, in my most recent column, I presented the traditional theory that inequality of income or wealth is a natural consequence of healthy capitalism, and so, we should not invest great resources in trying to create economic equality.

Most folks subscribe to this traditional view, at least in part. Individuals will always exhibit differences in ability and effort, and we should expect these differences to lead to inequality of outcomes.

Where many economists diverge from this no-cause-for-alarm line of thinking, however, is in a scenario like we see in Glynn County, where we face incredibly vast inequality and where our economic division is highly correlated with a factor not determined by ability or effort — in our case, race. Here, it becomes clear that more is at play than the natural forces of capitalism, and many believe this is when inequality becomes detrimental to growth within a capitalist system.

To understand this view of inequality, it is important to recognize a key characteristic of wealth and poverty: They are dynamic. An individual may move up or down the proverbial socioeconomic ladder several times during her lifetime, as long as the ladder remains unobstructed. And, as long as the ladder remains unobstructed, poverty is only a temporary state and one that can certainly be overcome with sufficient effort.

This is called social mobility, and it is the idea upon which much of the traditional capitalist view of inequality is based. One man’s success is another man’s incentive to climb the ladder. Persistent inequality does not imply persistent poverty, for today’s poor are tomorrow’s rich.

Data show, however, that this is not the story for many Americans living in poverty, according to the 2011 paper “Recent developments in intergenerational mobility,” authored by Sandra E. Black, Paul J. Devereux and published in the Handbook of Labor Economics. In the U.S., there is a 50 percent likelihood that an adult son remains on the same rung of the ladder as his father, the paper shows. This figure is 30 percent in the U.K. and even lower in other European countries.

Poverty in the U.S. is persistent, which gives rise to the notion of a poverty trap. A family living in poverty is often forced to consume its resources rather than invest them, and so over time, the family struggles to increase its wealth. Climbing the socioeconomic ladder becomes nearly impossible.

Moreover, a study conducted by the federal reserve, “The decline in intergenerational mobility after 1980,” shows that social mobility declines as income inequality increases. This is the crux of economists’ argument that inequality is a threat to our economic well-being. A wider the gap between rich and poor indicates a stronger poverty trap.

Fed economists Jonathan Davis and Bhash Mazumder suggest in the paper this trend is not due to the observed inequality of outcomes — that some are rich and others are poor — but to an underlying inequality of opportunity. When compared with wealthier families, poor families have limited access to necessary tools for climbing the socioeconomic ladder, such as quality education, or transportation, or finance options.

The ladder of the poor American is not unobstructed, and for many poor Americans, poverty is not a temporary state. Our inequality is not simply a product of healthy capitalism.

It is, therefore, healthy that we continue conversations around how to bridge Glynn County’s four-mile gap.

Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

  • Melissa Trussell
  • Reg Murphy Center