DARLA MOORE
SPEECH TO THE ORANGEBURG ROTARY CLUB

APRIL 19, 2005

I have thought a great deal about what I wanted to discuss with you tonight. I believe we all share a common desire-a desire for a more prosperous state-a desire to offer our young people a future here, now, rather than watching them leave South Carolina to find better educational and career opportunities. At a recent event for the Governor's School for Science and Mathematics, the keynote speaker, Senator Lindsey Graham, gave a most passionate plea to the graduating students who had been accepted at such outstanding institutions as MIT, Harvard, and Stanford for them to please come home. My godchild, Mary Ellen Player, Spencer Dixon's niece and a graduate of the Governor's School, recently finished Harvard with honors but so far we have not lured her back to South Carolina. And, here is the point - we will not be able to lure her or any of these other great young minds back until we improve the economic opportunities in South Carolina.

So, the dilemma is manifest. We all fervently desire to improve our state, but how do we do it? How do we make our state more competitive in the global, knowledge-based economy we now face? How do we create the jobs and opportunities that will make our young people want to stay and invest in South Carolina's future? I will tell you it is a daunting challenge. But, let me hasten to say, it is one where we can achieve great success.

But do not take just my word. One of the world's leading experts on making regions and states and even countries more competitive, Professor Michael Porter, after doing extensive research on the economic capabilities of South Carolina, also believes we have the assets to be competitive and to be more prosperous. The question then is, how do we meet this challenge and, more importantly, do we have the will and resolve to make the changes necessary to meet the challenge? As I try to give you an outline of what this state needs to accomplish and what the Palmetto Institute has begun to do to assist in this effort, rest assured I am not going to tell you to keep doing the same things you have been doing for the last 30 years. As a successful business person, I can tell you, in a crisis and believe me this state is in a crisis, you do not continue to do the same thing even if you can do it better, you do something different. As someone once commented, "Having new ideas is pretty easy. The hard part is getting rid of the old ones."

So, let's begin by making sure we understand the basics. For Orangeburg County, the basics are this:

• Your per capita income as of 2002 was $21, 418-this ranked 28th in the state and was 84% of the state average and 69% of the national average.
• The average wage per job in Orangeburg was $26,946 as compared to a state average of $30,280.
• Unemployment in February 2005 was at 10.6%, 3 ½ percentage points higher than the state unemployment.
• The poverty rate for Orangeburg County was 20.8% as of 2002, with a poverty rate of 27.9% for children ages 0 to 17 years.
• According to the 2000 Census, of the population of 25 years or older, 71.5% were high school graduates or higher.

As you can see, Orangeburg County has some work to do, but we all do.

For the Palmetto Institute, we have a single mission, a basic and clear measurement to chart our progress and a singular guiding principle which governs our work. Our mission is direct and straightforward, to increase the wealth of every single citizen of South Carolina. While we follow and review a host of economic indicators, we have chosen per capita income as the measurement we rely on to check our progress. Lastly, and probably most important, we are dedicated to the use and production of high quality, independent, academically sound scholarly research to guide our efforts. That led us to our first research project which was to see where our state stood as compared to other states and the nation in our economic competitiveness.

The basic results of the study told us we had a great deal of work to accomplish. Our per capita income was only 82% of the national average. Average wages in South Carolina were only 80.5% of the U.S. average. More alarming, our wage growth rate was 3.6%, lagging behind the national average of 3.9%. The study also found South Carolina's gross state product was 20% below the U.S. average, and our labor force participation rate was extremely low at 63.5%. All in all, the study concluded that South Carolina could not compete vigorously in the new global, knowledge-based economy with the existing mix of industries and the quality of our economic foundations, particularly our work force quality or educational attainment. The study recommended that we look at establishing industry cluster initiatives as a way to diversify the state's industrial base as well as improving our economic foundations, especially education.

So there we were with our first study confirming what most of us feared but without the clear details the study gave us. We were not competitive nationally or with our neighboring states. We were concerned our government leaders were being sidetracked with parochial issues and petty political fights which did nothing to make our state more competitive. At that time, very few people knew what a cluster was much less how to organize a clustering initiative in South Carolina.

Again, we went back to basics and were able to associate Harvard Professor Michael Porter and the Monitor Group to assist us in developing a long term strategy for economic development through the use of clustering initiatives. We retained the Monitor Group and Professor Porter for several reasons. First, their reputation in the area of economic development was outstanding. Second, they had demonstrated extraordinary success with clustering initiatives in other regions. And I might add because of his reputation and incredibly busy schedule, we were fortunate to persuade Professor Porter to assist us in large part because he had grown up in Chesterfield County.

As a result of the work of Professor Porter and the Monitor Group, we are now trying to implement a new economic strategy for South Carolina which I feel is absolutely critical to our state being able to compete in the global, knowledge-based economy. However, to be successful, it requires that we move away from our traditional strategy to a new direction. Historically, the state's strategy has focused on creating jobs and attracting capital investment by offering abundant low-cost labor, tax breaks, and high financial incentives. The state's efforts targeted major foreign operations based on the number of jobs and size of investments they would bring. This strategy by its very nature was led by government. They recruited large-scale manufacturing companies while local governments created an array of aggressive regional and local economic development organizations focused on business attraction for their specific areas. While very successful in its mission of creating jobs and attracting capital investment, this approach by itself will no longer succeed. I say this for two very compelling reasons. First, the world has changed. Orangeburg's competition no longer just comes from Greenville or Charleston or even neighboring states. It comes from Mexico and China and India. These countries have discovered capitalism and they are hungry to compete with us on wages and speed and yes quality. Second. It is not just jobs and capital investment. Remember the statistics I just mentioned of wages at 80% of the national average and growing at a slower rate. You cannot have the kind of quality of life we seek with those statistics. Think about it from this perspective. If I am a company locating in South Carolina because of low wages, the one thing I do not want is competition because that will cause wages to increase. Well we do want competitive wages for our workers. We do want to raise the prosperity of our state and that is what professor Porter wants us to target as our new direction. Rather than competing as a low cost location, Professor Porter wants us to compete by enabling firms to create higher value through the development of higher work force skills, innovative and better technologies, and investments in our own assets rather than foreign ones. This requires a collaborative effort led not by the government but by the private sector involving a multitude of related interests. Teaching and research universities, technical educations colleges and government at multiple state and local levels will have a role to play in this statewide collaboration. In other words, we need to build clusters by upgrading and enabling our business environment to retain and grow existing companies, recruiting new companies based on their fit with existing clusters and assets, and investing in new assets to seed clusters. What I have just explained is in fact the definition of cluster building and it works. Ask the folks in the research triangle in North Carolina or Austin Texas or Pittsburgh if clustering works.

In order to develop and implement this new strategy, the Council on Competitiveness has been created. It is a 50 member group made of outstanding business and community leaders. Existing cluster groups such as automotive, tourism, textile, and chemical have been organized to find ways to add value and grow their clusters. The Council has also created task forces to tackle 8 key issues fundamental to achieving our new strategy. They include task forces to activate and upgrade clusters, to enhance education and workforce training, to invest in research and the university system, to increase support for start-up and local firms, to create economic development plans for distressed areas, to launch internal and external marketing campaigns, to measure our progress and to create new institutions to support economic development. Already some of these task forces have come up with ideas which we are actively supporting. As a direct result of the work of the start-up and local firm Task Force, the jobs creation bill which has passed the House and now is in the Senate includes recommended tax credit and loan guarantees for small businesses as well as new incentives for small local businesses. The Education and Workforce Task Force is supporting and expanding on the education and economic legislation recommended by the Pathways to Prosperity work group. We are asking the private sector through the South Carolina Research Authority to help create innovation centers at our research universities to help commercialize research into new companies and products as well as new jobs. I wish you could have seen the presentation last week by Jack Stone of the new apparel cluster. The cluster is composed of 45 small manufacturing companies located in mainly rural areas who have just about been put out of business by foreign competition and increasing difficulty in making direct sales to big retailers such as Wal-Mart. Not only are they working on ways to share cost and marketing capabilities but they are working on ways to sell to the customer directly through the internet. In essence, they are seeking ways to add value to their products through collaborative, innovative ways which will not only reduce cost but get their product to the consumer in a quicker and more targeted manner. There are other initiatives which time does not permit me to mention but be assured the council is exploring every avenue to help our state to be more competitive. Beyond the Council on Competitiveness, The Institute is working with the Council of Black Mayors to find ways to help them with the work force skills of their constituents as well as their economic development efforts. We have met with Senator Graham in an effort to help identify and seek federal grants. We are seeking "best practices" from other organizations and states to help with economic development. We are training our own staff in grant writing in order to help teach these small communities how to seek both public and private grants. We have commissioned an overall study of South Carolina's tax structure to find ways to ensure not only a fair and equitable system but also a system which will encourage people and businesses to stay and grow and invest in our state. We are looking at how to attack the rising cost of health care in our state. We have been asked to study the feasibility and cost of a 4year voluntary, universal kindergarten as a means of having our children better prepared and therefore less likely to drop out of school. To say the least, we have been busy. It is not easy. Even when you show people the statistics and demonstrate why it is so important to collaborative in changing the way we do things, they are still reluctant. But it is a fight we have to make-and by we I mean all of us. If we succeed in making our state more competitive, we will also improve the quality of your life. Now I hope the question on all of your minds is, what can I do to help make this state better?

Let me suggest just a few thoughts.

Let me start with a request. I need your support with issues which I believe will make our state more competitive. We have put together the 4 major business leadership groups in South Carolina for the first time to speak as one on critical matters. The State Chamber, the Palmetto Business Forum, the Council on Competitiveness, and the Palmetto Institute have come together to identify and support key issues which we believe our state must address to be able to successfully compete. We are not going to stop with these groups; we are now talking to regional groups all around the state to join us. We can become an army for change. We, you and I, can make a difference. We will not involve ourselves in every political issue that comes along; the Institute will work hard to provide the independent thoughtful research necessary to allow you to make decisions on facts and not political rhetoric. But we need your help. When someone comes to you asking your support for legislation because it will help education or it will help economic development, ask them how will it help? How will it improve our work force quality? How will it keep our best and brightest in South Carolina? How will it make our state more competitive? Where is the research and data to support their position? And if that is not enough for you to make a decision then look and see if the proposal is supported by the group I just discussed.

When I spoke earlier of using cluster initiatives as a means to change the focus of our economic strategy, I want you to understand that the clustering initiatives themselves are no magical solution. They have been successful in other regions and they have been recommended by two of the most reputable consultant groups we could find. But more important, their real value is to make us focus on the issues we have to address to succeed. The clustering initiatives make us work hand in hand with the education community to build our work force quality. They force us to build upon our own assets in order to attract new businesses. They force us to address the inadequacies in our economic foundations rather than simply hiding them with promises of cheap labor and high financial incentives. No longer can we say it is an education problem or it is an economic development problem and let the government handle it. Most important, it puts the burden of making our state a more prosperous state in our hands. It now is our job to change the direction of our economic strategy. It is our job to demand more of our policymakers.

I will tell you the institute is committed to this effort and in it for the long run. We need you to join us. The quality of our state depends upon it.

Thank you