By: Grace Greenwell
Braidy Industries will break ground on construction of a greenfield aluminum mill in Eastern Kentucky in early 2018. While proponents like Matt Bevin, the Kentucky Governor credited with successfully orchestrating the deal, believe the aluminum mill is the answer to the economic devastation caused by the collapse of the region’s coal industry, Kentuckians should consider whether swapping one fluctuating industry for another is the long-term solution we need. To be sure, the mill – its jobs, skills training programs, and related development – is a good thing; however, much of this story rings in undeniable parallels with the narrative of “the resource curse,” the phenomena whereby resource-rich communities are plagued by poverty and poor governance.[i] The Braidy Mill Project must be accompanied by diversification of industry, a strengthening of human capital building institutions, and accountable revenue generation mechanisms.[ii]
The funding for the deal securing Kentucky as the site for the Braidy Industries Mill was procured in an appropriately dramatic fashion for a deal Bevin believes has the “potential to be as significant as any economic deal ever made in the history of Kentucky.”[iii] Late in the evening of March 30th, 2017, the last day of the legislative session, Kentucky lawmakers authorized the Governor to issue $15 million in bonds for a “mystery” economic development project in Eastern Kentucky.[iv] House Bill 482, which contained unrelated measures for law enforcement training, was amended to authorize the spending, passing the Senate on a vote of 38-0 and the House 90-0.[v]
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In addition to the $15 million appropriation, the Kentucky Economic Development Finance Authority has approved up to $10 million in tax incentives for Braidy, some of which are tied to requirements that the company meets job creation and other development targets.[vi] The mill is expected to generate 1,000 temporary construction jobs and 550 jobs with an average pay of $38 an hour or $75,000 a year, 367 of which must be held by Kentucky workers to qualify for the tax incentives.[vii] The $1.3 billion aluminum mill will be built new, the first greenfield build of its kind in over thirty years, in Greenup County, Kentucky.[viii]
The parties involved in the deal point to varied reasons Eastern Kentucky was selected – from “an abundance of hard-working skilled workers trained in the metal and mining industries,” to “a perfect logistical location to serve auto and aerospace customers” – but never fail to laud Kentucky’s recent Right-to-Work legislation as fundamental to attracting Braidy.[ix] Further sweetening the deal, Kentucky Power is partnering with Braidy to provide low cost energy.[x]
So, what of the resource curse? The warning signs are plenty: Kentucky leaders’ rent-seeking behavior and positioning as gatekeepers for private development; lack of transparency in the deal struck; worsening indicators of education and health among a stratifying community; pitting workers’ rights as incompatible with profit; and a failure to diversify sources of economic development.[xi] Is the Braidy Mill another example of government using its citizen’s resources to attract a private company guaranteed to generate easy-to-point-to immediate profit, knowing such profit will only be felt by a certain segment of the population and will be at the expense of constant, but slower long-term economic growth?
Absolutely not, respond mill proponents. First, the Braidy Mill is not an extractive operation, but a manufacturing plant. It requires skilled and trained workers, and Braidy has already indicated its commitment to invest in the education of future workers and continued training of employees. Specifically, Braidy will partner with the Kentucky Community and Technical College system, building a “specialized Associates Degree in Material Sciences and Advanced Manufacturing.” [xii] Further, nothing about the Braidy Mill is expected to be limited to the short term or prohibitive of diversification. In fact, the opposite is the case.
Braidy plans to develop and implement cutting edge technologies and manufacturing methods, positioning the mill as a leader not just in the automotive industry, but also the developing aerospace services emerging in Kentucky. Currently, Kentucky exports more than $10 billion a year in aerospace products,[xiii] suggesting limitless potential for the plant.
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Despite this hopeful rhetoric, it remains concerning that every press release, every appearance promoting the deal is imbued with the narrative of workers’ rights, transparency and regulation as incompatible with private business development. In this context, secrete appropriations transition easily into a citizenry held hostage by its leaders, backed into a corner by the promise that one’s economic situation will improve, as long as no one questions whether it’s as good as it should be. This dramatic foreboding is given power by centuries of the resource curse persisting, including in Appalachia, which appears positioned once again to entrust private industry – one requiring removal of all oversight to play ball – with the alleviation of deep, systemic poverty.
“This $1.3 billion investment will create enormous opportunity for people in the region, and would not have been possible without our recently passed right-to-work legislation. I look forward to the success of Braidy Industries as they leverage the incredible work ethic found in Eastern Kentucky. The ripple effect of this investment will be significant and will produce positive change in the region for generations to come.”
-- Kentucky Governor Matt Bevin
[i] R.M. Auty, Resource-Based Industrialization: Sowing the Oil in Eight Developing Countries, (1990).
[ii] Tiernan Mennen, The Resource State: Deconstructing the Causality of Poverty, Bad Governance, and Natural Resource Rights, 23 U.C. Davis J. Int'l L. & Pol'y 101 (2016).
[iii] Braidy Industries, Braidy Industries Inc. to Spend $1.3 billion to Build the Highest Quality, Lowest Cost Auto Body Sheet and Aerospace Plate Aluminum Rolling Mill in the United States, Press Release (April 26, 2017), http://www.braidyindustries.com/2017/04/26/braidy-industries-press-release/.
[iv] Deborah Yetter, Lawmakers OK $15 million for Mystery Project, The Courier J. (March 30, 2017), http://www.courier-journal.com/story/news/politics/2017/03/30/lawmakers-ok-15-million-mystery-project/99850414/.
[v] Id.
[vi] Marty Finley, Metals Company to Invest $1.3 billion in Kentucky, Louisville Business First (April 26, 2017), https://www.bizjournals.com/louisville/news/2017/04/26/metals-company-to-invest-1-3-billion-in-kentucky.html.
[vii] Id.
[viii] Braidy, supra note iii.
[ix] Id.
[x] Id.
[xi] Tiernan Mennen, The Resource State: Deconstructing the Causality of Poverty, Bad Governance, and Natural Resource Rights, 23 U.C. Davis J. Int'l L. & Pol'y 101 (2016).
[xii] Braidy, supra note iii.
[xiii] Id.