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Fri September 14, 2012
Carcieri’s 38 Studios denial
Former Gov. Donald Carcieri has finally broken his silence on 38 Studios. RIPR political analyst Scott MacKay on what the former governor did not say.
It was a grim-looking Don Carcieri who ended his retirement hiatus from media scrutiny with an interview with WPRI-TV’s Tim White. If not contrite about the disaster that was the state’s $75 million investment in the video game company, the former governor at least took responsibility for pushing the deal.
It was an appearance that had none of the exuberance that Carcieri, with his trademark chuckle, showed the public during his eight-year State House tenure. He said that he regretted what happened in a bankruptcy that has state taxpayers on the hook for as much as $102 million.
And Carcieri said he regretted what happened to retired Red Sox pitching ace Curt Schilling’s 38 Studios, but the former governor stopped short of apologizing to Rhode Island taxpayers for his role in this fiasco.
Carcieri never mentioned the name of Governor Lincoln Chafee, in whose lap Carcieri’s video game mess landed. Yet Carcieri tried to shift some responsibility to Chafee, saying that the governor should not have been surprised at the company’s imploding finances. And Carcieri took another veiled shot at Chafee, saying that the governor might have considered pouring even more taxpayer money into 38 Studios in the form of tax credits even as the company was teetering on the edge of bankruptcy.
What Carcieri seems to be saying, camouflaged in the usual political double-speak, is that Chafee should have considered throwing good money after bad in a desperate attempt to keep 38 Studios afloat. That might have been a reasonable, albeit it risky, strategy if Carcieri, a one-time banker, was still in the private sector. But Rhode Islanders are lucky we now have Chafee in charge, because he took the prudent course of protecting the taxpayers from more exposure.
Any way you try to spin this deal, this we know for certain: 38 Studios was in deep trouble when the company defaulted on a loan payment in April, which opened the floodgate of red ink that led to bankruptcy. The company was burning through millions of dollars in labor and development costs and was far behind in bringing its breakthrough video game product to market.
The other factor that led Chafee to pull the plug on the state subsidy was the brutal way the financial marketplace had signaled that 38 Studios was a turkey. No private banks or venture capital companies ever came forward to put their money into Curt Schilling’s company, despite his best efforts to attract investors.
Capitalism enforces its own rules via the marketplace. And never forget that Schilling only moved the company to Rhode Island after Massachusetts Gov. Deval Patrick refused to put Bay State taxpayers on the line for the World Series hero’s dream of running a video game company.
There is a much bigger lesson in this fiasco for our struggling state, which has the nation’s second-highest unemployment rate and is the only New England state with an unemployment rate higher than the national average.
We must stop looking for silver-bullet solutions to economic problems that have festered for decades. Dumping state money into individual companies in risk-laden markets doesn’t work. It never has.
Taxpayers lost millions on a similar crony capitalism deal back in the 1990s when then-Gov. Bruce Sundlun bet state money on Alpha-Beta, a bio-tech company that went belly up.
Isn’t it time we addressed the state’s lack of an educated work force that can compete in a 21st Century knowledge economy. Let’s end the fiction of thinking that we can bring in manufacturing factories; in the words of that noted economic philosopher, Bruce Springsteen, those jobs are gone and they ain’t coming back. Let’s concentrate on what government does best to influence economic growth – providing education and such infrastructure as good ports, highways, airports, trains and a reasonable regulatory regimen for business. Voters can help by choosing political leaders who are honest and serious about spending taxpayer dollars wisely. Too many Rhode Island politicians still end their careers with plea bargains. (We have yet another one today in Rep. John McCauley, D-Providence).
And, this time, for once, can’t we learn from our mistakes and move forward? Don Carcieri may be in denial about 38 Studios. Rhode Islanders don’t have to be.