Leveraging philanthropy for the economy

By Richard C. Longworth

There's a new community foundation in St. Joseph, Missouri, that is trying something really new: to marshal the funds it oversees to promote economic development in St. Joseph and the northwestern Missouri region that neighbours it.

A community foundation exists to house personal or family foundations in its area. Most wealthy families can't set up vast billion-dollar foundations, lavishly staffed, like the Fords or MacArthurs. So they set up smaller foundations and park them inside community foundations, which handle the paperwork and see that the funds are spent as the founding families direct.

This money can go to scholarships, or to an arboretum, or to the care and feeding of cats. The Community Foundation of Northwest Missouri will accommodate these directives, if asked. But one of its goals is to educate the region, including its philanthropists, on the importance of repairing the region's tired old economy, generating a new economy and reviving the area as an economically decent place to live.

So far as I know, no other community foundation in the country — and there are more than 700 of them — has set itself this goal.

But this raises the next question: what's the best way to spend this money? What does northwestern Missouri need that money — especially philanthropic money — can buy?

I was in St. Joseph recently to talk with Foundation leaders as they wrestle with this problem.

St. Joseph is an old Missouri River town north of Kansas City that is best known as the eastern terminus of the Pony Express and as the place where Jesse James got shot: the town commemorates both events. For years, it was a stockyards city with a lot of meatpacking and meat processing. The stockyards are gone, although some meat processing remains, along with other ag-related businesses. Downtown St. Joseph still boasts some beautiful old architecture, but most of those buildings are empty or rundown. Newer industry is outside town, near the spectacular hospital complex and Missouri Western University.

The 18 surrounding counties include Northwest Missouri State University, an excellent school. But most of the area is agricultural and semi-industrial and has seen better days: population is declining and young people are leaving. The region's economy needs a boost, and the foundation aims to provide it.

But how? The Community Foundation, now in its fourth year, hosted Tom Vilsack last year, and the agriculture secretary said money would be best spent in helping young would-be farmers buy land, to give them a start in that capital-intensive business. Since then, land prices in northwest Missouri, as elsewhere in the Midwest, have gone through the roof, making Vilsack's advice moot.

I urged them to think regionally, as all Midwesterners should think regionally in this global economy. Northwest Missouri, like other regions, should put petty rivalries with neighbours aside, count their regional assets and work together to leverage those assets.

What are those assets? I was told by people there that the region is populated by good people, all hard workers. It has scenic beauty and some good schools. This is great — but it pretty much describes every other Midwestern area. To survive and thrive, a region needs something extra.

St. Joseph and northwest Missouri have that something extra — their location astride what is called the Animal Health Corridor. This corridor stretches between the region's two big research universities, Kansas State in Manhattan and the University of Missouri in Columbia. The region bills itself as "the single largest concentration of animal health interests in the world", and includes not only the two universities but a raft of research facilities and, most important, hundreds of companies churning out veterinary products and creating thousands of jobs.

Kansas City, 50 miles to the south, is the center of much of this activity. But enough animal health companies exist in St. Joseph to make it a secondary hub along the corridor. Very little of this activity has moved into the other 17 counties, though, giving them the well-founded suspicion that, when it comes to economic development, St. Joseph may be thinking of itself first and the others not at all.

There's a base for real development here, but it's going to take work. The region's two small universities should play a bigger role. Regional efforts should be made to locate some animal health companies outside St. Joseph, in the other counties, creating jobs where they are badly needed. Schools should work together with universities and community colleges to give students the education in science and other subjects they will need to get jobs in this industry.

Philanthropy can be aimed at funding research, or providing venture capital for start-ups, or endowing scholarships for animal health students (on their promise to stay in the region after graduation), or creating incubator buildings, or underwriting internships and apprenticeships in animal health companies for high school and community college students. The possibilities are limited only by local imaginations. 

Why animal health? Because it's already there. Because it builds on the region's agricultural history, including those stockyards. Because northwest Missouri already knows livestock. Because it's a cluster industry, bringing together researchers and businesses in a synergistic relationship: most regions would kill for a social cluster economy, and northwest Missouri already has one.

I shared the stage in St. Joseph with Mark Drabenstott, formerly of the Federal Reserve Bank of Kansas City and author of The Chicago Council's Heartland Paper, "Past Silos and Smokestacks: Transforming the Rural Economy in the Midwest". Drabenstott may be the Midwest's leading expert on refitting rural economies to meet global challenges. He applauded our hosts' 18-county regional drive, but suggested that even this might be too small in the global age.

St. Joseph seems to have amazingly little to do with Kansas City, even though it could benefit from that city's healthy economy. It also is just across the river from Kansas, about 20 miles from Nebraska and 50 miles south of Iowa, but has barely considered cooperating with nearby towns in those states, with which they share an economy, a history and a future. In St. Joseph, as elsewhere in the Midwest, all thinking seems to stop at state lines, an anachronism in an era when states themselves are too small and incompetent to provide for their citizens. 

The real future lies in collaboration within regions with something in common. The challenge in St. Joseph is to use the foundation, which is to say philanthropy, to ignite that collaboration.

There should be enough money there, although perhaps not as much as they think. Northwest Missouri, like much of the Midwest, has an exaggerated assessment of the amount of money that will be available for philanthropy from "wealth transfer" — what assets parents pass on to their children. Recent studies have predicted that each state will have billions of dollars in wealth transfer, and only have to tap 5 per cent of that total to make a real impact.

This is unrealistic: the real amount devoted to philanthropy is less than 1 per cent. In any community, only a few truly wealthy families set up foundations. The task of economic developers is to find those families and persuade them to invest a part of their estates in securing the future of the towns and counties where they made their money.

This post was originally published at The Midwesterner

15 February 2013