Nevada is mired in the third-worst economic crisis of its history. Only the 20-year-plus mining depression of the latter 19th century and the Great Depression of the 1930s more adversely affected the Silver State.
Most Nevadans have never witnessed anything like this “Great Recession.” Our state is at an economic crossroads requiring leadership and planning, driven by a sense of urgency. The old way of doing business won’t cut it for the rest of the 21st century. Nevada must reinvent itself economically.
With Nevada paralyzed by depression and losing population in the 1880s and 1890s, the state’s leaders looked to desert reclamation and agriculture to temper the boom and bust cycles of mining. The federally financed Truckee-Carson Reclamation (Newlands) Project and other smaller reclamation projects had a modest effect on the economy. However, Nevada readily returned to its dependence on the mining industry during another great mining boom beginning in 1900.
By the 1920s, with mining again in decline, Nevada once more searched for prosperity. The state with the smallest population in the nation, and particularly its largest city, Reno, had developed a service economy catering to prospective divorcees and couples seeking quickie weddings. Two federal public works projects, the Hawthorne Naval Ammunition Depot and the Boulder Canyon Project (Hoover Dam), and extensive public highway construction, stimulated Nevada’s economy while the rest of the nation rapidly sank into depression after the 1929 stock market crash.
Nevada’s emerging tourist trade received a substantial boost in 1931. The state’s leaders, driven by a sense of urgency with Nevada sinking into the Great Depression, legalized casino gambling and further reduced residency for quickie-divorces. The end of Prohibition in 1933 meant liquor was readily available in a wet state. Modern Nevada and its dependence on a service economy date back to this period.
In addition, Nevada received the most per-capita federal dollars of the 48 states during the New Deal era. The Silver State’s mining industry also boomed again because of our senators’ — Key Pittman and Patrick McCarran — support of the 1934 Silver Purchase Act.
Attracted by Gov. Richard Kirman’s “One Sound State” marketing campaign, scores of millionaires found their way to Nevada to buy tracts of land and escape higher taxes elsewhere. By 1935 Nevada had a budget surplus; in 1939 the state cut its property tax. All of the factors cited in the aforementioned paragraphs meant that the Great Depression lasted less than five years in Nevada.
Military spending boosted Nevada’s economy during World War II. After the war a burgeoning casino industry set the tone for Nevada’s phenomenal growth. Once thought to be recession-proof, Nevada’s gambling-dominated economy weathered national recessions over the past 30 years, each time coming back bigger and stronger.
However, Nevada had lost its monopoly on casino gambling in 1978 when Atlantic City opened its first casinos. At the same time, liberalization of divorce laws throughout the nation in the late 1960s signaled the end of Nevada’s migratory divorce trade in the 1970s.
The 1981-82 national recession was a wake-up call and resulted in efforts to promote economic diversification during Gov. Richard Bryan’s administration. The state launched an effort to make Nevada into “the next Silicon Valley.”
Yet competition from other states for the high-tech industry was fierce. In the end, Nevada lacked the infrastructure essential to supporting high-tech firms like those based in the Santa Clara Valley and elsewhere.
A resurgence in Nevada’s casino industry, particularly the opening of megaresorts such as the Mirage in Las Vegas, took the urgency out of diversification efforts. At the same time, recommendations made to the Legislature and governor in the Price Waterhouse/Urban Institute tax study (1988) to revamp Nevada’s tax structure were essentially ignored in this time of renewed prosperity.
The 1990-91 national recession hit Nevada hard. Midwest riverboat gambling and tribal casinos by that time competed with Nevada’s casinos for the nation’s tourist trade. But with a strong recovery in Nevada’s service economy in the 1990s, Nevada’s leaders failed to recognize that diversifying the state’s economy still needed to be a top priority, particularly with the phenomenal growth in California tribal gambling. Arguably, efforts to turn Nevada into a center of renewable energy should have begun at this time.
The 2001-02 national recession should have been a big wake-up call for Nevada’s leadership to chart a new economic course in the 21st century. It wasn’t and the can was kicked down the road one more time. Nevada’s casino industry rebounded once again to undermine the urgent need to dramatically diversify.
The “Great Recession” is now technically in its 21st month. But Nevada’s casino industry felt the effects of recession by the fall of 2007. Even if the nation begins the long journey out of recession this year, Nevada’s service economy will take even longer to recover. In the end, casino gambling in Nevada will not be the growth industry it was for 75 years.
In the 2011 legislative session, Nevada will be at another critical threshold. The state’s leadership, particularly the governor and Legislature, must recognize that relying principally on a tourism-based economy will no longer ensure a prosperous future.
The state is betting heavily that it can out-compete other states for hegemony in the renewable energy industry. Its success remains to be seen over the next 10 years. In the meantime, Nevada will be hard-pressed to meet the needs of its citizens.