‘The shakiness of this company is a tragedy for Rhode Island,” Governor Lincoln Chafee said Wednesday about 38 Studios. “Shakiness” was an understatement. The next day, Curt Schilling’s troubled video game studio, which the state lured from Massachusetts with a $75 million loan guarantee, abruptly laid off its entire staff.
Yet the problem isn’t just that Schilling’s company has apparently run out of cash. It’s that Rhode Island put itself in a position where the failure of one specific mid-size firm would be a tragedy for the state. Whenever any state gets into the “economic development” business — that is, handing out favors to individually selected firms — it is playing venture capitalist with taxpayer dollars. But while real venture capitalists know that many investments fail, Rhode Island doesn’t appear to have planned for anything other than success.