Public Affairs; Prospects For New England

The prospects for New England from the Maine Public Broadcasting Network highlights from a conference of the Woodrow Wilson International Center for Scholars held on October 7 1974 at the Woodrow Wilson Center in Washington D.C. this daylong meeting featured invited participants from the business government press and academic sectors of New England life and discussions centered on the future of the North East region. During the next hour we will feature the addresses of the keynote speakers at the conference. First an overview of the New England situation with the conference moderator and Wilson fellow Neil Piers Piers is the author of mega states a multi volume series on the American states and regions. Here's his remarks will be followed by two alternative views of regional future the economic and social costs of New England's high unemployment rates high energy and transportation costs slow growth rate and the problematic competitive situation in the national economy will be compared and contrasted with the costs of growth. Population increase and pollution endangering the traditional values of the region.

The speakers will be Dr. James Howell vice president of the First National Bank of Boston and Professor de meadows of the Thayer school of Dartmouth College co-author of The Limits to Growth. Here now is Wilson fellow Neal Peirce. My job today is to set the scene a little bit which I want him to do and in a few minutes time here before we go on to our our major two guests to give us the presentations this morning. In many senses it thing to me is I've been looking at it and thinking about it. New England is to America what Old England is to the English speaking world. The womb and the starting place the the fountain head of a culture of laws and language and learning the smaller geographic entity from which broader spaces were called colonized in centuries past both Old England and New England sent ships in trade to the furthest corners of the globe. Both became bankers and insurers and financiers of a very broad influence.

Both were early centers of manufacturing and tasted some of the early and bitter fruits of the Industrial Revolution both by determination retained their economic position long after the centers of fresh growth had shifted to other realms. The question for both Old and New England Now one might say is whether the clock may not finally be running out and whether the pressures of competition have not become too great for both for their mature economies. Closing off options whether they have now the space or the natural resources or the sufficient internal spirit to remain viable entities in the world of the late 20th century. Consider if you would for a moment what New England once was. And with some of its problems are now Jane Jacobs wrote rather engagingly in the economy of cities. That in the 19th century saw as an axis made in New England cleared the forests and Ohio New England plows broke the prairie sod. New England blankets warm children by night and New

England textbooks preached to them by day. A New England dive laves looms for Jews presses and screwdrivers outfitted factories far and wide but by the 20th century New England plants were closing up and laying off workers. And we wondered brooded upon the reason for this loss. Cheaper labor in the south. Obsolescence of the old brick factories along the rivers and beside the waterfalls the decay of Boston's docks imports from Switzerland and Japan. Not today New England is what the economists call a prototype of a mature economy. Their definition of that is an area in which the transition from agriculture to industry is long since accomplished a major manufacturing base is in place and wages work themselves up to a relatively high level. The capital stock tends to be aged cost of operations rather high. NEW out new job opportunities rather scarce. Traditionally mature economies are export ors of capital and

depend in significant measure on interest and dividends flowing in from other regions. This leads to a rather cautious approach to investment aversion to risk taking. Lack of entrepreneurial dynamic. The proportion of older people is much higher than in younger and more expanding regions and there tends to be a rather severe burden then that has to be carried by the population at large for its retirees and unemployed and the welfare population. The once mighty New England textile industry is exhibit number one of the mature economies problems and I don't think we're the audience here today I need say too much about the reason for textiles long decline ranging from the southern competition and foreign imports to the lack of imagination of many textile executives. But even though the region's mills now employ only 75000 people roughly compared to a one time high of about 400000. Those who'd like to see the rest of the textile industry fade from the theme fail to suggest what could be done in terms of employment for the remaining workers or what would replace the two billion dollars in annual sales from that industry

from New England alone. Leather and shoe manufacturers a similar case in point an industry in which New England dominated the national market for close to three hundred years now in dire straits. Sure employment down from one hundred forty five thousand just before the Depression to some 60000 now. But that industry still remains the largest single employer in the state of Maine. Number two in Massachusetts and a smaller but still significant base of employment and Massachusetts. There are of course many other major manufacturing segments to the new in the Qana me ranging from electrical machinery to machine tools aircraft paper printing publishing. They will not be time to review all of them today but I think it is worth noting that their present total employment about one million four hundred thousand jobs is one hundred thirty five thousand less than it was seven years ago and not much different from the total of a full generation ago. Over the span of their history of course New Englanders have been able to overcome the adverse odds posed by their

location and sparse natural resources through a combination of pluck and luck. The China trade the clipper ship technological innovation cheap immigrant labor tariffs smart financing and wartime stimuli. And for most of the 1960s it appeared that New England would be able to lock it out again as it were to make a relatively painless transition from outmoded styles of low wage factory unemployment to better paid production jobs and high technology export oriented type of economy. There is no question that the region has admitted benefit of the mentally from its capacity to produce some of the important products of the century specialized papers and plastics photographic and biomedical instruments electronic components mainframe computers and computer peripheral equipment missile and space systems jet aircraft instrumentation for pollution monitoring and control. The heart of these new wave industries as you all knows in the Route 128 area around Boston with major spillover in the Hartford area in southern New

Hampshire and even up into the Burlington area of Vermont. The figures for the 20 year period ending in 1970 show that while New England was indeed suffering a net loss of two hundred thirty four thousand jobs in its traditional exporting industries like textiles and shoes it was adding one hundred ninety one thousand jobs in durable goods and the new style exporting industries. It also added seventy eight thousand jobs in the very promising area of export services. The region's most important export services higher education area of course in which the region has so long excelled. Massachusetts I understand private education draws more dollars into the state than all manufacturing combined. The other important export services all of which draw off the region's lead in scientific research include hospital finance and insurance business consultation architectural and engineering services research and development work and headquarters of national level corporations. Of course tourism also draws in a very large amount of outside dollars and understandably

New Englanders would look to these types of areas as the keystone for their economic future. The question though is whether the new style export goods and services are enough. And that became abundantly clear when the soaring job levels of the early 60s in electronics and machinery and university related employment began to flatten out and decline. As the Vietnam War in the space race wound down the federal government began to cut back in its defense and aerospace orders. Then came the national recession of 1971 accelerating their trend and to their horror the original economists began to note that the New England unemployment rate which for two decades had varied scarcely from what the national level was was beginning to diverge up and away from the national rate. The regional unemployment has been 25 percent higher than the nations since 1970 or 71. The major defense cutbacks of the last two years costing more than 30000 civilian jobs the lost economy of about a half billion dollars in personal income have just

exacerbated that situation. This bleak outlook has led some people to suggest that New England has entered an era of structural that is long term high unemployment rather basic to the nature of the economic scheme of the region as a whole unlikely to be relieved by anything that one can now see on the horizon in terms of economic relief. Fuel costs of which we will hear more later today is one of the economic possibilities of course that make it less easy to get out of that economic bind of high unemployment because of its almost total lack of indigenous energy the region is highly dependent on petroleum and in the last year its total energy bill has risen one hundred thirty nine percent more roughly one point two billion dollars on a per capita basis the increase in new england was close to three times the national average. That of course can act as a very severe depressant on new industries and can encourage old ones to live to leave. The related to this is the fact that New England's power costs without a significant element of public power to act as a kind of a

governing mechanism have traditionally been the nation's highest. Then there's the fact of the cost of living is higher in New England than anywhere else in the United States with the exception of Hawaii and Alaska. And some people just came in late. I will say that both of them would like coffee you can get up on the balcony and feel free to move around. I don't have to be glued to your chairs. We're going to keep things as informal as we can as we move along. The high cost of doing business in New England is underscored by high construction costs high land prices decaying rail transportation and Environmental Control stricter than the national average. Taxes also top in the nation and Massachusetts and Connecticut with the bulk of the regional population per capita state and local taxes ranked third and fifth highest respectively among all of the 50 states. The principal reason for the high tax rate is the advanced level of social services in the region including welfare unemployment compensation health and education costs. There are some New Englanders who see a silver lining to those high social costs.

They suggest that in New England they've already been factored into the economy generally. We've had our problems in new and California and the South will get them later. According to the President the First National Bank of Boston. In the meantime however it is hard to see how New England will not suffer and the stiff competition between regions for a new job producing plants and capital investment and without growth some people suggest the region won't have upward social mobility with the inevitable result of some severe social tensions. Now it is true that New England per capita income has traditionally been and remains above the national average but the region has what one might call a bi modal pattern of income distribution in which a substantial group of very wealthy families many of whom have got their essential wealth from earnings of a century or more ago coexist with a large pool of the working poor who still await their first entry into middle middle class or middle income ranks. In 1969 for instance 6 percent of New England families earned

more than $25000 a year which was more impressive than it is now. But on a comparative basis that was 20 percent higher and that higher income bracket than the United States as a whole. But at the same time about 25 percent of the region's families were earning less than $7000 a year. And there are they extreme examples of dire poverty in Mainz distant Washington County Vermont's Northeast Kingdom and communities like the Portuguese and New Bedford people with a great deal of pride who nevertheless are obliged to work in almost biologic subsistence level. The supreme irony of present day New England is that while it suffers from problems of insufficient growth and high unemployment on the one hand it is in grave danger of over development and a rape of its lovely countryside on the other. Purpura population pressure has something to do with this. In the 9000 40s and 50s the growth of population in New England was only about 70 percent of the national average in the 1950s that figure rose to 95 percent of the

national average. One government projection is that the region's population from its present level of about 12 million people will rise to 16 million by the year 2000 which is really not so far away. New England find itself with the northern extension of the East Coast megalopolis which now covers most of southern New England and is extended into southeastern New Hampshire and the Portland area of Maine. And as that dense development continues the rural stretches between the cities may disappear at an alarming rate. New England's lead use problem things to me are much more complex than those of polluted waters which have been the focus of environmental control up to now and generally seem to be on their way toward solution. Some of the land use problems relate to urban sprawl in southern New England which is in peril of becoming New Jersey I've others have to do with the splurge of vacation developments in northern New England and of the herald of the regions remaining and shrinking farmlands. Then there are the demands conjured up by the energy shortage refineries and deep water ports nuclear

plants and the gobbling up of lands for transmission lines. Yet the natural setting is undoubtedly one of New-England greatest assets. This region. I think there are limits often on quiet and understated way is one of the most beautiful on the continent. No one ever has ever spent time in the lakes and mountains of New Hampshire and Vermont are watching their changing moods as the weather cycles go by or walk through New England's forests or villages in the clarity of an autumn day like like this one which would be even more dazzling there or known the ocean Polt against Cape Cod beaches or Maine coasts would doubt the conclusion of the physical beauty and preciousness of the wood in the way of New England. But the economists interestingly point out that the eagerness of so many highly skilled and professional workers to locate in the wing wind often at lower wage rates that they might demand in other regions is directly related to New England's amenities physical and cultural according to Harvard's Martin Katzman who is one of our conference members today. The economic health of New England depends in

great measure on attracting creative people who can produce innovative and specialized products and services and with a despoiled natural environment such people would really repulsed rather than attracted and New England would lose its best hope to make the delicate transition from quantity growth to quality growth. That is to say its only chance to survive as a viable place to live and work. Of course environmentalists take that same view and I heard sentiments very similar expressed by a number of New England businessmen with whom I've spoken this remarkable commonality of view. Providing it can go beyond lip service to actual accommodation in nitty gritty decisions could be the most exciting development of all in modern New England. But the areas of actual and potential conflict are formidable. They involve complex costs and tradeoffs. First in developing adequate environmental controls and particularly in getting to the point of having intelligent land use policies in an area with little excess acreage in which to make mistakes.

Second deciding how much growth is necessary or desirable. And third the question of which levels of government or mix between them will be the most appropriate forum to thrash out the region's problems and apply solutions. Those questions aren't back roughly our agenda for today. That seems to me there's a great danger in discussing problems of that nature without reference to the political cultures of the people involved. The New Englanders themselves. In an interesting discussion we had here at the Wilson Center some weeks ago preparing for the conference Elliot Richardson suggested that the question was fundamentally one of class attitudes the extent to which economic evolution and therefore land use in New England is to be designed to create more and better jobs for the least well-off New Englanders versus the extent to which the area is to be preserved for people who either have other income or are prepared to get along with comparatively little who reflect the middle class set of values in the whole ecological point of view. It's the cultural gap one might say between the

snowmobilers and the cross-country skiers. They Senator Roberts in Trowbridge of New Hampshire is the publisher of Yankee magazine in the New Englander and a part of me just made it through the door a few minutes ago told me of some of the conflicts in southern and central New Hampshire. The second home people coming into the area he said are environmentally concerned because they want to be the last people to get in and then close the door when they arrive they land on top of a strata of workers and loggers and lower paid persons whose concern about the environment is nowhere near the same persons whose forebears sweated it out in the mills who are barely making it today and who are preoccupied with their own jobs and security. The new people coming into northern New England over suggested are the ones coming in and saying stop all the development and the old ones are saying to hell with you we're just beginning to sell. Now not always but quite frequently these conflicts find New England's huge Catholic ethnic population together with some lower income Yankees on the

pro-development side. Opposed to the applet Yankees and recent arrivals from the crowded heart of the Eastern Seaboard seeking some peace and a return to nature in New England. I doubt if it's any accident for instance that Vermont the most old style Yankee in rural small state the culture of the region has been so advanced and daring environmental measures that run the gamut from commissions to control future vacation home developments to the banning of billboards and non-returnable bottles final implementation of the land use controls is in political danger in Vermont now although it's already advanced quite a way. Among the vast majority of Vermonters I think it's safe to say that there's a very common clear determination that the pastoral setting of an idyllic state will not be trampled to death by the thundering hordes of skiers and second home developers from New York. Next Door New Hampshire is a study in contrast big mill towns heavily populated with cautious and conservative French-Canadian workers sprang up a century ago.

The state's Yankee aristocracy which helped found some of the earliest conservation organizations in America has found itself increasingly outgunned the dominant newspaper The Manchester Union Leader is screamingly pro-development anti planning and anti-tax and a state with low social services and uniquely in the entire United States not a single broad based tax or environmental legislation in New Hampshire has lagged seriously and land use controls if they come in the near future. Maybe only possible. Conceivably because the developers have become alarmed by the complete shut out they are experiencing in some of the small towns with choice property and stiff zoning controls. Maine falls between those two extremes in northern New England but much closer to Vermont than to Hampshire for close to a century after the Civil War when Maine lost the flower of its hue. There was a tendency even among the state's own people to downgrade Maine as a rural backwater. This began to change after World War 2 when the Democrats under Edmund Muskie sprang out of their narrow Irish French Canadian base bringing young people to

positions of leadership a consciousness of Maine's coast and villages as a treasure to to be preserved began to thrive in part because of people beginning to move into the state and this led to a strong bipartisan environmental movement. Great Battles have been fought in recent years over oil refineries water pollution wetlands preservation and billboards with the conservation is very often Victoria's land use planning has advanced significantly but not quite to the level of sophistication as we've already seen in Vermont. Massachusetts has a very mixed record on environmental protection for reasons that hark back to the old Yankee ethnic rivalry that burned so intensely and so long the ethnics mostly Democrats with Irish in the first rank in terms of political power are the dominant force but this is not prevent of the number of Yankee Republicans from winning major office in the Yankee leaders from a background of fiscal conservatism are also civil libertarians which harks back to their abolitionist ancestry and in recent years they've become rather strong environmentalists on many

policy issues. They are close to the wave of more highly educated less patriot less patronage oriented new Irish of which John Kennedy was the great exemplar with many followers since the political mix has been further influenced by the professional professionals from Massachusetts universities and various high technology service areas. Witches are an articulate group with unusual political influence anywhere in the United States for a group of its nature. Massachusetts has a model Environmental Protection Act modeled after the Federal EPA and it pioneered in wetlands control. But for reasons largely political the ethnic based Democrats controlling the legislature have been leery about giving the Yankee Republican governor the authority he's wanted to solidify relevant services under his newly created cabinet department of environmental affairs. But you see the picture in the very sophisticated state where some of the country's most advanced discussions about environmental and land use planning go on the state government itself is still struggling to coordinate anti-pollution efforts and to start on

the road toward effective land use planning. Connecticut politics have long been marked by political ball control colorful ethnic rivalries in which the old WASP of constantly lost influence and a strong Home Rule tradition. The per capita income of the nation's highest But Connecticut also had hundreds of thousands of blue collar working folk of Irish Italian and Polish background people who are not normally attuned to forward looking social programmes. Connecticut environmental laws up of this decade were a study in fragment of authority. Then came the rise of an environmental coalition kinetic action now of remarkable potency which was headed the course by a by Dan Lufkin a young wasp of Wall Street fame sort of in your elitist environmentalist mold if you would. But in the 171 legislative session where the most important bill was passed in terms of environmental coordination the leadership came from a Democrat named Stanley Packer who was a Polish Catholic liquor

salesman from New Britain and scarcely the picture of the elitist environmentalist the bill that was passed that year created a comprehensive state Department of Environmental Protection with very impressive powers it seems to me over virtually every aspect of pollution control forest and park Lions fishing game flood plain encroachment and coastal wetlands Lufkin became the first commissioner of the new department succeeded by Douglas costal who's a former fellow of the Woodrow Wilson Center we're glad to tell you. And one of our conference members today through its broad powers the Environmental Protection Agency has substantial negative powers in terms of land use control in Connecticut but it lacks the positive controls in terms of laying out guidelines for future development which you probably ought to have. Rhode Island is a picture of arrested political development where the antagonisms of the 1930s linger on a Democratic Catholic ethnic party. Now an overwhelming majority versus a Republican Protestant capitalist party of lesser and lesser numbers. The

ruling Democrats are bread and butter liberals. But social conservatives and they have not had much interest in environmental laws. To be fair one has to say that Rhode Island has faced problems of sheer survival including for instance the massive impact of the Navy pull out in which the incumbent governor and his associates have worked on a quite imaginatively to find replacement jobs. The state has a powerful coastal resources management board but police powers over air and water pollution are submersed within the Department of Health. Rhode Island How does environmental groups but it lacks a large absolute intelligentsia to give them power. Comprehensive land use controls are scarcely in sight. Now any ranking of the six New England states on environmental and land use policies is necessarily subjective and I've probably already going to catch the devil from some of what I've said already but I would like to maybe go a step further and take even more risk by suggesting that in the protection of their natural surroundings Connecticut and Vermont are

the leaders within New England at this point by my perception. Maine and Massachusetts one might put in the middle and New Hampshire and Rhode Island would certainly have to be considered the most retarded on that scale. All of the things to me is important because New England as interdependent as it is is going to have to cope with very real problems of divergent political cultures and state policies if it hopes to form a coherent approach toward assuring the income of peoples and the future of their environment. In our time this afternoon we will turn to some of those problems of government from the state and local level up to the rather amazing group of regional organizations which have sprung into being in New England. But we first have two distinguished panelists to this gust for us the issue of whether New England in terms of its economic environmental futures. Our first speaker is a Dr. James Howe vice president of the First National Bank of Boston. He's a native Texan whose fresh ideas on economic planning have triggered a great deal of fresh thought

in New England in the last few years. In fact I can't think of another economist around the United States and I've been looking rather carefully region by region in the last few years whose views and thinkings are playing such an important part in economic planning and outlook for a major section of the United States. Dr. Howell. Thank you Neal. Good morning you all. Ice particularly fun to be here to see so many of my good New England friends this close to the cell. I feel much more comfortable being practically home. Neil has already made reference to my my nefarious background of being Southern born and Southern educated and Jim Billington reminded me of or reminded you all of his background of being a proud New England there. I'm a proud Southerner of five generations that we started in Georgia and went to Texas and now Boston via Washington. I speak more slowly. You'll probably be able to understand me better here. I have no reverence to New England period. Therefore much of what I say is

very well known to all of you and I don't know why I have to come down here and say it again the old but I'll say it again. Whether New England thinking about that might my might say my friends are often on friend my kin even the globe oer And Lou Larry Collins refer to me as a Jeremiah of New England. Maybe I should be killed after today's remarks I hope not. When thinking about New England's economic future I've want to make it very clear to my fellow panelists this morning that I am for growth. I have been for growth for some time I'm for it today and I'll be for it tomorrow whatever happens. I think I'm for growth because the region's options are closed off and thus making our path clear. If you use it in the understandable language to me a Bill Faulkner as he would almost put it this way New England simply can't afford not to grow. Let's look backward first and when I get to this part part of the text I did have a text of my remarks and I mailed it to Neil in the middle of week and he called me up and said My God under no conditions can you read that it's

far too long and nobody will understand it. Never have anybody been paid. Jim how will such a comment that they couldn't understand what he had to say because of my upbringing. But anyway I've cut it way down and if you'll allow me the luxury of reading just briefly two or three pages then we can get started. Let's begin. It's often been said that I know of no way of judging the future but not the past. As a decade of the 70s began our country was still attempting to recover from a divisive war financed by an unusually sharp monetary expansion. Instead of raising taxes the federal government had chosen to accumulate a long series of deficits. The price level moved steadily in only one direction for the longest period of time in our history. The confluence of economic factors contributed significantly to an erosion of public confidence in the federal government's ability ability to deal effectively with the issues of the day. A virtual financial collapse in the

fall of night dove 73 rapidly plunging plunge the stock market downward as unsound banking practices became increasingly apparent in the long cyclical contraction that followed. Overall demand and real wages diminished. Large segments of the population became restive. One contemporary observer noted Labor's view saying and I quote that there rose a sullen discontent on the part of the great mass of workers and these attempts to seize upon one remedy after another represented part of the dark reverse of the bright shield of industrial prosperity and expansion in quote national psychology reinforce the downward spiral as buyers became more and more selective. Work became harder to obtain even at a reduced real wage. The recession became worse an economic depression set in.

A leading historian wrote in quote reflecting people were painfully aware that in many respects the bicentennial year was an inflorescence infelicitous time for America to place herself on exhibition Not only was economic distress still widespread but the epidemic of political scandal and corruption had not yet fully run its course and quote things of course were not all bad. And one of the mistake of all evidence of a healthy spirit was a forthcoming presidential election. This campaign displayed more aspects of social interests than any contest since 60. The excitement of the ensuing days. Brought out the innate character of the American people as nothing had done since impeachment. Throughout the years the moderation and so Bridey of the American people stood up well against the terrific economic political and social stress. But politics do not make a business cycle and it would be nearly three years before light was visible at the end of the economic tunnel.

And so these years all unemployment still rising. A growing national mood against excess profiteering was plainly visible. Often the more moderate views such as the one that I quote now from a recent from an addition issue of Atlantic Monthly were shouted down but nonetheless listened. Quote If instead of a declaration against the vices of capitalism and the unholy mess of putting one's money in the business and against the short sightedness of misled working people we could have calm discussion of the causes of difference. It would be much better for society and for all concerned individually and quote. What is good for the goose is good for the gander. And neither was Labour's Bayard of national dissatisfaction. One contemporary observer noted quote Trade Unionism attempts to hurt the number of apprentices in any given trade and thereby hopes to keep down the number of competing workmen in quote. As might be expected New Englanders registered a unique response to the

dislocations in the national economy. They Yankee concern with austerity and responsibility was a thread that unified the long cyclical contraction this duality of concern as apparent in the local press. For example in response to the governor's state of the state message in January the globe editorialized and I quote The governor contends him self with presenting a summary of information on state affairs and throwing out him since suggestions rather than making positive recommendations and supporting them with arguments. He shows that we are burdened with heavy debts state county and municipal and that there has been an alarming tendency to excessive expenditures. This is a matter of serious consequences which is not mitigated by the knowledge of other states are just as badly off in quote. What the globe did not limit itself to criticism of the Commonwealth alone. With typical and casual candor the

Globe wrote about the president's State of the Union message quote that it was all modest and unpretending in tone and almost pathetic. And its lack of self assertion. End quote. These two quotes address the mutually interdependent issues of fiscal and political responsibility. They express attitudes and concerns of the time and reflect accurately the accumulation of tensions between the various levels of government and their constituents. Finally these two quotes indicate the force is being carried over into the remainder of the decade. Both were written at the midpoint of the 73 79 depression. That is the 1873 eight hundred seventy nine depression. Let me pause Our Let us pause a moment to consider the purpose and meaning of the historical sleight of hand and its relationship to our. Discussion today namely whether New England in the 1880s. This central issue we're facing today is the

nature and validity of economic forecasting. It's accuracy in the past and perhaps its potential in the future and certainly immediately and most importantly to us today its lessons for New England over the next decade. We are here today to attempt on Ravel the economic dimensions the New England economy and the extent that we can be successfully identify and understand these fundamental determinants. It's been on many factors in my brief comments I've personally drawn out economic issues of national and regional economies a century ago to dramatize the timeless nature of economic problems today. Thus what may be seem to be pressing issues of our times have been pressing issues in a market economy from the virtual beginnings of the industrialized society a century ago. These handful of issues seemingly have their own momentum and it is apparent today. And if our assessment is their own changing nature is accurate then they will continue to dominate our behavior over the next decade. Before we look at these issues

how about forecasting the 80s. That is the 1880s from the 70s. If one were forecasting the economy the national economy from the vantage of the eighteen seventies and looking into the 1880s you would almost scratch the surface of anyone and you would reach a most obvious conclusion. Whatever happened in the 70s would carry over into the 80s. Using time series analysis we made such a trend forecast for a number of key variables wages prices output business failures. The errors were enormous ranging from an understatement of 34 percent to an overstatement of 56 percent. These forecasting errors are great. They are so great to raise serious questions about quantitative forecasting period. Therefore let's cut through the economy trick recurse event and reiterate

rhetoric. I won't say that but once in the morning in my opinion there are two issues above all others that affect whether New England first is the role of government especially state and local government and its impact on the private sector. Second the response or interaction of the private sector to state and local government as we see these are the two issues their interaction that provides support for my principal conclusion that we must grow in New England. Let's look at the first state and local government. I think there are two dimensions to state and local government. One and first is the process of what I choose to call cumulative encroachment on the private sector. Consider these statistics just briefly from 1939 until today. Federal civilian employment has had a constant share of employment in the country as a whole. If you look at the statistics there are about 2.3 percent showing almost no variation.

That's not so for state and local government. In 1939 nationally state local governments share of employment and income is not different. What about 10 percent and today it's risen to 15 percent and all of the data don't go back quite so far for New England the trend is quite similar. Thus we must conclude first that state and local government is rapidly increasing its share of the economy. And second New England and the United States show quite similar patterns despite the fact namely this similarity. The similarity of state and local encroachment on the private sector government state and local government troubles New-Englanders greatly as I've indicated from an earlier quote from The Boston Globe. A century ago it troubles New Englanders today. My troll things around and tub thumping in the England over the last three or four years tell me that state and local government bothers New-Englanders greatly in my paper we had

developed the following hypothesis namely that state and local government changed dramatically as the region passes from early industrialization to economic maturity and then surely state and local government a small highly responsive to the private sector always lagging behind change in the private sector. Finally as a state of economic maturity is reached. Manufacturing of course is declining and state level local government takes on an entirely new dimension. That is it develops its own momentum to its own constituency and it leads economic progress to be sure. Part of it is still responsive building bridges creating highways and so forth. But increasingly a larger proportions of state and local government grow on their own. We tested this hypothesis with cross-sectional data from 18 New England cities and

towns in the economically material area and twenty two Southern cities and towns among the South and the Deep South in the Atlantic seaboard. We concluded from this analysis which is outlined in some detail in my complete text which Neil did not want me to read. That in New England state and local government is only statistically significant as an independent variable not as a response a beep in a variable and as expected exactly opposite was the case in the dynamically going south. Namely that state and local government was a deep into variable and lag behind economic change in the private sector. Let's bear down hard on this point and stay with me for a minute. Two closely related points come from the analysis. First of all that the multipliers from state and local government decline over time. In other words the impact of state local government used as an independent variable declines over time.

Why I think that the rationale for this is a shift in the spending mix as economic maturity set Sam away from a highly complimentary infrastructure investment in roads and bridges which by now are already brought into place in a mature society. To an economy wide programs that are involved in principally income redistribution and thus a lower secondary impact. Second and remember this the future growth of state and local government in New England. Our economy for that matter depends on a dynamic private sector with a growing tax base. But today in New England there's a declining manufacturing sector and this means higher taxation. Thank you for that some sort of New England reminder as to I'm supposed to be finished by now. A declining manufacturing sector means higher taxation on those that

are left and thus it sets in time into motion a cumulative destruction destructive process that could conceivably lead to economic nothingness. Thus we much can must conclude that a balance between a growing private sector and a growing public sector is crucial if this balance is not maintained. New England could slip off into a fundamental structural imbalance and possibly become a minor footnote in the dynamic affairs of our nation. No. Well I said growing private sector. Must not let us. We're faced with the opportunity in the argument that one often hears. Let's get rid of the residual manufacturing we don't like it anyway and it pollutes the viewpoint of many web footed environmentalist. We can make it on services alone in our mature economy. Listen carefully in my opinion there are three reasons why it is a it is obligatory to nurture the

growth in manufacturing. Point number one most service activity is exportable only for short distances only a few miles. Consider the reason for this Tuesday very clear that substitutes are readily available in other markets. Consider printing one come to Boston for example boxing job if one were in Washington would one go to Boston if one were in Pittsfield to have one on one's arm set if it were broken. Service is can only be exported short distances. Point number two manufacturing generally generates a higher value per unit of output thus allowing us to more easily continue to support and this is terribly important in my opinion to continue to support the social programs that are already on the books. Services alone would dramatically lower the existing ceiling on state and local spending and mean that many of the equity issues that we've been facing in attempting to ameliorate would no longer be would

would be constrained in doing so. Point number three I think the composition of the demographic factors of the mass of the manufacturing labor force in New England today are such that we have in my Baptist upbringing almost a moral obligation to nurture manufacturing by my count there two hundred fifty six thousand two hundred workers today in a labor intensive industries. That's about 20 percent of manufacturing. If you look at the age composition of those workers for one reason or another because they have been in manufacturing they are either going to spend the rest of their career in manufacturing or are on welfare. We cannot retrain them to be tellers or bank lending officers. We have a responsibility to provide these manufacturing workers a manufacturing job and that demand is going to continue for another couple to three decades. Now the sharp cleavage between business and state local government comes into view. A

growing balance must be sought between government and not only the private sector but especially manufacturing. And this above all others is a task of economic power policy in the decade ahead. To be sure there are other issues and I discussed these in my paper such as the capital labor mix unionism the export of capital the minimum wage and energy and industrial attraction especially in Europe. But it is the balance that is crucial. And very briefly it has a final dimension working out of this balance. Our maintenance of this balance could be very easy if attitudes between these two sectors sectors were good but they're not. You know what and I know it. Years of inattention of the private sector years of lack of concern years of aggressive social legislation and years of encroachment have meant that their poor attitude between the business sector and the government sector consider these data although they're only although they're two years old and they're only for the Commonwealth of Massachusetts we took a survey

about attitudes of manufacturers toward state and local government and we found out the following. Two years ago 88 percent of those that responded said the governor was ineffective in dealing with manufacturing in the Commonwealth. Ninety six percent said the General Court was not attuned to the private sector are manufacturing local if issues. Officials fared somewhat better. Fifty percent said they were doing a pretty good job in other states around New England talking with business and labor and governmental lever leaders. I find similar attitude. Now let's conclude the continuation of growth in state and local government. State local government will grow and to be sure it will continue to stimulate new growth in the service sector. No question about it. This impetus cannot be sustained indefinitely. Our path is less clear. There are no other options. Regional Economic Policy must make growth and a significant part of this must be in manufacturing. This

is the crucial balance that our region is faced with today. There's no better place to conclude in the wisdom of King Solomon Solomon set a false weight a false balance is the abomination of the lard but to just wait is his delight today and in the next decade in New England we must strive for that just wait. Thank you. Thank you Dr. Howell I feel a little bit like the ogre that has deprived all of you of another hour of sound statistical analysis which would have been every point down positively if there are copies of Dr House paper or there were over on the table over there and in our final version of this conference I'm sure we'll be able to reinsert some material that he had to delete. Our other speaker this morning on whether New England is one who's been with us before including for our very important conference on the Limits to Growth which was held here two years ago over two and a half years ago. He's a Professor

Denis Mehta of who was a co-author of the book on the limits to growth and a member of the group that did that study for the Club of Rome. Presently has a New England base and he's looking from a little bit less of a global scale to more of a local or even in this case the instant case of lot of the work he's doing right now if they'd scale in terms of a study on future land use patterns for Vermont. He's presently the co-director of that Dartmouth study group. He's at the Thayer school at Dartmouth College and Dennis were very pleased to have you here. Thank you very much Neal. I must confess some admiration at the way you seem to have brought a juxtaposition of views to this first session in the morning. I am from the north. I'm against growth. I look to the future rather than the past for some guidance

about what we ought to be doing today. And I will focus not on money flows but on matter and energy which it seems to me will have to be ultimately accommodated within our political theories. The force of time will preclude the customary disclaimers or the ability to accurately project the future. Let me simply indicate that the strong and in some cases rather negative statements I will make about the future. Probably will not be fulfilled in detail but are well enough based on current trends that we ought to begin taking them into account as we map out the institutions and the policies which are going to have a very profound influence on New England over the next 30 years. I am in favor of growth to the extent that that is an

option where it is not. It seems to me the better course of wisdom to acknowledge constraints and begin preparing for a transition to demographic immaterial equilibrium growth is going to stop in this country and it is certainly going to stop in New England and it will stop over the time period which will be influenced by the decisions we make now. So we certainly have. It seems ethically to take that into our calculations. I would rather look to the future than the past because it seems to me that the mid part of the last century is deficient in a number of important ways as a basis for analogy at that time. We had unprecedented international freedom to pursue domestic policies today as we well know. At every turn our institutional and financial policies here are curtailed by their international effects. We had

a period of very substantial population and institutional growth ahead of us. We can no longer suspect that that's the case. And finally we were still just at the very beginning of exploiting one of the most generous natural resource and balance given to any nation on earth. And today we are well into the depletion phase of that exploitation cycle. Let me focus my remarks on a number of trends. Some of them are exogamous to New England and some of them are being forced on our Even on us even from outside our national boundaries. And I will seek to understand and suggest as a mental exercise for you the interpretation of how these trends will differentially affect New England or the other regions of the country.

It was customary to. Expect that the US population might grow as much as another 70 million people before it finally stabilized. Demographic forecasting has always been a hazardous occupation but I would feel rather confident in suggesting that this country will have to accommodate something between 20 and 30 or 40 million people at most. Over the next 30 years and that therefore the pressures on the undeveloped areas of the country are going to be somewhat less than they might otherwise have been expected to be. Energy is a trend whose broad outlines now are very clear at least for the rest of this century. We're in the middle stages nationally of an energy scarcity which will intensify. Sometimes slowly and sometimes with discrete inputs from the. Arabs through into the period of 1985 or 95.

Indeed I would say there's a better than even chance that this country will have to accommodate date itself to a declining absolute level of energy consumption starting in the early 80s. Nuclear reactors have been relied upon very heavily in New England as a source of future power. I don't think that they will grow to assume the dominant position which has been anticipated social and technical problems will probably block that growth. Fossil fuel imports will probably by the early 80s be below current levels in absolute terms. And that leaves us only with coal as the dominant energy input to this country for the period between now and perhaps 2020 or 2030 when the so-called ultimate sources fusion geothermal solar and other as yet unidentified technologies can begin to have real impact. The main growth in coal will come not from the east or off

the East Coast as the dominant growth in energy has been over the last few years with the growing importance of oil imports but from the west. These terrible reserves are not infinite but they will be the major source of energy inputs between now and perhaps 2010. That energy will gradually work its way into New England either through high power transmission lines through unit coal trains or through pipelines which carry some sort of synthetic liquid derived from coal and any of those events it seems that New England is likely to be even worse off. In terms of energy with respect to the rest of the country than it has been over the last 15 or 20 years. The best guess is that energy will become even more important as a input. And my group would suggest that absolute energy prices in real terms will either double or triple between now and the end of the century. That of course will

substantially increase the cost of transportation. But the process heat which is important for heavy industry and will also have a strong impact on agriculture. So far as I can interpret the impact it's likely to further decrease the competitiveness of New England in the manufacturing industries which are either reliant on process heat or transportation. So it should have a positive influence on agriculture as labor intensive agriculture near to the sources of concern to the point of consumption becomes relatively more attractive. The second trend which appears evident for the next 30 years is that increasing communication technologies will substantially reduce the economies of scale that have led to the geographic concentration of our major financial and other large scale services. That leaves us then in New England with services which are land based

recreation provision of food and fourth products. Another trend which is only beginning to emerge in about which it's not yet possible to be very precise has to do with our climate. There is increasing evidence that the period in the middle of the 20th century. Is absolutely unique in the history of. Or let's say very very rare in the history of our continent. Facilitating. Agriculture to a degree not very often possible on this continent at least in geological times spans. Apparently the climate has been cooling off since about 1970 and the rate of cooling is proceeding at really quite an astonishingly rapid rate. Certainly fast enough to substantially reduce the growing season in the northern part of the country. If it's sustained through the rest of the 20th century

as one who tries to wet rest. A few tomatoes from my stony soil every summer and who finds it always to be a race. Against the first frost in early September I can suggest on a firsthand basis that any trend of this sort will have a substantial impact on New England. These trends should accelerate another one. Land prices are likely to decline in New England. Back down to levels much more in consonance with the true productive value of the land. As many of you know the major component of land prices in many areas of New England has been its speculative value. The vast majority of second home sites are never built upon simply held in anticipation of future gains. There are some preliminary evidence that over the last year or two the land prices have stabilized and may indeed already be declining. I don't

think that that is a short term security effect but it will persist through the rest of the century. The data are somewhat ambiguous but Vermont for example reported a 25 percent decline in its attacks from land transactions over the last year. Of course that can come not only from the volume but also from the price of land and it will take a little bit longer to see which of those two components is more important. These trends. May tend to facilitate another which is at the moment still very slight but could grow in importance and that is the inward migration to New England of people who want to live off the land and wish to decouple from the large technical and social system which evolved in this country. The economics of the situation probably dictate that that group will never become numerically very large and probably its political importance will be even less

since this group of people tends fine arts not to become actively involved in politics. But it's an interesting trend and one which could have some coloring of the future of the region. Given that population growth is going to stop and assuming with some basis in fact that material growth is likely also to stop in New England over the next 30 years another trend will be the increasing difficulty of maintaining the economic and social infrastructure which is already present in the region. It is always true that when you shift from a growth to a period to a period of equilibrium the average age of the items which are flowing through your system tends to increase. People on the average will become older as the population stabilizes. Roads will grow older and in both cases more maintenance will be required so that the burden imposes on the relatively smaller

productive part of the population will grow. Looking at this set of trends one could perhaps legitimately Esquire I live in New England. The reason many people have chosen to live in New England is because it offers a set of amine a nice and very different from those which are available other you know other places much inferior in some respects much superior in still others. During the 60s this country was able to convince itself that it was moving a century towards a homogenization. We were putting all the races together in one melting pot we were slowly taking the post-industrial society across very evenly. The entire country. I think that the substantial increase in energy costs will arrest that trend and that rather than be troubled by that we should

look for the opportunity of maintaining in this country through our policies in New England and elsewhere. An attribute which has always been its great strength and that is certain diversity of certain difference in point of view variability in the modes of economic occupation and recreation. I find it very difficult to understand precisely how these trends will resolve themselves in New England had I to guess I would say that there will be increasing pull there already. It's a large fraction of the population clustered in urban areas where transportation costs and other services are relatively easy to provide engaged in services associated with education. Some high technology activity. Perhaps it's still the rendering of financial assistance through. Insurance and other activities and up much larger though still in relative terms small population diffused father across the land

engaged in activities which place it really at the periphery of an industrial society. Achieving their own goals not really depending on anybody else for very much and maintaining a culture which has always been associated with and we thank you. You've been listening to the keynote addresses from a conference titled The prospects for a New England sponsored by the Woodrow Wilson International Center for Scholars in Washington D.C. speakers where Wilson fellow Neal Peirce James Howell vice president of the First National Bank of Boston and Dennis Meadows author of The Limits to Growth. Our thanks go to Neil Pearson the Woodrow Wilson Center for making the recordings of these sessions available to us. This is Bella's year and this is the Maine Public Broadcasting Network.