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What RIPEC’s report doesn’t say

September 27, 2012

So there is yet another tome out dissecting Rhode Island’s economic woes. RIPR political analyst Scott MacKay talks about what the big Rhode Island Public Expenditure report didn’t say.

If Rhode Island was a shelf, it would collapse under the weight of all the blue-ribbon commission reports written over the years about our state’s foundering economy. Since the infamous Greenhouse Compact of 1984, which was an attempt at a state industrial policy, the wonks, politicians, academics and economic thinkers have cleared entire Canadian provinces of trees to publish white papers and dense reports on how to heal the sickest economy in New England.

Now comes RIPEC, a business-financed government research hothouse, with the latest assessment of our state’s economy. Designed to address the utter failure of state economic development efforts, this report was done in reaction to former Don Carcieri’s ill-fated $75 million taxpayer-backed loan to Curt Schilling’s 38 Studios.

Some of the recommendations in the RIPEC report are no-brainers: making state development efforts more accountable to the governor, integrating job-training efforts and bringing business regulation into the 21st Century. Too many business men and women complain that their interactions with government come from the Department of Redundancy Department.

But other recommendations need serious scrutiny. For example, the idea that the director of the Department of Environmental Management should report to a new economic czar in state government should raise all sorts of red flags. Rhode Island’s devotion to environmental protection should never be sacrificed to the short-term imperatives of   industry.

In this realm, our state can learn from past mistakes. For years, jewelry and textile companies were allowed to use Narragansett Bay as an open sewer. It has cost taxpayers billions to clean up that pollution.

In the 1950s, when every week brought news of a textile firm moving south, state government backed a plan to build a huge oil refinery in Jamestown. The refinery deal met defeat when wealthy Newporters and the nascent environmental movement went to federal court. Years later, when Gov. Dennis Roberts was asked why he supported the refinery, he said that the state was desperate for jobs. In a state whose economy is wedded to tourism, just think what a refinery belching smoky pollution would have done to fishing and sailing on the Bay.

Rhode Island is once again in a deep economic rut, with the nation’s second-highest unemployment rate.

Turning this around will take years and smart investments by both government and citizens. It will  take much more than moving the economic development pieces around a government chess board.

While the RIPEC report concentrated on process and government reorganization, it really didn’t touch on the deeper diseases that afflict our tiny state. One of  the saddest legacies of Carcieri’s two terms as governor was the dramatic cut in state support for the University of Rhode Island, which trains the workers of the future. Another doleful piece of news came last week with the release of SAT scores. Not only does the state lag behind the national average, we are also behind the average of the six New England states. Woefully, Rhode Island scrapes the bottom of the barrel with the lowest participation rate among students taking the college-entrance exam in New England.

Rhode Island will never be a relevant player in a 21st Century economy without a well-educated workforce.

Other hurdles are more easily scaled, if only the politicians would cooperate. We must stop the crony-capitalism deals that led to the Alpha-Beta bio tech fiasco in the 1990s and the Schilling-Carcieri mess. Targeted tax cuts sometimes work; eliminating passive investment taxes lured Fidelity here under former Gov. Lincoln Almond and the historic tax credits generated jobs and cemented Rhode Island’s reputation as a national leader in historic preservation.

Rhode Islanders need to understand that governments don’t create jobs. Government can establish the conditions for a healthy  economy by making smart investments in roads, schools, ports, bridges, highways and the environment. But people have to take personal responsibility. Look in the mirror: if you or your children don’t have the skills to compete in the new job market, go get them. Don’t expect the government to bail you out.

A more elusive but important goal is an issue no one in the business or political hierarchy speaks about publicly: the need for leadership from the business community. Two decades ago, such leaders as banker Terry Murray and the late Providence Journal publishers Michael Metcalf and Stephen Hamblett stepped to the plate to steer economic advances. Murray was a crucial player in the Greenhouse Compact and it was his idea to change the tax system to bring Fidelity to Smithfield. And Murray, Metcalf and Hamblett were influential forces in the rebirth of Providence and construction of the Providence Place Mall.

Where is the new generation of such leaders?

3 Comments leave one →
  1. September 28, 2012 3:14 am

    Overall, this is a good analysis of RIPEC’s heavily biased report. But “Governments don’t create jobs”? That’s a pretty severe misunderstanding of economics, especially when it comes to our state. Governments very much do employ people, and the people they employ spend their salaries in the broader economy, boosting demand and creating more jobs. Plus, much of the work government employees do (say educating kids or preventing crime) is very good for the economy. So when the government lays tons of people off during a crash, the economy underperforms. This is, of course, what happened in Rhode Island. We had the second highest per capita public sector layoffs in the country, losing 7.75% of state and local workers. Not coincidentally, we have wound up with the second highest unemployment rate in the country.

    Of course, this isn’t the whole story. For instance, huge property tax hikes dumped a massive tax burden on businesses, especially small ones, and working families took a pretty huge hit as well.

  2. September 28, 2012 4:01 pm

    Thanks Sam. Thoughtful comment

  3. barry permalink
    September 28, 2012 7:01 pm

    I think the point about little obusiness leadership relates the selling off of local businesses to faraway coprorations. Murry and Hamblett noted above worked for Fleet and the Providence Journal, no longer locally owned. Citizens, Soveriegn, National grid, Stop and Shop are now owned by foreign companies whose interest is RI is inevitably only as a profit center. When a Grid forerunner, Providence Gas Co, was local, its head, Jim Dodge, co-founded Grow Smart RI in part to help restore downtown Providence, but National Grid has completely moved out of their city office building, you cannot even pay a National Grid bill downtown any more!

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