After several months of more-or-less positive jobs numbers in RI, the last two months have been anything but. And the December numbers were, frankly, horrific. While it is certainly true that a wonk could parse [spin] the recent down-turn toward neutral, the same could be done with the previous up-cycle.
As the wonk that could do either, let me tell you this: the jobs scene in RI is bad. Damn bad. Later, I’ll parse these numbers to show how bad things really are.
Unlike my usual polemics, I’m not going to rant as if there were some obvious course of action on which pols are unwilling to act [even though that's been true for decades]. At this point, I don’t have a lot of answers, just one brutal, ugly question: where do we go from here?
So, enough with the introductory niceties; let’s have at.
RI’s Jobs Numbers Since the Economic Collapse
Before we can talk about our numbers since the collapse, we need to appreciate that the mid-00′s were the best economic times RI had seen in decades. Of the main jobs indicators, all of them – labor force, employment and unemployment – topped out in 2006/2007. Being the Biggest Little, we need to accept that we largely rise and fall on the national trend. Or at least, we rise on it.
The lead graphic shows how most industrial sectors were basically flat 2001 to 2008 with these notable exceptions: education and health care exploded while manufacturing continued its decades-long collapse. [Source: BLS]
Ed/Health has held its gains since the collapse while professional services and hospitality, which showed solid gains to 2008, have only modest declines since. Construction, not surprisingly, along with government employment, financial services and trades, transportation and utilities (TTU) have sloped off badly.
It’s important to note that I haven’t parsed the contribution of construction in RI relative to other states, but given the collapse of manufacturing, it is at best a secondary impediment.
Long story short: our problems today are the same as our problems 20 years ago – manufacturing is dying, and we have not yet found a way to replace those jobs.
The Recent Horrors
For most of this year, we followed or even amplified the national trend downward until October, when we hit some kind of top and turned counter-trend. In the fourth quarter of 2011, we diverged almost a full percentage point from the national average.
That, my friends, is some ugly shit.
Granted, I could spin these declines toward neutral, but just as easily could I spin the gains toward neutral. The gains were mostly declines in the labor force – that is, people who say they’re looking for jobs – while the declines were gains in the same.
Long story short: we’re not creating jobs, we’re treading water. People dropped out and then dropped in again.
I probably should have mentioned that we need to create 40,000 jobs to get back to “full employment”. 40,000 jobs on a basis of just over 500,000 employed means 1 new job for every 12.5 that currently exist. It’s a giant number.
But wait…it gets worse.
The Current Situation
Look at this jobs board. Plenty jobs listed, for a certain kind of worker. These are all full-time jobs, and they are recent listings. Even ones from months ago may still be unfilled. This state lacks highly educated workers. In fact, we lack moderately educated workers – we import welders. Not Ruby on Rails developers – welders!
That’s the situation. RI’s historic under-investment in education has yielded a work force ill-prepared to face the current economy, much less the emerging one. [See above under collapse of manufacturing sector.]
To be sure, if you drive an automobile on an elevated highway, it’s important that welders that construct the steel-on-steel joints that support the reinforced concrete substrates that hold the gloriously smooth asphalt on which you drive understand the operational parameters of joint strength relative to weld length and depth as that applies to steel grade and thickness.
“Welder” does not equal “ignoramus”. If it did, you’d be dead. [If welder had ever equaled ignoramus, he or she would be dead. Welding is, you know, dangerous. Go pick up a torch some time...]
So we need a range of workers, and we import some of them from India or Slovakia or Colombia. Meanwhile, we export highly educated workers to such remote locations as Massachusetts.
But none of that does Jack Squat for our unemployment numbers. Why? Sadly, that answer is all too simple.
Our Prospects
Long ago on a blog far, far away, I wrote a post called “Our Prospects for Economic Growth”. And that post was just as cheery as this one. The cold, hard fact is that the RI’s unemployed are poorly suited to those scant jobs our economy is creating.
This state’s historic disinvestment in education has created a self-reinforcing feedback loop in which jobs exist for imports, and local don’t get jobs. I call this phenomenon “government at war with its population”. If you don’t have an advanced degree, they want you to go away…to some other place where people like you live. While the cities of Pawtucket and Woonsocket (and the ex-government of Central Falls) exemplify this trend, the RI state government proves it out, as well.
To the long-term denizens of the State House, “welder” – challenging as that job might be – is not good enough for them. They want you to have an advanced degree in micro-biology, computer science or (choir of angels) business management before they’ll say you’re RI material. [Note: Financial Services is among the employment sectors that collapsed, much to Smithfield's chagrin regarding the enormously expensive and now only partially occupied Fidelity campus.]
Except this: RI has an unemployment rate of 10.8% as of this writing, and those people lack substantial education. What’s to do?
Non-Snarky, Future-Oriented Discussion
This state needs to recognize the fact that we’ve got a serious problem, and it’s not going to fix itself. It requires action – immediate, meaningful action. Here are some things I think we can look to create some jobs at the lower end of the wage/education scale.
Get our heads around the “1099 economy” – Having been self-employed for about a decade, I know that it doesn’t really matter if you have “a job” so long as you have “work”. But the deck is stacked badly against the 1099-ers. From health insurance to FICA, you pay a serious penalty when you try to strike out on your own. The Powers that Be have only recently become aware that there is such a thing as the 1099 economy, so they’re still getting up to speed on what it means and how they can help move it forward. Recent changes to the RI EDC Board of Directors certainly help, but they need to be far more aggressive about making this happen.
Fulfill our “Arts and Entertainment” Promise with a Downcity Casino - Like it or not, Providence is known as a party town, and we should build that out for all it’s worth. Despite all it’s challenges and downsides, I think it’s possible for us to “do a casino right” so that we get maximum benefits. And we should go the whole hog, including the postage. We should take a serious look at developing looser rules around the vice trades in which government oversight and monitoring keeps the criminal element at bay. In simple terms, we take a more Cuban or Dutch approach to the sex trades where pimps are replaced by health services.
Sell “War-on-Joblessness” Bonds that Fund Infrastructure – The same way the US sold War Bonds in the 2oth century, we sell bonds to fund the infrastructure critical to a thriving economy. Because we’re not auctioning bonds on the market but selling them directly, we can set the interest rate where ever we want it. The payoff for investors is more moral than financial. Crazy-talk, I know, but it could happen.
Take Another Look at “Dirty” Industries – The new metals recycling operation on Allens Ave is the kind of “working waterfront” thing we would do well to expand on. Garbage is big business, and it’s the kind of unglamorous industry that nobody goes after. Like the casino, it’s disastrous if done wrong, but brilliant if done right. I’m actually a connoisseur of dumps, so I’ve visited or read about some very advanced operations.
What else? My ideas aren’t the only possibilities. But whatever we talk about doing, it has to focus right down on the kind of jobs we need, not the kind of jobs we want.
Frymaster -
Our economic future in Hookers, Gambling and Trash? Sounds like you could be the new gubernatorial campaign manager for Mr. Patriarca :-)
What have you got, Fred? Seriously, I’m open…
Right-on, Frymaster!
I think we’re moving towards a ’1099 economy’, especially in areas like ours that are urban and ‘hip’. We need to change the way government works to facilitate this.
As far as casinos, I think you’re exactly right that we need one downtown where it would bolster the core and live on existing infrastructure, instead of providing property tax abatement for a single suburb.. I don’t think we should try to compete with Foxwoods; instead, we could issue five (to start) permits (at auction!) for private gaming facilities not holding more than 300 persons each. Small, ‘gaming parlors’ that would reflect the demands of different audiences and become ‘part of a night out in Providence’ instead of a destination megaplex that people are stuck in.
I’d actually like to see the Port of Providence moved down to Quonset, where it Just Makes More Sense, and expanded to include waste processing. I’m pretty confident that in the 21st century we’re going to actually be mining the landfill for materials, may as well put big reprocessing facilities near the port. Inside Providence, the port is an eyesore and an environmental disaster waiting to happen.
Expanding the airport to allow flights to the West Coast is a no-brainer.
What can be done with the ‘mill space’ that’s still left? Loosen the three-tier liquor laws and get breweries in here. Microbrewing works in those spaces.
As for easing things for the 1099ers… Detach RI’s taxes from the federal form and do something simpler and more progressive, then use proceeds to reduce fees. Implement a statewide ‘public option’ healthcare that people can opt into. Offer student loans or scholarships ONLY for programs that are projected to be in demand, and forgive the loans a bit for every year people work in RI.
I like it. Good to see you back, mangeek!
Frymaster,
I like the suggestions from you and Mangeek regarding the realities of the 1099 world, expanding the airport, and thinking more creatively about the port. The other best ideas are initiatives you are unlikely to support. We have the highest property taxes of anywhere in the country except Detroit and our other taxes are out of control also. Our regulatory hurdles for developing, building or upgrading any facility are insane. Our legislature is far too heavily influenced by public employee unions. The solutions to those problems peak for themselves. They are solutions that truly progressive democrats should embrace, because even though they are typically associated with others, reducing the tax and regulatory burdens in the state is the only way we will get the economy moving and a healthy economy is the only way we will ever see any actual progress. Its not a quick easy fix like hookers and slot machines unfortunately.
Fred
Starting from the back to the front… Dutch- or Cuban-style prostitution is in no way easy. Nor would a well-specified casino be. I’d steer away from the slots and focus on the table action and the sports book. Keep it classy! lolz
Regarding regulation and permitting, we could certainly have a conversation about rationalizing that situation, streamlining, automating and creating accountability for the regulating entities. I actually learned some horrific stuff in one volunteer project I did, but not for sharing here.
I agree that in some regards we’re driving a box truck with a giant sail on top and then trying to compete in F1. But, as I mentioned on the old blog, when it comes to developing technology solutions to these issues, the decision-makers are way over their heads. So we end up with an over-priced, vendor-driven kluge that “makes sense” to the muckety mucks because it sounds like something they understand. “Nobody ever got fired for choosing Microsoft.” But they should.
That certainly will have an impact, although I doubt it’s as great as you think.
Now, taxes… Let’s just go slowly and carefully, okay? There is so much stupid in the way taxes are structured that it doesn’t really matter how much we pay because it’s always going to the wrong place. Property taxes are the tax of last resort for municipalities. Sales tax is regressive in the extreme. Income taxes mostly go to the Feds and, in a state as small as ours, to our neighbors. At various times, I’ve paid for roads in CT and MA more than roads in RI.
The fact of the matter is that we’re largely powerless to impact this on our own. I know a lot of people bitch about paying taxes, but you’ve never heard me do it. And I’m just getting over a Republican-style tax problem. I could bitch alongside Righty…but I don’t.
Vilifying public employee unions will get you nowhere with me – there is no more tyrannical boss that The People. I saw a comment of a local MSM site saying that public employees should be paid a flat-rate percentage of the average wage. I believe that percentage was 50. Do you really want the comptroller and the director of IT to get paid $20k or whatever that would work out to be? And if you know any public school teachers, you know how horrid that job has become. (Note: THAT is the root of our problem.)
So, yeah, we could improve things, but I don’t see that creating 40,000 living wage jobs.
And you do know that the point here is to come up with creative, realistic ideas to create a large amount of jobs.
Maybe we should listen to why businesses say they are unwilling to relocate or expand into Rhode Island. The subjects of “overregulation,” “overtaxation,” and “corruption” will probably come up a few times during those conversations.
Nah, what do businesses know about their own economic situations and motivations… better to centrally plan Rhode Island’s economic growth through government investment in “hot” areas that fluctuate from decade to decade, issue more bonds and loans, etc. After all, with a bunch of self-proclaimed “wonks” advising the shots, how could the state ever go wrong?
In my circle, it’s not too much regulation but opaque, confusing and poorly managed regulation that’s the problem. Any business can and will deal with any regulation. What they (we) hate is confusion and surprises – to find out late in the game that you failed to jump through this or that hoop. Just tell us up front ALL the crap we have to go through and we’ll deal.
I don’t know of anybody who’s ever made a serious business decision based on tax rates. It is SO marginal to a business plan that it’s never come up once. I’ve been in entrepreneurial situations in some of the most taxed states in the US – VT, CT, RI, MA and CA. NYC, by extension but not direct. That argument is a load of crap.
Corruption – that is a problem that we ALL can agree degrades our attractiveness. Not only does it directly dissuade investment, but it indirectly drags us down because incompetent people get put in important positions. Anti-nepotism and transparency MUST be implemented. On this score, your Frymaster is likely to be part of the solution in one local area.
Seriously, Righty, this is my wheelhouse. Tomorrow morning I will go to my office in a factory in MA Blackstone Valley. It’s an integrated, engineering-based company that does everything from R&D through manufacturing and sales under “one roof”. (In truth, engineering and admin are in one part of the mill complex and manufacturing is down at the other end.) The company is owned by a mid-tier private equity group and I’m part of the turn-around team. I have responsibility for global marketing. Our sales in the Asia/Pacific region more-or-less doubled last year to about $10mm. I’ve been part of start-ups and know the difference between seed, angel, venture and mezzanine finance. Most companies I work with are at or get up to the $100mm range. Every person reading this blog has experienced our products somewhere, even though none of you have ever heard of the brand. Steven Tyler’s National Anthem this afternoon — we’re in there in a giant way!
I don’t speak theoretically but from years of experience.
“In my circle, it’s not too much regulation but opaque, confusing and poorly managed regulation that’s the problem.”
I basically agree but don’t draw a hard distinction between the two, i.e., if it’s confusing and poorly managed then it’s extraneous by definition and just get rid of it. Michael Morse had an op-ed a year or two ago in the ProJo and on Anchor Rising, the point of which was basically, “Hey, I just started a small business in Rhode Island and it was super easy. People are just complainers after all!” Then the RI “boiler inspectors” and such showed up, cited him, and started shaking him down for all kinds of fees and nonsense. His business-related op-eds now read more like, “For the love of God, leave us small businesses alone!” I have no sympathy there – opening a small business in Rhode Island at this point is like building a sandcastle on a sandbar at low tide. Just build in a sane state with a low deficit, a good labor environment, and stable business policies. Lots to choose from.
“I don’t know of anybody who’s ever made a serious business decision based on tax rates.”
It’s seldom “the” deciding factor, but a business would be crazy not to consider it like any other fixed cost. I seriously doubt any business would treat it as irrelevant, and when Rhode Island has so little going for it to begin with, it becomes all the more important. It should be Rhode Island’s draw, not its repulsion. New Hampshire, for example, has an aggressive recruitment campaign for businesses located nearby across the border in Massachusetts. Based on a number of articles I’ve read and interviews with business owners that did decide to make the move, their main pitch is low taxes and it’s a persuasive sell, all other things being equal.
We’ll likely disagree on corruption – not whether it is good or bad, obviously, but from where it stems in Rhode Island. Single-party legislative rule for 70+ years certainly doesn’t help, but a lot of the things progressive think government should be doing more of, e.g. loans to small businesses/”green” firms, subsidization of nonprofits, legislative grants, etc. are so inherently ripe for corruption that it is practically the inevitable result. Oversight is not a realistic solution either. My solution is less power and less money in the hands of government officials and there will be fewer favors worth buying from the insider class. Beyond that, I don’t know what can be done since the AG’s office is run like a political dumping ground.
You don’t have to sell me on your experience or credentials. I don’t question them, but they’re not really relevant to me on this issue. I simply don’t accept that Rhode Island’s chronic and severe economic problems can be solved by a few “enlightened” individuals or “wonks” taking turns directing public funding to the right areas based on educated guesses and their own personal whims. Most economic issues are legitimately debatable, but what is not debatable is that central economic planning doesn’t work. If history has taught us anything, it has taught us that.
In other words, maybe RI should expand its airport. Maybe RI should expand its dock operations. Maybe RI should invest more in gambling facilities. But maybe it *shouldn’t*, and the best people to have the kind of dispersed, in-depth, and up-to-date knowledge to make those decisions are not a bunch of self-proclaimed “policy experts” in a conference room at the state house. It’s good to know a lot about a subject, but far more important is to acknowledge what you don’t know and what is fundamentally not knowable. I don’t think any one person can “know” where the Rhode Island economy should direct its resources any more than they can accurately predict the price of oil 10 years from now (but government agencies still try – and fail over and over).
Well, that’s the way the old expression goes, right? If it’s actually broken, don’t fix it.
Or is it that other one: if you just ignore the problem, it will go away by itself.
That’s just the difference between your narrative of what ails the state and my own. I don’t consider removing obstacles to economic growth to be ignoring the problem. Quite the contrary.
But your narrative does not hold up to serious analysis. If lower taxation, “less government” and a lack of regulation were actually the keys to a prosperous economy, I wouldn’t be mentally preparing myself for the crap I’m going to take next week when I go to Europe. By every possible measure, the northern Europeans kick our asses up and down the block. Their economies are more dynamic than ours, not less. And they do this with twice our taxation and very stringent regulation.
There was an article in the NY Times Sunday mag in 2009 or so called Going Dutch, written by a staunch conservative who got transferred to Holland. At first, he bristled against the high tax rate – 75%! But then, when the checks started to arrive, he softened considerably – especially the check that came with the explicit instructions “take a vacation as required by law”. Those folks do a damn good job of balancing the social and the economic. If your analysis were accurate, the Euro would be considerably below par. And, as I’ll feel distinctly in a few day’s time, it ain’t!
When I was deep in the IT space, we had a saying: it’s not the machine; it’s the maintenance. Your flattened, black-and-white, cartoon-like world view doesn’t leave enough room for, you know, the world. To say this or that – taxation or regulation – is a pure evil is, frankly, more religious than it is social or economic analysis. Almost anything done smartly will beat almost anything done stupidly.
And just as a little nugget, I agree with you 100% that one-party rule is an inherent danger. You can say that that is a de facto indictment of liberalism, but that would be silly. My 20-year thesis on RI is: with Democrats like these, who needs Republicans? (I know, fellow authors, you’re sick of hearing me say that.)
Checks and balances…freakin’ good idea. And nationally, the pendulum has gone so far right that I’m giddy like a schoolboy watching Righty in the classic overreach. Go, Newt!
I’m with you Frymaster but that’s a tough road to hoe. You’ve picked some of the most offensive industries on the planet, gambling, prostitution, and trash. Each one brings its own opposition. I love mangeek’s brewery idea. How is it possible with Johnson & Wales right here that we don’t have a plethora of micro breweries? You have my support. Desperate times call for desperate measures.
Well, we do have micros. Trinity, Revival and ‘Gansett coming home to Warren in the offing.
One thing I didn’t mention above, hoping somebody else would, is food-stuffs. The PVD farmers markets are seriously excellent. If a market is willing to pay a premium for local foods, it does amazing things to the economy.
Being as small as we are, we rapidly bump up against a ceiling. But with rising fuel costs, the pricing settles itself out.
The main problem with an agricultural economy is the “lumpiness” of the jobs created. There’s a big spike during the harvest period that usually means a migrant work force. Certainly, more in-state or in-region food production is to the good, but it’s not going to generate the numbers of full time jobs we need.
Tell me where I’m wrong. Seriously, I’m open; tell me…
“Take Another Look at ‘Dirty’ Industries”
What a terrible idea. Nothing says arts and entertainment better than giant exposed piles of garbage on the waterfront. Not to mention the health impacts. How about letting the hospitals expand there instead? Cruise ships, heck, ANYTHING is better than the mess that’s there now. Might as well say [re]legalize prostitution and go the strip club route as economic plan.
Plus I’m not buyng that tired “RI has no skilled workers” line. What, those folks in MA and CT can’t drive 30 minutes to take a job here?
To review, PHL, the thesis here is that we need to create about 40,000 jobs for low-education RIers. You suggest that we do what we’re already doing – create a slow trickle of high-wage jobs for imports.
Now, as to everybody’s abhorrence of garbage, you remind me of the Outkast song Roses. Are you familiar? Until we stop producing waste of all kinds, we’d do well to deal effectively and efficiently with our own. And, no, it don’t smell like roses.
Well, I think everyone here knows I am not a fan of the privatization of public resources. However, because I want to work within the Fryman’s thesis here, let’s start with one of the serious reasons large businesses won’t ever consider moving to Rhode Island (long before they even think about any fixed costs or regulations I would think) — it’s basically a disconnected small metropolitan area (discounting the forests of the northwest, the beaches and farms of South County, etc.)
What do I mean by that?
- There is no commuter rail in Rhode Island (like the MTA) that runs between Kingston, Warwick, Cranston would need a stop of its own, and Providence.
- What public transportation we do have is constantly underfunded, is nearly 100% bus-based, with a series of increasingly complicated and less reliable routes as you progress out from Providence.
- Rt. 195 is a parking lot during rush hour. I used to drive it all the time.
- Rt. 95 is a parking lot near Rt. 4S, and anywhere near Providence during many times of day that aren’t even rush hour.
This state has too many cars in too dense an area, and it makes commuting to work unreliable, especially during the inclement weather RI often suffers from during 1/3 of the year. Why would any companies want to move here, even if the problems of corruption, poor regulation structures, and sure, even competitive state business taxes were solved, if they can’t even count on a well-trained (a significant RI problem — not talking about 4-year degrees either), mobile (as I described above) workforce to power those companies?
So my humble and newish in my own head suggestion is to lease existing track or sell land for new track to any company that could make a profit on some limited mass-transit system in Rhode Island. This would create construction jobs for a while as tracks were upgraded or installed, and lasting jobs in maintenance, customer service jobs, train operation jobs, and associated back office work.
Alternatively, lease out 95 and 195, and let some company install a toll system, with the caveat that they must keep the roads maintained within some pre-defined levels. Makes the state money, brings in new highway maintenance and toll booth operation jobs, and encourages further mass transit (even if it stays just buses) use by putting a premium on driving. For those that can afford the premium? Now they have better roads and fewer people on them… plus those tolls would also be collected on people from out-of-state who already laugh at us for not having any tolls like most of the other states on the northern half on the I-95 corridor (MD, DE, NJ, NY, NH, ME). It’s just RI, CT, and MA who don’t have any tolls on I-95 north of the Mason-Dixon Line.
Hard talk indeed!
Actually, let me amend that on the hyper local rail concept.
I’ve toyed around with a truly radical idea on this: on top of the rails-to-trails bike paths, we lay on a trails-to-rails transit system. It would be the kind of thing that could co-exist with the bike paths. Light rail to the extreme – so light that a crew of 4 could pick up a “pod” and carry it up to a flat bed for service.
This would be 100% new transit technology, and I’m actually thinking about running two directions on a single, elevated rail.
When I use the word “radical”, I mean it!
If you Google Earth the local area, it’s easy to identify massive amounts of disused rail infrastructure that’s overgrown. Look carefully and you can trace a route from Providence right down to Town Beach in ‘Gansett. It ends right at Rt 1 at the Town Beach parking lot.
My crazy-ass plan circumnavigates the Bay, going from PVD to NPT on both sides. Like I said, it would run in both directions on a single, elevated rail.
Even more radical, instead of “a company”, it could be a consortium of companies that handle different aspects: the pods, the propulsion technology, the post-and-rail technology, the construction, the passenger management, etc. That way, you could tie it to the tech and entrepreneurial ecosystem we’re developing.
Yes, Righty, the G would be in it, too. Go ahead and freak out on that…
But let me tell you, the future ain’t what it used to be!
Yeah, this is going in the right direction. If my so far only ridiculed War on Joblessness Bonds happened, they’d pay for this kind of stuff. Here’s the challenges:
Rail on the coast is brutal. That’s why the proposed high-speed goes Worcester to Danbury then picks it’s way to NYC. There is NO space for another track. If there were, it would exist. And you can’t parallel rail on the highway because the cornering radius required for a decent speed is broken in key places. As much as I love to ride the rails, it would require eminent domain seizures of an unacceptable scale. Best case here is more MBTA service, and I’m all for that.
Tolls are another story. “When I was your age” CT eliminated all tolls on environmental grounds and NY followed suit inbound on 95 in Westchester. The backups created smog factories of Los Angelean proportions. Times and technology have changed. Cars – thanks partly to those horrid inspection regulations and partly to those horrid EPA regulations – emit so much less pollution that it’s not an issue. Plus, the Fast Lane deals eliminate stopping almost entirely. Some roads have 55 MPH tolls with explicit instructions: Don’t Slow Down.
So, yeah, that kind of a deal down in the single-digit exits on 95 where there’s space to install it could totally work. Funds upgrade roads AND non-road transit.
Jobs created = minimal. But I like the thinking!
“But your narrative does not hold up to serious analysis. If lower taxation, “less government” and a lack of regulation were actually the keys to a prosperous economy, I wouldn’t be mentally preparing myself for the crap I’m going to take next week when I go to Europe. By every possible measure, the northern Europeans kick our asses up and down the block. Their economies are more dynamic than ours, not less. And they do this with twice our taxation and very stringent regulation.”
Certainly not by “every possible measure.” That’s a rather silly exaggeration. The United States leads the world in lots of areas, especially where technology or advanced medical care are concerned. I don’t know what it means to have a “dynamic” economy in your book – Greece is a socialist hellhole that spent itself into oblivion on public employee benefits and is now rioting so that Germany will bail it out. Germany is in a strong position to do so because it instituted major, painful labor reforms under the Hartz commission back in 2002 to kick its stagnant economy back into gear, including drastically reducing their unemployment safety net, repealing employer benefit mandates, and many more reforms progressives would surely oppose but were dragging down its economy. Lots of commenters think Europe hasn’t really begun to bleed yet and the real crisis is still looming. Italy and Spain, two very generous countries work benefits-wise, are on the brink of default in the not too distant future and how they dig themselves out of their self-created mess remains to be seen.
“There was an article in the NY Times Sunday mag in 2009 or so called Going Dutch, written by a staunch conservative who got transferred to Holland. At first, he bristled against the high tax rate – 75%! But then, when the checks started to arrive, he softened considerably – especially the check that came with the explicit instructions “take a vacation as required by law”. Those folks do a damn good job of balancing the social and the economic. If your analysis were accurate, the Euro would be considerably below par. And, as I’ll feel distinctly in a few day’s time, it ain’t!”
Well, it’s a little more complicated than that. I’m actually very interested in Denmark because what they do is not at all progressive. In fact, it is a model that progressives generally *despise* – neoliberalism. They redistribute a large portion of their wealth through social safety net programs, but they keep the overall size of their government small and take a hands off, laissez faire approach to their economy. I think this model can work well, in a certain type of homogeneous culture where everyone feels like the people getting the benefits and helping hand are fundamentally “like them,” as the Dutch have. In America, things are a bit more complicated culturally and it doesn’t quite work so well because people feel like the poor are just scamming them (sometimes they are, sometimes they aren’t). That could all change, but it would be very difficult to do so.
“Your flattened, black-and-white, cartoon-like world view doesn’t leave enough room for, you know, the world. To say this or that – taxation or regulation – is a pure evil is, frankly, more religious than it is social or economic analysis. Almost anything done smartly will beat almost anything done stupidly.”
Good thing I never said that then. I’m not as much of a hardliner as you think. I think different systems can work, but I have my own preferences and ideas about which tend to be better than others. Libertarianism is no more inherently fundamentalist than progressivism.
Oops – apparently I was up too late last night and initially thought you said Denmmark instead of “Dutch.” Not quite that ignorant of geography, just shouldn’t comment right before bed. I do admit that I don’t know as much about the economy of the Netherlands as other European countries. That in itself might say something, although the country is very small so that alone could be the reason it hasn’t had a huge impact. I do notice that they are over 80% “Dutch” by ethnic/cultural group and another 5% “EU”, so that would be in line with my earlier point that redistributionist systems work well where people feel like the people getting the helping hand are fundamentally like them. America is about as far from that as a country can get. But America isn’t all bad – our culture just highly values self-sufficiency, work, and risk-taking, and it has made our country a economic powerhouse for over 200 years. Americans don’t use the vacation time they already have, so I don’t know why we need more days off or government to tell us to take vacations. Maybe the Dutch like that kind of paternalism and submission to central authority, but I’m not interested. I like going to work, personally, and when I stay home more than several days in a row, I start to feel lazy and useless.
Brian – something is screwed up with the commenting system. It won’t let me reply to Frymaster after a certain number of sub-replies.
Frymaster – The comment tree system is screwed up, so I’ll just submit this generally at the end of my last two posts on the issue of European social-democracy.
On my break today, I did have a chance to read the article you mentioned on “going Dutch.” It was an interesting read, but I think your preconceptions about social democracy might have led to selective memory on a few issues. The author does not self-identify as having been a “staunch conservative,” in fact, he begins with the disclaimer that he is “left of center on most issues.” The point of the article is also not quite as broad as you make it out to be: he characterizes the Netherlands as free-market country with deep laissez faire roots but with a substantial redistrubtion of wealth on top of it. This is in line with my statements about neoliberalism, which progressives fiercely oppose, and how social safety nets can work well in certain homogeneous cultures, but large, interventionist governments do tend drag down economies. I generally view redistribution systems as largely a matter of preference and the latter more as a matter of economic fact. Just my personal take.
There was a good EconTalk podcast on the subject of Europe, neoliberalism, and growth a year and a half ago:
www.econtalk.org/archives/2010/06/sumner_on_growt.html
Don’t let the “liberty’ tag on the website throw you. It’s a great program, and they have lots of famous economists as guests with a variety of viewpoints.
So coming around full circle, to tie all of this back into the original post and Rhode Island’s economy – what creates wealth?
What creates wealth is a free market economy based on division of labor, comparative advantage, economies of scale, and trial and error investment based on dispersed knowledge.
What doesn’t create wealth is central economic planning, i.e., a bunch of ultra-knowledgeable “policy experts” or “wonks” meeting at the state house or in a fancy hotel downtown to decide which sectors of the economy Rhode Island (as a single, public ”entity”, apparently) should invest in. Regulated economies can work, but planned economies invariably fail because of the limits of centralized, aggregated knowledge and financial forecasting.
All of this says nothing about what to do with the wealth *after* it is created through the market economy. This is much less determinative of whether a country will function or not because it’s all after the fact of wealth creation. Substantial redistribution through government is not my personal preference, but I’m willing to admit that certain neoliberal (not progressive) European countries have demonstrated that it can work decently enough.
“You suggest that we do what we’re already doing – create a slow trickle of high-wage jobs for imports.”
Not all, mixed-use would allow retail, hotels, cruiseships, etc, all with working class jobs. Not to mention that the hospitals employ many, many folks, not just drs. and nurses. When we talk biotech, it’s not just scientists but manufacturing jobs as well.
“Until we stop producing waste of all kinds, we’d do well to deal effectively and efficiently with our own.”
But have you ever noticed that it’s always the people in the poor neighborhoods who pay the costs? I’m all for locating massive garbage piles along the waterfront in Barrington and Jamestown. Your thinking in my mind takes in no consideration of the concept of environmental justice.
You use “garbage” as a generic catch-all that’s doesn’t capture the complexity of the situation. [Redacted rant on recycling and the new single-stream deal, but it's off topic...]
First, it’s not like Allens Ave is a residential neighborhood. Plus, this action could go down in the Port of P, where only J&W kids will be annoyed. More importantly, beyond the visual impact of piles of junk, if there are environmental impacts from the kinds of things I’m on about, you’re doing it wrong!
For example, those people up in Johnston are bothered by the smell from the dump – the smell of methane. Not only is methane a serious greenhouse gas, it’s valuable! That should be bothering people when they’re trying to watch TV, it should powering their TVs. Modern anaerobic composting is a mediocre business with outstanding consequences. And first stage composting should happen as close to the waste production as possible, so a composting operation would be a good fit.
The real money is in the metals and the construction debris. It’s going to go somewhere and somebody’s going to get paid to deal with it. Why not us? Why not innovate solutions to the problems? New things _CAN_ happen. Everything doesn’t have to suck tomorrow as badly as they sucked yesterday.
I’m not oblivious to the fact that industry isn’t as pretty as condos and waterfront walks. I just don’t think that’s a realistic option for us right now. I’m not adamant, but I’ve had enough of fancy-pants real estate deals for a while. We need to get some more mix in the mixed use.
So, RTW, I was working an economic developers conference for the northeast US region, and it was a pretty sad show. Those guys aren’t feeling particularly good about themselves these days, and for good reason. Their land-and-labor approach hasn’t been working for some time in these parts.
Anyway, one of them was asking “how can I create wealth in these conditions? That’s our job…to create wealth.” He’s wrong, of course. Enormous amounts of wealth have been created in the past 30 years, and the results are, to my reading, exactly as Marx predicted. Radical capitalism rapidly reaches its end game.
The only people there who weren’t crying on their tasseled loafers was the contingent from Burlington, VT. Vermont has an admirably low unemployment rate, and Burlington’s is even lower. They’re straight-up progressive, and it works well. They’re active in encouraging some industries, and they own and operate a composting plant and a power plant. They’re building another power plant in the downtown area, working with some Danes to implement district heating with the energy lost as heat. It’s progressive and damn smart.
They don’t have an economic development office, but a CEDO – community economic development office. Their charter demands that they focus on generating prosperity in the local community, not “elephant hunting” or attracting transplant businesses. They manage money well, running a fat surplus year after year. They’re awash in cash.
Likewise, the Germans dialed back their social programs, but they’re still miles ahead of us. They’re real strength is that they’ve been very cautious about debt. But they also have an aggressive feed-in tariff on alternative energy. They’re still incredibly active in managing the economy. (Any discussion of Greece’s problems that doesn’t include the words “tax collection” is not even worth entering into.) Your points about ethnic diversity are well taken, but that could and should be a plus, not a minus. But we can leave that discussion for another time…
At its base, your assertion that active government involvement in “shaping” economic activity is inherently detrimental just doesn’t hold up. There are times when it’s helpful and times when it’s hurtful. I’ll say it over and over until it stops being true:
It’s not the machine, it’s the maintenance.
“Enormous amounts of wealth have been created in the past 30 years, and the results are, to my reading, exactly as Marx predicted. Radical capitalism rapidly reaches its end game.”
The United States is 223 years old and counting – odd definition of “rapidly.” I don’t think many would claim that the United States has become “more capitalist” in recent history. More corporatist, maybe.
The term I used was “radical”.
So we have “radical capitalism” in the United States today? You might find 1 or 2 out of 100 people actually willing to believe that.
The literally hundreds of Federal agencies must just be twiddling their thumbs all day:
en.wikipedia.org/wiki/List_of_United_States_federal_agencies
because they certainly aren’t regulating the hell out of the private sector.
Over 40,000 new laws were passed last year in this country, Federal, state, and local. The Code of Federal Regulations is over 29 feet long. We’re on “notice” for all of the above. I hardly think this qualifies us as a radical anarcho-capitalist experiment.