Smokestack Chasing Hurt Sun Belt Economy, Report Concludes With AM-Report Card-List
Mar. 18, 1987
WASHINGTON (AP) _ Sun Belt states that cut taxes and services to ''chase smokestacks'' are paying the price with lackluster economies, according to an economic development report card released Wednesday.
Meanwhile, the heavily unionized, more regulated and highly taxed Mid- Atlantic and Northeastern states are prospering because they invested in an educated workforce and an infrastructure of roads, bridges, airports, water supply and sewage sytems, concludes a study by the Corporation for Enterprise Development.
The corporation, a Washington-based, non-profit economic development research and consulting group, rated states' business climates using a broader range of factors than the more traditional studies that have found low-tax, low-wage states of the South and West to be more hospitable toward business.
California, Connecticut, Massachussetts, Minnesota, New York and Maryland made the organization's honor roll with grades of A or B in each of four categories, which took into account such ''quality of life'' factors as life expectancy, infant mortality and crime. Alabama and Tennessee received Fs across the board.
Among the conclusions of the study:
-''High-tax, highly regulated and heavily unionized states ... do best overall.''
-''The Mid-Atlantic states ... get good grades ... ranking just behind the national leaders.''
-''Except for Florida, the Southeast suffers the legacy of poverty and smokestack-chasing.''
-''Many states hit hard by recent problems in agriculture, mining, forestry and petroleum - mainly in the Rockies and the Plains - are not yet pursuing policies that could help them ... build strength for long-term recovery.''
Robert Friedman, president of the corporation, told a news conference that a business index should attempt to measure ''widely shared, long-term economic prosperity,'' not ''the cost of everything and the value of very little.''
But Selwin Price, a partner in the Chicago-based accounting firm, Grant Thornton, which issues annual state manufacturing climate ratings, said his firm's index considers a range of factors, including health care and education, but weights them in accordance with what manufacturers identified in a survey as important.
The weighting of factors in Friedman's study is subjective, he said, and undercounts the importance of tax and wage levels.
''You find me a manufacturer who isn't very vitally concerned with those issues and I'll eat their study page by page,'' he said.
He also noted that Friedman's study was financed in part by government employee unions and relied on economists and academics - ''people who have never had to met a payroll in their lives.''
Friedman said Southern leaders, particularly business leaders, ''have seen the handwriting on the wall'' and are leading the fight for improved government services and better educational systems, but it will take years for the shift to pay off in solid economic growth.
The South ''started poor in 1940, 1950, then adopted a policy of smokestack chasing ... and in doing that disinvested in themselves ... only to find in the 70s and 80s that those firms either went overseas or began to fail because there were lower cost places to do business in a global economy,'' he said.
The evidence indicates that 80 percent of the new jobs created in a state come not from outside firms that have relocated but from businesses that start up or expand in the state, Friedman said.
William Lucy, secretary-treasurer of the American Federation of State County and Municipal Employees, said the report illustrates the counterproductivity of a ''vicious beggar-thy-neighbor war'' among states for each others' business.
''Those parts of the country that had once looked down and out, but had spent many, many decades investing ... showed a remarkable ability to turn around and recover,'' said American Federation of Teachers President Albert Shanker. ''... And those states that looked like they had the great economic advantages of operating on the cheap, had a rather fast boom.''
The grades in the study were in four areas:
-Economic performance, including employment growth, income per capita, job quality and quality of life.
-Business vitality, referring to the competitiveness of existing business and ability to spawn new business.
-Economic capacity, covering human and capital resources, infrastructure and amenities to attract and retain talent.
-Policy strength, including effectiveness of government and regulation, improvement of education and research and help for distressed communities.
The two-year research effort, which cost $200,000, was paid for by 13 business and labor groups: Aetna Life and Casualty Foundation; American Federation of State, County and Municipal Employees; American Federation of Teachers; Ameritech Foundation; Atlantic Richfield Foundation; James C. Penney Foundation, The Joyce Foundation, Public Employee Department AFL-CIO, Samuel Rubin Foundation, Service Employees International Union, The Shalan Foundation, Tobacco Institute Labor Management Committee, and The Youth Project.