The New England Problem
================
policy system cut
The New England Problem
The Second New England Textile War: A Progressive Response to Deindustrialization
This low-wage economy prompted the chronic, on again—off again textile war with New England. The simple existence of a Carolina low-wage alternative amid a global competitive, cost reduction environment prompted the migration of textile production, to the Carolinas and Georgia. The South was in an economic war with its northern hegemon, less through active economic development or conscious business climate initiatives, than its economic isolation and dependence on a low-wage, dualistic, increasingly surplus, agricultural labor force. It is important to note that for the most part, these brilliant insights presented here were not fully appreciated in either the North or South. This “fog of war” is an important observation for economic developers who persist in attributing mistaken motivations to external forces. When the post World War I cotton economy collapsed, the South was devastated. Economic desperation in turn triggered an aggressive “southern economic development” strategy, which attempted relocation of northern industrial branch firms.
As far as New England was concerned, deindustrialization was a gift that continued to give through World War II and into the post-war period. They didn’t call it deindustrialization in the forties and fifties, no more than they did in the 1920’s or even in the 1890’s; they saw it as the collapse of the New England textile industry. New England, especially Massachusetts and Rhode Island cotton and textile factories were by 1946 through the fifties shattered and shuttered. What little that remained was fast imploding. The Curmudgeon, a young Salem, Massachusetts’ resident, a city with several large, but closing cotton mills, witnessed members of his own family tossed out into the streets. For the decade following he walked past the residue of the closed facilities, passing along the way a new DEC facility a couple of blocks away which made some kind of widget of no consequence to the young Curmudgeon.
Employment in Massachusetts’ woolen and worsted sector plummeted from 49,000 in 1946 to 25,000 in 1953. In cotton goods, the number of jobs sank from 35,000 in 1946 to 19,000 in 1953. Due largely to declines in these industries total factory employment in the commonwealth fell from 582,000 in 1947 to 531,000 in 1955, a drop of 9 percent. Other states in the area also lost manufacturing jobs during these years. The economic difficulties of the region were known as ‘the New England problem’ (and so described in 1951 by the Council of Economic Advisors, Committee on the New England Economy).[1]
In this section, the policy (and political) responses to this problem in the decades following World War II will be assessed and deliberated. While we shall concentrate on Massachusetts, and to some extent Rhode Island and Maine, we consider these states as typical to the textile-related industries in other New England states as well. The Textile “War” was very much a New England regional matter. That textile war prompted an economic development policy reaction and a concomitant organizational (EDO formation) response throughout the region. Those responses will be extremely helpful to understand the evolution of economic development in many deindustrializing Progressive communities through the remainder of the twentieth century.
Drawing from contemporary literature on deindustrialization, David Koistinen a noteworthy scholar of the New England textile deindustrialization, posited two possible strategies a state or community could bring to bear to counter its effects. We will add a third[2]. As we understand from past chapters, several southern states were using a Privatist strategy to recruit and attract New England textile-related firms. Would New England states respond to this Privatist competitive threat by responding in kind, or would they devise their own more Progressive counter approach?
The first strategy Koistinen titles “retrenchment” (we have used cost minimization elsewhere in this history) which attempts to “cut back government social programs and reduce corporate taxes (and we would add regulation) so as to reduce production costs”. In essence, this strategy which can be linked with business climate reforms, incentive programs, and promotion and recruitment. This strategy is Privatist in nature. The core idea is to create an attractive business climate, spiced with incentives and low cost advantages to attract new, hopefully growing, firms to a community/jurisdiction/state and retain what one already possesses. Aggressive promotion and recruitment campaigns by localities and in this period by state governments, often accompany the strategy.
A second strategy which Koistinen dubs “economic development” is very similar to a post-1980 strategy: economic gardening. The focus on this “gardening” strategy is to use government programs to preserve and protect a community’s existing firms and to “foster the emergence of new ones”. While this strategy may employ promotional attraction programs, such programs tend to be more defensive and are mostly content to make firms outside the community aware of the community and its helpful assets. Business climate and aggressive firm-industry recruitment efforts are minimal, if used at all. Protect and grow your own is the thrust of the gardening approach. To us, this strategy is a plausibly Progressive-style strategy which views each community/jurisdiction/state as its own garden to protect and nourish.
We would add, on the basis of hindsight, a third strategy which we call the “macro-federal government strategy. With the relatively recent entry (as of the 1950’s) of the federal government into state , local and regional economic development, a third approach would be to affect federal policy to either, or both, counter any effects of federal policy and create supportive federal policy which could potentially ameliorate deindustrialization’s impacts. This strategy is opportunistic, and could be used by either Privatists or Progressives, but the latter seem to us more inclined to involve the federal government in the affairs of states and localities[3].
The Initial New England Policy Reaction to Deindustrialization
By 1945 the bottom is dropping out of New England’s textile industry manufacturing. At war’s end, with soldiers returning home in the millions, unemployment steeply climbed and shortages existed for virtually everything. In this environment, for its own reasons, Maine was the first state to respond to textile deindustrialization by adopting a unique economic development initiative. The Maine was acutely aware and sensitive to the IDB inter-state business attraction debate trigged by the south central states in the immediate postwar IDB diffusion.[4]. Maine’s pioneering answer, forged to accommodate its state constitutional strictures and precedential judicial interpretations, was the “development capital corporation (DCC)”.
Maine approved its first DCC in 1949 and through the fifties Vermont, Connecticut, Massachusetts, New Hampshire, and Rhode Island copied Maine and established their own versions of the DCC. The DCC model was a sort of quasi, almost private EDO hybrid. Outside of the state governmental system, the Maine DCC secured private funds and made direct loans to private firms which were indirectly guaranteed by hedge-like state mortgage funds. The DCC let the private sector with minimal state governmental support fend off whatever inter-state business competitive pressures existed. This semi-private variant of the DCC was found almost exclusively in New England (the only major exception being New York)[5].
Through most of the fifties, the DCC was New England’s counter to the rising and aggressive use of industrial development bonds–although the DCC is not in structure and concept similar to an IDB. It was the best New England could do given state constitutional restrictions of that time. We can reasonably construe the DCC to be a Progressive innovation developed in response to the Privatist Mississippi and Kentucky IDBs. Massachusetts, however, was the dominant economy and regional leader–and ground zero of textile deindustrialization—seems most likely to react to the IDB threat and set the tone for New England (not Maine). Massachusetts, the home of American Progressivism, was not about to enter into the IDB fray.
Massachusetts disappointment with its prospects in the peacetime US economy generated internal debate that Democratic governor Tobin filed a bill (1946) in the Massachusetts legislature to form a new state department to foster economic development (defined as manufacturing). Up to that time, the only Massachusetts state economic development agency in existence, the Massachusetts Development and Industrial Commission established in 1929 in the throes of the first textile war was considered both chronically underfunded and ineffectual.[6] The proposal got nowhere, however, despite significant chamber/business support. Perhaps, surprisingly, the Massachusetts Association for Manufacturers opposed it fearing that if successful, wage competition would raise wages still further and increase unionization. The legislation stalled and languished for the next seven years. In its place, budgetary and staff increases were provided to the still ineffectual Development and Industrial Commission.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Massachusetts post-New Deal politics was characterized by governors who alternated between the two parties and a bi-cameral legislature usually dominated by Republicans–at least until 1950. After 1950, control of the House alternated between the two parties. Policy-wise, Massachusetts was liberal despite the strong Republican bias:
Even during the pre-New Deal period of Republican dominance, the Bay State had been a national leader in enacting social legislation that restricted corporate behavior and improved conditions for the working class. Action was taken on child labor, female working hours, factory safety, minimum wages and workman compensation …. To pass these bills, Democrats allied with the legislature’s more liberal Republican representatives …. Organized labor had long been a leading advocate of reform in Massachusetts …. Union membership in the Bay State jumped dramatically in the 1930’s and remained high for decades (following).[7]
In this policy environment, business climate issues might well have been cited as critical in the state’s effort to protect itself from the low wage, low tax southern competition for textile industry jobs and firms. Interestingly, the only policy which garnered sustained demand to reform was business payments for unemployment insurance. The system itself demanded reform without any issue of increased payments by business. It was a generous system[8] and in that respect was not nationally competitive. The system as a whole was poorly conceptualized, chronically underfunded, and relied on annual subsidies and debt issuance to compensate for chronic deficits. Bankruptcy was not out of the question. An element of the unemployment system (which was nationally common) was the “merit rating” which required increased payments the more a firm lay off workers. This was counter intuitive to the declining textile industry which was laying off workers in droves and paying more for the pleasure.
Throughout the 1950’s the Republicans and business groups sought reform of the unemployment benefit payment system. Bill after bill was submitted, the usual suspects would line up and year after year. The reform bills went nowhere–one chamber approvals, competing counter bills, high levels of partisanship, textile industry screaming and laying off workers in ever-increasing numbers, and gubernatorial vetoes versus various gubernatorial plans to reform. “Despite the resources invested and the political force brought to bear, employers in the end accomplished very little of what they initially wanted”. When a Republican governor, Herter was elected in 1952–with a strong economic development platform–hope for reform increased and was dashed when several years later an extremely weak compromise on the unemployment system reform was finally approved in 1954–providing virtually no relief to business in general or the textile industry in particular. To rub salt in the wounds of business climate reformers, the new Republican-dominated state governance did little to nothing to alter the disadvantages to firms operating in Massachusetts.
The new Republican governor did even less to alleviate the elevated corporate taxes in Massachusetts…. Herter took no action to revive the unheeded 1952 recommendations of legislative special commission that the state’s corporate taxes be eased.[9]
The irony of all this was the Republican Governor Herter campaigned, and was successfully elected in 1952, on a platform which included a strong and reasonably specific economic development agenda. Indeed, an extensive section of his inaugural address addressed his concern and his approach to Massachusetts economic development and deindustrialization issues:
‘There has been built up throughout the entire country the feeling that Massachusetts is an unfavorable place either for the development and expansion of its existing industries or for the attraction for industries from other parts of the country’.
The speech then included a rundown of the economic strengths and weaknesses of the commonwealth …. Among the state’s handicaps, in addition to frequently cited factors such as lack of natural resources, growing competition from other locations, and a heavy tax and regulatory burden, the governor listed ‘ineffective promotional and development programs’. Rectifying this shortcoming would be the focus of his economic revitalization effort.[10]
True to his word, the governor submitted a bill in the next session which successfully created the first cabinet level state economic development department in the history of Massachusetts (the Department of Commerce). The Department of Commerce was meant to be the chief counter to the economic disruption caused by deindustrialization and the chief mechanism for the state’s ability to compete nationally while growing resident industries.
[In his Inaugural Address Herter had declared that] insufficiencies of the Development and Industrial Commission meant that there ‘remains in our governmental structure no agency to which business can turn for assistance … no agency which can hope to attract new industry into Massachusetts; no agency which can attempt to convert empty industrial space into profitable enterprises with needed payrolls’.[11]
Democrats and unions lined up–in support! The AFL cited its reason as the new economic development agency would “attract new industries and encourage the expansion of one’s presently located here”.[12] The agency[13] was approved and in 1955 with an allocation of $551,000 eight economic development staff went to work in the new cabinet agency. No doubt southern states were shaking at the prospect of competing with this newly created economic development dynamo.
In addition to the Department of Commerce Herter was also able to secure approval of a second state economic development agency, the Massachusetts Business Development Corporation (MBDC)[14]. The MBDC borrowed funds from banks and insurance companies and made loans to private firms which were unable to secure conventional bank financing. Access to capital, not cost minimization of profit-challenged Stage 4 (Markusen) firms was its goal. Virtually all of the corporate loans in this period went to manufacturers and some loans (fixed asset, working capital) were made to corporations moving into the state. Lending did favor high unemployment geographies in an informal targeting–but unemployment in most of Massachusetts second and third tier cities was relatively high due to textile industry losses. Over this period, MBDC made several hundred loans and should be considered as fairly active lender.
That any of these efforts and initiatives had any effect on the textile industry is doubtful. The thrust of the Massachusetts’ economic development program did not and could not address the more microeconomic needs of struggling textile firms. The post-1950’s decline continued as is evident in our use of one New Bedford textile mill as an example. This particular mill, built in 1927 was the headquarters of Hathaway Manufacturing Company–as demonstrated by its “expansive offices (which) featured oak and mahogany paneling and a marble fireplace. Taking advantage of the 1950’s textile decline, Hathaway bought out Berkshire Fine Spinning and became Berkshire Hathaway.
By 1962 Berkshire Hathaway was closing plants to cut its costs and using the proceeds to buy back its stock. A thirty-four year old investor by name of Warren Buffett saw in Berkshire an opportunity to buy cheap and sell dearly and so he acquired a majority stake in the company. Eventually, after a brutal personal fight with the owners, tossed them out and took over in 1965. Buffett closed the plant completely in 1885 and sold the eighteen acre facility to an entrepreneur who makes military parachutes for $215,000 in 2000. The facility has been listed for sale since 2008 and is now threatened with demolition because the Mayor of New Bedford is concerned that the present owner may lease part of the facility to process “medical marijuana”. To add to the merriment preservationists are considering applying for landmark status. Buffett, in any case, did retain control of the name, however, and today, sans textile mill, Berkshire Hathaway, headquartered in Omaha, is the ninth largest public company in the world[15].
There are two sides to a coin. Having discussed at some length that Massachusetts’ response to 1950’s textile deindustrialization was decidedly not Privatist, we must also concern ourselves with how Massachusetts/New England did react to the consequences of deindustrialization. To start that discussion, it is best that we first turn to Massachusetts’ neighbor, Rhode Island. Rhode Island possessed a substantial textile industry presence, second only to Massachusetts–and it too suffered similar deindustrialization effects simultaneous with Massachusetts. By way of background, Democrats had dominated state politics since the 1930’s, there was a very strong union presence in state politics and the governor elected in 1951 was democrat Dennis Roberts. As with Massachusetts, the business community focused on reform of the unemployment payment schedule as their major initiative throughout the 1950’s. When an agreement was reached in 1958, similar to Massachusetts, Rhode Island business community got very little in terms of unemployment reform or business climate tax reductions.
But the self-same Governor Roberts, who vigorously resisted business retrenchment initiatives throughout the fifties, had in 1951 launched a series of economic development initiatives which, in our mind at least, constitutes a more Progressive policy response to the effects of textile deindustrialization.
In 1951, at the governor’s urging, Rhode Island expanded its existing promotional commission into a regular state government department. In 1952, Roberts sought action to increase the supply of ready-to-lease (i.e. shovel-ready, spec) modern factory space so as to attract new employers. That year the state chartered a (Maine-style) DCC that was explicitly authorized to build and lease industrial facilities. In early 1957, the governor assembled a commission to consider providing public aid to localities seeking to construct new plants … (and) the legislature the following year approved creation of the Rhode Island Industrial Building Authority …. The plan required approval in a referendum, and Roberts successfully campaigned for a ‘yes’ vote. …. The governor in early 1958 won the legislature’s approval for creation of the state Science and Research Council which would coordinate existing research efforts and seek new ones.[16]
To our best knowledge, Rhode Island’s Science and Research Council was the first state-level science and technology agency in the nation.[17] The 1957 referendum was a constitutional amendment allowing Rhode Island to create its version of an IDB[18]. The IBA model has generally been referred to as “the New England model” IDB. Only two states adopted this model. In the mid-1960’s under intense pressure from states with more aggressive forms of IDB, the New England states would take another bite of the IDB apple and pass a second round of legislation-and constitutional amendment referendums–to approve and launch more aggressive IDB forms (New Hampshire would follow the Oklahoma model and Maine and Vermont the Kentucky).
Massachusetts and Rhode Island were not alone in taking this approach in New England. Maine, having elected democratic governor Edmund Muskie in 1954 (the first since 1929), created its first state-level economic development cabinet department in 1955. “Expanding Maine’s existing promotional commission into a more effective government department was the leading item on the reform agenda”. And, in 1957, “at Muskie’s urging, Maine created the Industrial Building Authority (IBA) to provide state assistance to local industrial corporations”.[19] The IBA, since it violated existing state constitutional precedent, required a constitutional amendment (14-A). Thus, Maine, simultaneously with Rhode Island successfully approved a constitutional amendment to allow the IBA, a variation of the IDB. Muskie led the referendum to successful passage and Maine then had an IDB in its quiver. In the mid-1950’s both New Hampshire and Connecticut also approved legislation authorizing the creation of Maine-style DCCs
Muskie[20] like Roberts and Herter constructed their state’s initial economic development effort to emphasize what we characterize as (1) nourishing firms already in the state (loans and developing suitable site locations presumably for new or relocated firms), (2) establishing what we describe as “defensive” promotional programs designed to get the word out the their states are a good place to do business and to reassure domestic firms that Massachusetts was still a viable place to do business (frankly, what did the South have that the New England states wanted to pirate in return?), (3) flirted with developing new firms (manufacturing and technological–gazelle-like firms). As pressures intensified over the fifties, Maine and Rhode Island conformed to outside competitive pressures and through constitutional amendments widened the permissible activity of the state government in regards to assisting private corporations. The irony is that as the New England state’s grappled with ways to assist their troubled economies, the main textile “competitors”, the two Carolinas, did not adopt any form of IDB through the entire of this period.
The New England reaction to deindustrialization brings us to better appreciate the role of the state in economic development. Our research does support that deindustrialization’s effects were first and most intensely felt at the local and municipal level. In many instances, these municipalities responded usually by reacting to opportunities that manifested themselves to local leaders. The response of localities was, therefore hap-hazard, episodic, of marginal utility and not infrequently ran afoul of the state constitution and judicial precedent. Nearly all the court decisions cited in this section involved the state courts rejecting some form of local government economic development activity. It was the state government that was in position to provide a coherent, state-wide response to deindustrialization and had resources more or less equal to the task. Moreover, without state empowerment legislation localities lacked the legal authority to pursue most forms of government-assisted economic development.
But economic development at the state level had its issues also. The establishment of state EDOs was one obviously logical response–but left unsaid was that economic development had evolved into a state level priority. And state politics was not receptive to any form of economic development. It had its own ideas which may or may not have been shared with local jurisdictions. Moreover, there were always the lawyers and the courts. State constitutions and judicial precedent set parameters for “what” could be done and how “the what” could be done. Yet, the state, its legislators could not sit idly by and watch other states eat their textile industry and manufacturing jobs. What was needed was vision and leadership–and for that the state needed the governor.
Early on the governor emerges as the chief instrument of state economic development policy-making. Economic development is his/her initiative and what constitutes economic development is defined in the governor’s electoral platform. The leadership and resources of the governor is capable of entering into new territory–successfully leading referendums to amend the state constitution for instance. But all this further reinforces points made in our opening chapter: that economic development is closely related and for all practical purposes tied to politics–and to its dominant political forces, political culture, and voting constituencies. In several New England states it appears that political parties and their ideologies were less impactful than major players such as chambers and in New England, the labor unions. The prevailing political culture may well shape which of these political players fits best in addressing the issues of the day. It is not in our economic history’s job description to assert that Progressive political cultures seem more open to unions–but we can wonder?
We would, however, be remiss in not mentioning a final strategy of New England states which also gathered momentum during the 1950s: appeal to the federal government (Congressional legislation) to redress abuses or unfair competition emanating from other regions of the nation. While many New England Congressional-Senate elected officials adopted fairly aggressive positions and advocated legislation whose purpose was to limit federal “incentives” which to some degree subsidized unfair regional competition, a leader of this anti-deindustrialization macro-federal strategy was John F. Kennedy, Senator and future President. His position was aggressive, relatively consistent and fairly detailed and is extensively summarized below:
The southward migration of industry from New England has too frequently taken place for causes other than normal competition and natural advantages.
Since 1946, in Massachusetts alone, seventy textile mills have been liquidated, generally for migration or disposition of their assets to plants in the South or other sections of the country. Besides textiles, there have been moves in the machinery, hosiery, apparel, electrical, paper, chemical and other important industries. Every month of the year some New England manufacturer is approached by public or private southern interests offering various inducements for migration southward. Other manufacturers warn their employees that they must take pay cuts to meet southern competition or face plant liquidations. … In 1925 New England had 80% of the (cotton textile) industry, now (1954) it has 20 per cent.
Another major reason (besides southern low wage labor) has been the influence of Federal programs. The best example of this is the cost of electric power (produced by TVA)… New England, it should be noted, has not yet acquired for itself a single Federal hydroelectric project. But the final reason for migration, with which I am particularly concerned, is the cost differential resulting from practices or conditions permitted or provided by Federal law which are unfair or substandard by any criterion.[21]
Kennedy proceeded to identify the federal minimum wage law of $.75 per hour compared to $ 1.64 in Massachusetts, “federal tax amortization benefits” disproportionately granted to southern plants (this is the IDB federal tax abatement) and Federally-regulated shipping rates which he alleges “discriminate unfairly against New England”. The involvement of the New England congressional and senatorial delegations in pursuing federal action to curtail or ameliorate “southward migration” of New England firms continued in fits and spasms for over three decades–climaxing in the middle 1970’s. Deindustrialization had become a federal issue as well as a state and sub-state economic development issue.
It is our contention that this is an important element of the New England Progressive response to deindustrialization. Unwilling to accept at face value the economic competition engendered by the undeveloped South’s not so desirable economic “advantages”, New Englanders with ever-increasing intensity attributed their loss of jobs to the unfair competition and aggressive economic development recruitment of Northern (and Midwestern) industry. This business climate advantage held by Southern states was by nature unfair due to its inability to properly sustain individuals and families. The Progressive solution was not a race to the bottom, but to involve the Federal government to require the South to “climb to the top” or at the very least discontinue the regional economic development strategy pursued by the Federal government as part of the Roosevelt’s New Deal. If so, are state Progressives screaming at Federal Progressives and telling them to call off the dogs–or vice versa more likely.
[1] Figures taken from Massachusetts Department of Labor and Industries, Census of Manufacturers in Massachusetts as cited in David Koistinen, “Public Policies for Countering Deindustrialization in Postwar Massachusetts”, Journal of Policy History, Volume 18, Number 3, 2006, p. 327.
[2] To those so-inclined these three possible strategy responses are a sort of sort of Weberian ideal type benchmark to assess how the New England states, especially Massachusetts and secondarily Rhode Island and Maine, confronted the reality of deindustrialization during the late forties and fifties.
[3]The New Deal and FDR’s effort to close the regional economic disparity between North and South through regional economic planning/TVA and raising minimum wage as well as supporting unionization efforts throughout the South suggests how involved the federal government could be in sub-state economic development. The dispersion of manufacturing and the development of production and facilities during the Second World War were yet other example. By 1946, tapping the federal government was a potentially powerful state and local economic development strategy.
[4] It is worth observing in passing that Maine, following its stereotypical image of going its own way yet quite observant of what is going on elsewhere—more so than many of its New England neighbors Impressionistic this may well be, but we hint that Maine’s reaction (which we believe has been persistently repeated since the fifties) demonstrates the state’s distinct path which not infrequently departs from its southern neighbors. Maine’s IDB policy review process during the forties and fifties seems more open to innovation in other states—but adapts such innovation to perceived Maine realities and needs. All states do this to be sure, but Maine’s “independence” from the New England general format should be noted.
[5] Tilden, “Public Inducements”, op. cit. p.8.
[6] David Koistinen, “Public Policy for Countering Deindustrialization” op. cit. p. 340. The Commission was a promotional agency intended to say good things, primarily to Massachusetts’ citizens and firms and to promote growth. Apparently, its security blanket function had not been successfully achieved.
[7] Koistinen, “Public Policy for Countering Deindustrialization” op. cit. pp. 328-329.
[8] “In nine Dixie states during this period, the mean weekly benefits were $15.55, with an average maximum duration of 16.9 weeks. Bay State benefits in the early 1950’s average $23.66 and a 23 week duration. Interestingly, Massachusetts was the cheapest of the six New England states and was lower than New York and other Mid-Atlantic states. Koistinen, “Public Policy” op. cit. p. 331.
[9] Koistinen, “Public Policy” op. cit. p. 338.
[10] Koistinen, “Public Policy” op. cit. p. 339. This quote is a précis of Herter’s 1953 Inaugural Address.
[11] IBID. p. 341.
[12] IBID. p. 341.
[13] “The Department of Commerce carried on a wide range of endeavors. Strengthening the state’s manufacturing sector was a primary focus. To bring in new employers from out of state, the agency coordinated with industrial realtors across the country, distributed information on available sites, and negotiated with prospects. The department put major emphasis on the role of local industrial development organizations in encouraging growth. To this end it advised existing groups and pushed for the formation of new ones…. In 1956 (it) considered donating state-owned land (to MIT) for an industrial park that would house Institute laboratories and research related companies [the first stretch of Route 128 opened up in 1951–and in 1956 the famous gazelle start up (DEC) moved into a empty industrial warehouse in a Boston suburb]… site visits began in 1958…. The department gathered and published vast quantities of information about development possibilities in individual cities and towns and the overall condition of the manufacturing sector… To improve perceptions of the battered Massachusetts economy, the agency conducted major campaigns touting the commonwealth’s economic strengths and attractiveness as a place to do business. The department also advertised the Bay State as a tourist destination. Koistinen, “Public Policy” op. cit. p. 342; see also, Richard J. Tilden, “Public Inducements for Industrial Location: A Lesson from Massachusetts”, Maine Law Review, pp. 6-7 and p. 21ff. http://www.mainelaw.maine.edu/academics/mainelaw
[14] Maine had created the nation’s first known “development capital corporation” in 1951 and the MBDC originally reflected the Maine Development Capital Corporation model. Today, to our best knowledge, the MBDC has morphed into a New England wide private not for profit SBA (among many other programs) certified lender (www.bdcnewengland.com).
[15] Kris Hudson and Anupreeta Das, “Mayoral Mission: Rescue Warren Buffett’s Bad Investment”, Wall Street Journal, p.1.
[16] Koistinen, op. cit. p.348-349.
[17] Eisinger concurs, Peter Eisinger, The Entrepreneurial State
[18] The Rhode Island Industrial Building Authority was “empowered to provide a state guarantee on loans taken out by local development corporation for the construction of new factory space. More precisely, through an IBA the state was able to insure mortgage payments required to support a first mortgage on privately-owned industrial property. This was an initial form of state guarantee of a private financing. It required the participation of an intermediate local development corporation which would actually issue the mortgage financing.
[19] Koistinen, op. cit. p. 349.
[20] Muskie would continue his economic development focus when shortly after he was elected to the Senate. In June 1963 as a member of ACIR he participated in its report A-18 which investigated IDBs and outlined several criticisms and proposed reforms to restrict usage of the federal tax abatement and urge states to curb abuses. The conclusions of this report were rejected by Muskie who dissented formally with his own statement which we, in part, cite as an interesting commentary on Maine and Muskie’s different approach to economic development. Maine, it turns out, was not similar to Massachusetts in how it viewed economic development: “I do not concur in the negative conclusions about industrial development bond financing expressed above. (1) States and their local governments should be encouraged–not discouraged–to attack problems of economic stagnation and underemployment; (2) abuses (of the IDB) have not been prevalent and …do not constitute a basis for condemning the self-help efforts of State and local governments; and (3) providing opportunity and incentive for industry and employment, through a free enterprise economy is a proper and legitimate concern of local government …” See “Industrial Development Bond Financing: A Commission Report”, The Advisory Commission on Intergovernmental Relations, A-18, June 1963, p. 15, footnote.
[21] John F. Kennedy, “New England and the South”, the Atlantic Monthly, January, 1954.
end of policy system cut
=================
The Second New England Textile War: A Progressive Response to Deindustrialization
As far as New England was concerned, deindustrialization was a gift that continued to give through World War II and into the post-war period. They didn’t call it deindustrialization in the forties and fifties, no more than they did in the 1920’s or even in the 1890’s; they saw it as the collapse of the New England textile industry. New England, especially Massachusetts and Rhode Island cotton and textile factories were by 1946 through the fifties shattered and shuttered. What little that remained was fast imploding. The Curmudgeon, a young Salem, Massachusetts’ resident, a city with several large, but closing cotton mills, witnessed members of his own family tossed out into the streets. For the decade following he walked past the residue of the closed facilities, passing along the way a new DEC facility a couple of blocks away which made some kind of widget of no consequence to the young Curmudgeon.
Employment in Massachusetts’ woolen and worsted sector plummeted from 49,000 in 1946 to 25,000 in 1953. In cotton goods, the number of jobs sank from 35,000 in 1946 to 19,000 in 1953. Due largely to declines in these industries total factory employment in the commonwealth fell from 582,000 in 1947 to 531,000 in 1955, a drop of 9 percent. Other states in the area also lost manufacturing jobs during these years. The economic difficulties of the region were known as ‘the New England problem’ (and so described in 1951 by the Council of Economic Advisors, Committee on the New England Economy).[1]
In this section, the policy (and political) responses to this problem in the decades following World War II will be assessed and deliberated. While we shall concentrate on Massachusetts, and to some extent Rhode Island and Maine, we consider these states as typical to the textile-related industries in other New England states as well. The Textile “War” was very much a New England regional matter. That textile war prompted an economic development policy reaction and a concomitant organizational (EDO formation) response throughout the region. Those responses will be extremely helpful to understand the evolution of economic development in many deindustrializing Progressive communities through the remainder of the twentieth century.
Drawing from contemporary literature on deindustrialization, David Koistinen a noteworthy scholar of the New England textile deindustrialization, posited two possible strategies a state or community could bring to bear to counter its effects. We will add a third[2]. As we understand from past chapters, several southern states were using a Privatist strategy to recruit and attract New England textile-related firms. Would New England states respond to this Privatist competitive threat by responding in kind, or would they devise their own more Progressive counter approach?
The first strategy Koistinen titles “retrenchment” (we have used cost minimization elsewhere in this history) which attempts to “cut back government social programs and reduce corporate taxes (and we would add regulation) so as to reduce production costs”. In essence, this strategy which can be linked with business climate reforms, incentive programs, and promotion and recruitment. This strategy is Privatist in nature. The core idea is to create an attractive business climate, spiced with incentives and low cost advantages to attract new, hopefully growing, firms to a community/jurisdiction/state and retain what one already possesses. Aggressive promotion and recruitment campaigns by localities and in this period by state governments, often accompany the strategy.
A second strategy which Koistinen dubs “economic development” is very similar to a post-1980 strategy: economic gardening. The focus on this “gardening” strategy is to use government programs to preserve and protect a community’s existing firms and to “foster the emergence of new ones”. While this strategy may employ promotional attraction programs, such programs tend to be more defensive and are mostly content to make firms outside the community aware of the community and its helpful assets. Business climate and aggressive firm-industry recruitment efforts are minimal, if used at all. Protect and grow your own is the thrust of the gardening approach. To us, this strategy is a plausibly Progressive-style strategy which views each community/jurisdiction/state as its own garden to protect and nourish.
We would add, on the basis of hindsight, a third strategy which we call the “macro-federal government strategy. With the relatively recent entry (as of the 1950’s) of the federal government into state , local and regional economic development, a third approach would be to affect federal policy to either, or both, counter any effects of federal policy and create supportive federal policy which could potentially ameliorate deindustrialization’s impacts. This strategy is opportunistic, and could be used by either Privatists or Progressives, but the latter seem to us more inclined to involve the federal government in the affairs of states and localities[3].
The Initial New England Policy Reaction to Deindustrialization
By 1945 the bottom is dropping out of New England’s textile industry manufacturing. At war’s end, with soldiers returning home in the millions, unemployment steeply climbed and shortages existed for virtually everything. In this environment, for its own reasons, Maine was the first state to respond to textile deindustrialization by adopting a unique economic development initiative. The Maine was acutely aware and sensitive to the IDB inter-state business attraction debate trigged by the south central states in the immediate postwar IDB diffusion.[4]. Maine’s pioneering answer, forged to accommodate its state constitutional strictures and precedential judicial interpretations, was the “development capital corporation (DCC)”.
Maine approved its first DCC in 1949 and through the fifties Vermont, Connecticut, Massachusetts, New Hampshire, and Rhode Island copied Maine and established their own versions of the DCC. The DCC model was a sort of quasi, almost private EDO hybrid. Outside of the state governmental system, the Maine DCC secured private funds and made direct loans to private firms which were indirectly guaranteed by hedge-like state mortgage funds. The DCC let the private sector with minimal state governmental support fend off whatever inter-state business competitive pressures existed. This semi-private variant of the DCC was found almost exclusively in New England (the only major exception being New York)[5].
Through most of the fifties, the DCC was New England’s counter to the rising and aggressive use of industrial development bonds–although the DCC is not in structure and concept similar to an IDB. It was the best New England could do given state constitutional restrictions of that time. We can reasonably construe the DCC to be a Progressive innovation developed in response to the Privatist Mississippi and Kentucky IDBs. Massachusetts, however, was the dominant economy and regional leader–and ground zero of textile deindustrialization—seems most likely to react to the IDB threat and set the tone for New England (not Maine). Massachusetts, the home of American Progressivism, was not about to enter into the IDB fray.
Massachusetts disappointment with its prospects in the peacetime US economy generated internal debate that Democratic governor Tobin filed a bill (1946) in the Massachusetts legislature to form a new state department to foster economic development (defined as manufacturing). Up to that time, the only Massachusetts state economic development agency in existence, the Massachusetts Development and Industrial Commission established in 1929 in the throes of the first textile war was considered both chronically underfunded and ineffectual.[6] The proposal got nowhere, however, despite significant chamber/business support. Perhaps, surprisingly, the Massachusetts Association for Manufacturers opposed it fearing that if successful, wage competition would raise wages still further and increase unionization. The legislation stalled and languished for the next seven years. In its place, budgetary and staff increases were provided to the still ineffectual Development and Industrial Commission.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Massachusetts post-New Deal politics was characterized by governors who alternated between the two parties and a bi-cameral legislature usually dominated by Republicans–at least until 1950. After 1950, control of the House alternated between the two parties. Policy-wise, Massachusetts was liberal despite the strong Republican bias:
Even during the pre-New Deal period of Republican dominance, the Bay State had been a national leader in enacting social legislation that restricted corporate behavior and improved conditions for the working class. Action was taken on child labor, female working hours, factory safety, minimum wages and workman compensation …. To pass these bills, Democrats allied with the legislature’s more liberal Republican representatives …. Organized labor had long been a leading advocate of reform in Massachusetts …. Union membership in the Bay State jumped dramatically in the 1930’s and remained high for decades (following).[7]
In this policy environment, business climate issues might well have been cited as critical in the state’s effort to protect itself from the low wage, low tax southern competition for textile industry jobs and firms. Interestingly, the only policy which garnered sustained demand to reform was business payments for unemployment insurance. The system itself demanded reform without any issue of increased payments by business. It was a generous system[8] and in that respect was not nationally competitive. The system as a whole was poorly conceptualized, chronically underfunded, and relied on annual subsidies and debt issuance to compensate for chronic deficits. Bankruptcy was not out of the question. An element of the unemployment system (which was nationally common) was the “merit rating” which required increased payments the more a firm lay off workers. This was counter intuitive to the declining textile industry which was laying off workers in droves and paying more for the pleasure.
Throughout the 1950’s the Republicans and business groups sought reform of the unemployment benefit payment system. Bill after bill was submitted, the usual suspects would line up and year after year. The reform bills went nowhere–one chamber approvals, competing counter bills, high levels of partisanship, textile industry screaming and laying off workers in ever-increasing numbers, and gubernatorial vetoes versus various gubernatorial plans to reform. “Despite the resources invested and the political force brought to bear, employers in the end accomplished very little of what they initially wanted”. When a Republican governor, Herter was elected in 1952–with a strong economic development platform–hope for reform increased and was dashed when several years later an extremely weak compromise on the unemployment system reform was finally approved in 1954–providing virtually no relief to business in general or the textile industry in particular. To rub salt in the wounds of business climate reformers, the new Republican-dominated state governance did little to nothing to alter the disadvantages to firms operating in Massachusetts.
The new Republican governor did even less to alleviate the elevated corporate taxes in Massachusetts…. Herter took no action to revive the unheeded 1952 recommendations of legislative special commission that the state’s corporate taxes be eased.[9]
The irony of all this was the Republican Governor Herter campaigned, and was successfully elected in 1952, on a platform which included a strong and reasonably specific economic development agenda. Indeed, an extensive section of his inaugural address addressed his concern and his approach to Massachusetts economic development and deindustrialization issues:
‘There has been built up throughout the entire country the feeling that Massachusetts is an unfavorable place either for the development and expansion of its existing industries or for the attraction for industries from other parts of the country’.
The speech then included a rundown of the economic strengths and weaknesses of the commonwealth …. Among the state’s handicaps, in addition to frequently cited factors such as lack of natural resources, growing competition from other locations, and a heavy tax and regulatory burden, the governor listed ‘ineffective promotional and development programs’. Rectifying this shortcoming would be the focus of his economic revitalization effort.[10]
True to his word, the governor submitted a bill in the next session which successfully created the first cabinet level state economic development department in the history of Massachusetts (the Department of Commerce). The Department of Commerce was meant to be the chief counter to the economic disruption caused by deindustrialization and the chief mechanism for the state’s ability to compete nationally while growing resident industries.
[In his Inaugural Address Herter had declared that] insufficiencies of the Development and Industrial Commission meant that there ‘remains in our governmental structure no agency to which business can turn for assistance … no agency which can hope to attract new industry into Massachusetts; no agency which can attempt to convert empty industrial space into profitable enterprises with needed payrolls’.[11]
Democrats and unions lined up–in support! The AFL cited its reason as the new economic development agency would “attract new industries and encourage the expansion of one’s presently located here”.[12] The agency[13] was approved and in 1955 with an allocation of $551,000 eight economic development staff went to work in the new cabinet agency. No doubt southern states were shaking at the prospect of competing with this newly created economic development dynamo.
In addition to the Department of Commerce Herter was also able to secure approval of a second state economic development agency, the Massachusetts Business Development Corporation (MBDC)[14]. The MBDC borrowed funds from banks and insurance companies and made loans to private firms which were unable to secure conventional bank financing. Access to capital, not cost minimization of profit-challenged Stage 4 (Markusen) firms was its goal. Virtually all of the corporate loans in this period went to manufacturers and some loans (fixed asset, working capital) were made to corporations moving into the state. Lending did favor high unemployment geographies in an informal targeting–but unemployment in most of Massachusetts second and third tier cities was relatively high due to textile industry losses. Over this period, MBDC made several hundred loans and should be considered as fairly active lender.
That any of these efforts and initiatives had any effect on the textile industry is doubtful. The thrust of the Massachusetts’ economic development program did not and could not address the more microeconomic needs of struggling textile firms. The post-1950’s decline continued as is evident in our use of one New Bedford textile mill as an example. This particular mill, built in 1927 was the headquarters of Hathaway Manufacturing Company–as demonstrated by its “expansive offices (which) featured oak and mahogany paneling and a marble fireplace. Taking advantage of the 1950’s textile decline, Hathaway bought out Berkshire Fine Spinning and became Berkshire Hathaway.
By 1962 Berkshire Hathaway was closing plants to cut its costs and using the proceeds to buy back its stock. A thirty-four year old investor by name of Warren Buffett saw in Berkshire an opportunity to buy cheap and sell dearly and so he acquired a majority stake in the company. Eventually, after a brutal personal fight with the owners, tossed them out and took over in 1965. Buffett closed the plant completely in 1885 and sold the eighteen acre facility to an entrepreneur who makes military parachutes for $215,000 in 2000. The facility has been listed for sale since 2008 and is now threatened with demolition because the Mayor of New Bedford is concerned that the present owner may lease part of the facility to process “medical marijuana”. To add to the merriment preservationists are considering applying for landmark status. Buffett, in any case, did retain control of the name, however, and today, sans textile mill, Berkshire Hathaway, headquartered in Omaha, is the ninth largest public company in the world[15].
There are two sides to a coin. Having discussed at some length that Massachusetts’ response to 1950’s textile deindustrialization was decidedly not Privatist, we must also concern ourselves with how Massachusetts/New England did react to the consequences of deindustrialization. To start that discussion, it is best that we first turn to Massachusetts’ neighbor, Rhode Island. Rhode Island possessed a substantial textile industry presence, second only to Massachusetts–and it too suffered similar deindustrialization effects simultaneous with Massachusetts. By way of background, Democrats had dominated state politics since the 1930’s, there was a very strong union presence in state politics and the governor elected in 1951 was democrat Dennis Roberts. As with Massachusetts, the business community focused on reform of the unemployment payment schedule as their major initiative throughout the 1950’s. When an agreement was reached in 1958, similar to Massachusetts, Rhode Island business community got very little in terms of unemployment reform or business climate tax reductions.
But the self-same Governor Roberts, who vigorously resisted business retrenchment initiatives throughout the fifties, had in 1951 launched a series of economic development initiatives which, in our mind at least, constitutes a more Progressive policy response to the effects of textile deindustrialization.
In 1951, at the governor’s urging, Rhode Island expanded its existing promotional commission into a regular state government department. In 1952, Roberts sought action to increase the supply of ready-to-lease (i.e. shovel-ready, spec) modern factory space so as to attract new employers. That year the state chartered a (Maine-style) DCC that was explicitly authorized to build and lease industrial facilities. In early 1957, the governor assembled a commission to consider providing public aid to localities seeking to construct new plants … (and) the legislature the following year approved creation of the Rhode Island Industrial Building Authority …. The plan required approval in a referendum, and Roberts successfully campaigned for a ‘yes’ vote. …. The governor in early 1958 won the legislature’s approval for creation of the state Science and Research Council which would coordinate existing research efforts and seek new ones.[16]
To our best knowledge, Rhode Island’s Science and Research Council was the first state-level science and technology agency in the nation.[17] The 1957 referendum was a constitutional amendment allowing Rhode Island to create its version of an IDB[18]. The IBA model has generally been referred to as “the New England model” IDB. Only two states adopted this model. In the mid-1960’s under intense pressure from states with more aggressive forms of IDB, the New England states would take another bite of the IDB apple and pass a second round of legislation-and constitutional amendment referendums–to approve and launch more aggressive IDB forms (New Hampshire would follow the Oklahoma model and Maine and Vermont the Kentucky).
Massachusetts and Rhode Island were not alone in taking this approach in New England. Maine, having elected democratic governor Edmund Muskie in 1954 (the first since 1929), created its first state-level economic development cabinet department in 1955. “Expanding Maine’s existing promotional commission into a more effective government department was the leading item on the reform agenda”. And, in 1957, “at Muskie’s urging, Maine created the Industrial Building Authority (IBA) to provide state assistance to local industrial corporations”.[19] The IBA, since it violated existing state constitutional precedent, required a constitutional amendment (14-A). Thus, Maine, simultaneously with Rhode Island successfully approved a constitutional amendment to allow the IBA, a variation of the IDB. Muskie led the referendum to successful passage and Maine then had an IDB in its quiver. In the mid-1950’s both New Hampshire and Connecticut also approved legislation authorizing the creation of Maine-style DCCs
Muskie[20] like Roberts and Herter constructed their state’s initial economic development effort to emphasize what we characterize as (1) nourishing firms already in the state (loans and developing suitable site locations presumably for new or relocated firms), (2) establishing what we describe as “defensive” promotional programs designed to get the word out the their states are a good place to do business and to reassure domestic firms that Massachusetts was still a viable place to do business (frankly, what did the South have that the New England states wanted to pirate in return?), (3) flirted with developing new firms (manufacturing and technological–gazelle-like firms). As pressures intensified over the fifties, Maine and Rhode Island conformed to outside competitive pressures and through constitutional amendments widened the permissible activity of the state government in regards to assisting private corporations. The irony is that as the New England state’s grappled with ways to assist their troubled economies, the main textile “competitors”, the two Carolinas, did not adopt any form of IDB through the entire of this period.
The New England reaction to deindustrialization brings us to better appreciate the role of the state in economic development. Our research does support that deindustrialization’s effects were first and most intensely felt at the local and municipal level. In many instances, these municipalities responded usually by reacting to opportunities that manifested themselves to local leaders. The response of localities was, therefore hap-hazard, episodic, of marginal utility and not infrequently ran afoul of the state constitution and judicial precedent. Nearly all the court decisions cited in this section involved the state courts rejecting some form of local government economic development activity. It was the state government that was in position to provide a coherent, state-wide response to deindustrialization and had resources more or less equal to the task. Moreover, without state empowerment legislation localities lacked the legal authority to pursue most forms of government-assisted economic development.
But economic development at the state level had its issues also. The establishment of state EDOs was one obviously logical response–but left unsaid was that economic development had evolved into a state level priority. And state politics was not receptive to any form of economic development. It had its own ideas which may or may not have been shared with local jurisdictions. Moreover, there were always the lawyers and the courts. State constitutions and judicial precedent set parameters for “what” could be done and how “the what” could be done. Yet, the state, its legislators could not sit idly by and watch other states eat their textile industry and manufacturing jobs. What was needed was vision and leadership–and for that the state needed the governor.
Early on the governor emerges as the chief instrument of state economic development policy-making. Economic development is his/her initiative and what constitutes economic development is defined in the governor’s electoral platform. The leadership and resources of the governor is capable of entering into new territory–successfully leading referendums to amend the state constitution for instance. But all this further reinforces points made in our opening chapter: that economic development is closely related and for all practical purposes tied to politics–and to its dominant political forces, political culture, and voting constituencies. In several New England states it appears that political parties and their ideologies were less impactful than major players such as chambers and in New England, the labor unions. The prevailing political culture may well shape which of these political players fits best in addressing the issues of the day. It is not in our economic history’s job description to assert that Progressive political cultures seem more open to unions–but we can wonder?
We would, however, be remiss in not mentioning a final strategy of New England states which also gathered momentum during the 1950s: appeal to the federal government (Congressional legislation) to redress abuses or unfair competition emanating from other regions of the nation. While many New England Congressional-Senate elected officials adopted fairly aggressive positions and advocated legislation whose purpose was to limit federal “incentives” which to some degree subsidized unfair regional competition, a leader of this anti-deindustrialization macro-federal strategy was John F. Kennedy, Senator and future President. His position was aggressive, relatively consistent and fairly detailed and is extensively summarized below:
The southward migration of industry from New England has too frequently taken place for causes other than normal competition and natural advantages.
Since 1946, in Massachusetts alone, seventy textile mills have been liquidated, generally for migration or disposition of their assets to plants in the South or other sections of the country. Besides textiles, there have been moves in the machinery, hosiery, apparel, electrical, paper, chemical and other important industries. Every month of the year some New England manufacturer is approached by public or private southern interests offering various inducements for migration southward. Other manufacturers warn their employees that they must take pay cuts to meet southern competition or face plant liquidations. … In 1925 New England had 80% of the (cotton textile) industry, now (1954) it has 20 per cent.
Another major reason (besides southern low wage labor) has been the influence of Federal programs. The best example of this is the cost of electric power (produced by TVA)… New England, it should be noted, has not yet acquired for itself a single Federal hydroelectric project. But the final reason for migration, with which I am particularly concerned, is the cost differential resulting from practices or conditions permitted or provided by Federal law which are unfair or substandard by any criterion.[21]
Kennedy proceeded to identify the federal minimum wage law of $.75 per hour compared to $ 1.64 in Massachusetts, “federal tax amortization benefits” disproportionately granted to southern plants (this is the IDB federal tax abatement) and Federally-regulated shipping rates which he alleges “discriminate unfairly against New England”. The involvement of the New England congressional and senatorial delegations in pursuing federal action to curtail or ameliorate “southward migration” of New England firms continued in fits and spasms for over three decades–climaxing in the middle 1970’s. Deindustrialization had become a federal issue as well as a state and sub-state economic development issue.
It is our contention that this is an important element of the New England Progressive response to deindustrialization. Unwilling to accept at face value the economic competition engendered by the undeveloped South’s not so desirable economic “advantages”, New Englanders with ever-increasing intensity attributed their loss of jobs to the unfair competition and aggressive economic development recruitment of Northern (and Midwestern) industry. This business climate advantage held by Southern states was by nature unfair due to its inability to properly sustain individuals and families. The Progressive solution was not a race to the bottom, but to involve the Federal government to require the South to “climb to the top” or at the very least discontinue the regional economic development strategy pursued by the Federal government as part of the Roosevelt’s New Deal. If so, are state Progressives screaming at Federal Progressives and telling them to call off the dogs–or vice versa more likely.
[1] Figures taken from Massachusetts Department of Labor and Industries, Census of Manufacturers in Massachusetts as cited in David Koistinen, “Public Policies for Countering Deindustrialization in Postwar Massachusetts”, Journal of Policy History, Volume 18, Number 3, 2006, p. 327.
[2] To those so-inclined these three possible strategy responses are a sort of sort of Weberian ideal type benchmark to assess how the New England states, especially Massachusetts and secondarily Rhode Island and Maine, confronted the reality of deindustrialization during the late forties and fifties.
[3]The New Deal and FDR’s effort to close the regional economic disparity between North and South through regional economic planning/TVA and raising minimum wage as well as supporting unionization efforts throughout the South suggests how involved the federal government could be in sub-state economic development. The dispersion of manufacturing and the development of production and facilities during the Second World War were yet other example. By 1946, tapping the federal government was a potentially powerful state and local economic development strategy.
[4] It is worth observing in passing that Maine, following its stereotypical image of going its own way yet quite observant of what is going on elsewhere—more so than many of its New England neighbors Impressionistic this may well be, but we hint that Maine’s reaction (which we believe has been persistently repeated since the fifties) demonstrates the state’s distinct path which not infrequently departs from its southern neighbors. Maine’s IDB policy review process during the forties and fifties seems more open to innovation in other states—but adapts such innovation to perceived Maine realities and needs. All states do this to be sure, but Maine’s “independence” from the New England general format should be noted.
[5] Tilden, “Public Inducements”, op. cit. p.8.
[6] David Koistinen, “Public Policy for Countering Deindustrialization” op. cit. p. 340. The Commission was a promotional agency intended to say good things, primarily to Massachusetts’ citizens and firms and to promote growth. Apparently, its security blanket function had not been successfully achieved.
[7] Koistinen, “Public Policy for Countering Deindustrialization” op. cit. pp. 328-329.
[8] “In nine Dixie states during this period, the mean weekly benefits were $15.55, with an average maximum duration of 16.9 weeks. Bay State benefits in the early 1950’s average $23.66 and a 23 week duration. Interestingly, Massachusetts was the cheapest of the six New England states and was lower than New York and other Mid-Atlantic states. Koistinen, “Public Policy” op. cit. p. 331.
[9] Koistinen, “Public Policy” op. cit. p. 338.
[10] Koistinen, “Public Policy” op. cit. p. 339. This quote is a précis of Herter’s 1953 Inaugural Address.
[11] IBID. p. 341.
[12] IBID. p. 341.
[13] “The Department of Commerce carried on a wide range of endeavors. Strengthening the state’s manufacturing sector was a primary focus. To bring in new employers from out of state, the agency coordinated with industrial realtors across the country, distributed information on available sites, and negotiated with prospects. The department put major emphasis on the role of local industrial development organizations in encouraging growth. To this end it advised existing groups and pushed for the formation of new ones…. In 1956 (it) considered donating state-owned land (to MIT) for an industrial park that would house Institute laboratories and research related companies [the first stretch of Route 128 opened up in 1951–and in 1956 the famous gazelle start up (DEC) moved into a empty industrial warehouse in a Boston suburb]… site visits began in 1958…. The department gathered and published vast quantities of information about development possibilities in individual cities and towns and the overall condition of the manufacturing sector… To improve perceptions of the battered Massachusetts economy, the agency conducted major campaigns touting the commonwealth’s economic strengths and attractiveness as a place to do business. The department also advertised the Bay State as a tourist destination. Koistinen, “Public Policy” op. cit. p. 342; see also, Richard J. Tilden, “Public Inducements for Industrial Location: A Lesson from Massachusetts”, Maine Law Review, pp. 6-7 and p. 21ff. http://www.mainelaw.maine.edu/academics/mainelaw
[14] Maine had created the nation’s first known “development capital corporation” in 1951 and the MBDC originally reflected the Maine Development Capital Corporation model. Today, to our best knowledge, the MBDC has morphed into a New England wide private not for profit SBA (among many other programs) certified lender (www.bdcnewengland.com).
[15] Kris Hudson and Anupreeta Das, “Mayoral Mission: Rescue Warren Buffett’s Bad Investment”, Wall Street Journal, p.1.
[16] Koistinen, op. cit. p.348-349.
[17] Eisinger concurs, Peter Eisinger, The Entrepreneurial State
[18] The Rhode Island Industrial Building Authority was “empowered to provide a state guarantee on loans taken out by local development corporation for the construction of new factory space. More precisely, through an IBA the state was able to insure mortgage payments required to support a first mortgage on privately-owned industrial property. This was an initial form of state guarantee of a private financing. It required the participation of an intermediate local development corporation which would actually issue the mortgage financing.
[19] Koistinen, op. cit. p. 349.
[20] Muskie would continue his economic development focus when shortly after he was elected to the Senate. In June 1963 as a member of ACIR he participated in its report A-18 which investigated IDBs and outlined several criticisms and proposed reforms to restrict usage of the federal tax abatement and urge states to curb abuses. The conclusions of this report were rejected by Muskie who dissented formally with his own statement which we, in part, cite as an interesting commentary on Maine and Muskie’s different approach to economic development. Maine, it turns out, was not similar to Massachusetts in how it viewed economic development: “I do not concur in the negative conclusions about industrial development bond financing expressed above. (1) States and their local governments should be encouraged–not discouraged–to attack problems of economic stagnation and underemployment; (2) abuses (of the IDB) have not been prevalent and …do not constitute a basis for condemning the self-help efforts of State and local governments; and (3) providing opportunity and incentive for industry and employment, through a free enterprise economy is a proper and legitimate concern of local government …” See “Industrial Development Bond Financing: A Commission Report”, The Advisory Commission on Intergovernmental Relations, A-18, June 1963, p. 15, footnote.
[21] John F. Kennedy, “New England and the South”, the Atlantic Monthly, January, 1954.
Ron W. Coan 