Massachusetts

Massachusetts

 

Boston and Massachusetts

John Winthrop: Laying the Keel of the Progressive Ship

Warner’s Privatist Philadelphia flowed from Quaker tolerance, anti-authoritarian, and equalitarianism. Boston, however, was settled by Puritans, not Quakers. Puritans were Calvinists who preached an “angry” God, a corrupt humanity, a heaven open to only those predestined (the Elect), and intense and inward-looking preference for community based on conformity to Puritan values/accepted morals, and an inherent obligation of the Elect to address the needs of the community’s unfortunates. A long sentence, to be sure, but Puritanism (Progressivism) has many moving parts, certainly compared to the Privatist Philadelphia’s anti-authoritarian, tolerant, decentralized (municipal-level dominant), and weak, fragmented government into which merchant business elites poured.

 

Puritanism in practice relied upon a state-level hierarchy governed by moral-Puritan elites combined with a New England town democracy significantly “managed” by state-level enactments. Town government will follow Progressive migration. Symbolically, the physical location of town democracy and the Puritan religion were one and the same: the town church. Unlike Penn, church and state were linked. Obviously, Philadelphia Privatism and Bostonian Progressivism sprang from vastly different religious roots and their system of municipal governance would differ accordingly.

 

Boston’s first leader (founder of the Town of Boston 1629)[1], the former English country squire John Winthrop, played a role corresponding to Penn’s in Philadelphia. Winthrop established a policy system which subtly distinguished the differing purpose-mission of the private and public sectors, and clearly separated the roles each would play in the Puritan community. Winthrop proposed in his famous “’A Modell of Christian Charity’… (that) under a due forme of government, both civill and ecclesiasticall” in which the concern for “the publique” must outweigh all private interests. We must bear one another’s burdens .… We must be willing to abridge ourselves of our superfluities for the supply of other’s necessities. We must uphold a familiar commerce together in all meekness, gentleness, patience, and liberality .… For we must consider that we shall be as a City upon a Hill. The eyes of all people are upon us. So that if we shall deal falsely with our God in this work we have undertaken, and so cause Him to withdraw His present help from us, we shall be made a story and a byword throughout the world.[2]

 

This is the famous “city on a shining hill” quote; the quote, however, retains the context in which the city on a hill refers. If this “modell” were applied to municipal governance—as Winthrop meant it to —the Model of Christian Charity would be Privatism turned upside-down or inside-out. Winthrop’s Puritanism perceived government as primary, to be an instrument to make men holy, and provide for the needs of the community’s most desperate. This (1) primary use of government (2) to care for the disadvantaged are two critical divides between Privatist and Progressivist political cultures. They are evident as early as the seventeenth century. A secondary focus upon private sector success as the key to community economic growth and prosperity meant that Progressive economic development pursued different goals than Privatist economic development. What’s lurking in the background is an inward-focused community that competes less with other cities, than serves as an inspiration and a model for them to follow. The “keels” (end-purposes) of our two ships reflected different principles of design and intention[3]. The ends of American economic development never were common or shared throughout the nation—not in 1629, not in 2015.

 

Massachusetts Political/Administrative Structures and Relationships

Penn intended that Pennsylvania and Philadelphia be free of a state religion–government and church were separated to achieve religious toleration. To Penn strong unified government was associated with religious persecution–to be avoided where possible. Winthrop, to the contrary, retained the unity of church and state less in his municipal corporation than at the state level. The State, led by Elect[4], was entrusted to infuse municipal governance with moral purpose and lead in policy direction. Municipal government was to be held accountable, not only to the will of the community and its shareholders (achieved through the famous New England town meeting which was established in Boston and Massachusetts in 1636)[5], but to God and his Elect as well—epitomized in state government.

 

Not well known today is the Puritans secured their charter from the crown as a “trading company” complete with shareholders. As intense their desire to practice their religion, they also emigrated to secure economic prosperity by tapping their middle class entrepreneurial spirits. Upon arrival they quickly set up a small number of land corporations (similar to today’s limited liability corporation), complete with shareholders. These were the famous New England towns and they were quite large compared to the namesake of the present day. The shareholders were the proprietors of the common land and were usually wealthier of its residents. Shareholders need not be residents, but could include investors as well. Wealthy Puritans formed their own towns; John Winthrop Jr., for example, founded towns in southwestern Rhode Island and southeastern Connecticut[6].

 

City-building, it is argued, in Massachusetts/early New England different radically from that in Pennsylvania. It was a formal, legal, economic enterprise regulated by the state and dominated by entrepreneurial wealthy Puritan elites. Wealthy families set up town governments across the whole of southern New England (Connecticut and Rhode Island separated only in 1662 and 1640’s respectively) and across the state to the contested New York borders. By the end of the 1600’s nearly all of New England, excepting the more northern areas, was carved up and the original phase of town founding ended. During the seventeenth century original towns sold off land to form smaller towns within their borders.

 

The town centers were seldom of any size or even consequence; settlement or residences in New England towns were widely dispersed amid the considerable geographies controlled by the town. Commercial centers did develop (Cambridge, New Haven, Hartford, Salem, Providence, Springfield, and, of course, Boston. Most were ports, on the Atlantic or rivers that ran to the Atlantic. Nearly all were grid. This all changed during the 1700’s when “clustering” or development of town centers occurred. The famous New England town democracy arose from town meetings that were not formalized with state legislation until the Massachusetts Open Town Meeting Law in 1680. The first town to use in the conventional sense of the expression was Ashfield.[7] Over time, town meetings offered an opportunity for rival elites to develop, and it probably is no accident that a town meeting (1772), not the Bay State legislature, voted into existence a Committee for Correspondence which included John Adams, Sam Adams, James Otis, Joseph Warren, and Josiah Quincy Sr.[8]

 

Towns were primary and counties were a secondary (created in 1643). Internally, each town formed an agreement/contract with its shareholders to perform tasks for the maintenance of the commons and designating tracts of land the proprietor solely owned and paid taxes for. Originally, most of the land went unused and a function of town government was to attract and sell such unused units to new residents. Such residents, may or may not have been conferred shareholder status. As a private corporation, most colonial public policy areas were left to the General Court (state government) to decide. The General Court regulated therefore the activities of their service delivery unit of government. With few exceptions[9], this tightly controlled and administered structure of sub-state government was not replicated elsewhere in the United States—certainly much less so in the southern colonies.

 

For Winthrop and governors that followed, the state of Massachusetts assumed responsibility to ensure towns and their residents would be moral, hard-working, prosperous citizens, deserving of a future with God in heaven. Accordingly in 1642 the Massachusetts General Court instructed each town to “train their children in learning, and labor and other imployments“. In 1647, the General Court required towns of fifty inhabitants to retain someone to teach children to “write and reade“, and a town of one hundred to set up a”grammer schoole” supported by public funds. The intention underlying education was each individual was expected to read his Bible. Literacy was essential, a prerequisite for self-governance at the town level. A state government, led by moral elites, provided the policy leadership for its sub-state jurisdictions. The role of the Massachusetts General Court in municipally-relevant affairs was significant then, and remains so today. Counties played insignificant roles at that time; in 2015 nearly half the state’s county governments are completely abolished or

 

Finally, from Massachusetts we can discern that town government has been molded to fit the primacy of the state, its governor and legislature. The level of government to which economic development is entrusted, therefore, will be important in understanding the nature of economic development policy-making in this culture. In its evolution previous to the Yankee Diaspora (see next section), the Town evolved into a pure service delivery unit of government. While many states have chosen to strengthen their reliance upon counties, Massachusetts has emasculated theirs to the point that in 2015 half no longer exist, but as mere geographic shells with no responsibilities–so are Connecticut’s and Rhode Island’s. As the twig is bent ….  The history of Massachusetts is littered with the Commonwealth’s state legislature’s inability to loosen policy control over sub-state jurisdictions. This reluctance long predates any rural/suburban control of the latter. While obviously premature to suggest anything definitive, the relationship of sub-state jurisdictions with state governments appears as an important aspect which may distinguish between and among the styles of our state SSS political cultures.

 

The Evolution of Puritan Elites

As the Bay Colony matured, the religious intensity of Massachusetts’ Puritan governance wilted; a secular humanism increasingly displaced the harsh and demanding Puritan value system. This new mentality, however, left untouched the critical values associated with Winthrop’s “city on a hill” passage. Commitment to community, a distrust of profit in public policy, the sharp separation of business from government,  moral elite leadership, the use of government to address needs of the disadvantaged, and the almost evangelistic function of the city on the hill as the “modele” of civic duty for others to imitate remained at the core of New England’s system of policy-making.

 

Many factors were involved in the shift from raw Puritanism (Congregationalism) to Unitarianism[10], which started in the late eighteenth century. Long before Unitarianism was first preached at King’s Chapel in Boston (1784), generational change, Puritan intolerance and inflexibility, and a changed economy had weathered the old Puritanism and reduced the centrality of religion to man’s daily life. In this atmosphere, authority, formerly derived from religion and morality, shifted to more secular sources. Substituted for religion was the Weberian Protestant ethic of hard work, a moral life, and commercial success. As early as fifty years after its initial settlement the Puritan perspective toward commercial elites began to shift. As Puritan culture became more secularized, the Puritan Religious Elect was replaced by a new Elect composed of morally-bound, highly educated commercial elites.

 

Post Puritan, pre-Unitarian business elites evolved into a “codfish” aristocracy, based on fishing, whaling, and foreign trade with Europe and the Far East. The codfish business elite replaced Winthrop’s stern Puritans, and by the birth of the Early Republic had assumed responsibility for the governance of the Massachusetts Bay Colony. Success in business defined the new Unitarian Elect, but it carried with it an obligation to serve the community by helping the disadvantaged and the general public welfare through service in government—a noblesse oblige. “The pulpit and the quarterdeck were the sacred and secular symbols of authority in the family, in society and in politics …. Boston federalism was a secularized version of the Puritan ethic.”[11] In this culture the elites ought to assume the obligation, the burden, of governance. Unlike Quaker elites, post-Puritan elites believed they were obligated to assume governmental leadership.

 

Governors appointed by the King after 1688, after the first, were all drawn from this Puritan aristocracy. “They modeled themselves not only on the Puritan ideal of authority, but also on the old Roman ideal of gravitas: self interest yes, self-indulgence no …. They stood rather than ran for office, they listened to their own consciences, not to the voice of the people …. (W)ere collectivists rather than individualists, believing in family and class as organic communities and society as the family writ large”[12]. These men presided over what Baltzell calls a “deference democracy”—a democracy where aristocratic elites made policy on behalf of the “best interests” of its citizenry—“the best people were elected to office, time after time, in town after town for over 200 years”[13].

 

The arrival of Unitarianism, especially its New England-based Transcendental variant, replaced the fire and brimstone and sinners in the hands of an angry God, with concern for humanity, a separation of church and state, a tolerance for religious diversity, and the essential goodness for mankind that if protected from the evils of civilization (sounds a bit like Rousseau here) would “live long and prosper”. In many ways, education, always a first order priority, became the key tool or strategy to achieve both moral and economic ends. Education enabled, enlightened and empowered and it lay at the core of addressing the needs of the disadvantaged. Almost imperceptibly, this focus altered how both the needs of the disadvantaged and economic growth could be linked. Economic change required transforming “people”, not to assist the profitability of business—which was regarded as an entirely separate sphere from government —if the community was to grow and prosper.

 

The homogeneity of the codfish aristocracy, however, was threatened during these Early Republic years by an emerging entrepreneurial business elite: the textile manufacturers. The new manufacturing elite, accumulated its resources and wealth from innovative factories set up in Lowell, Andover, Salem and southern New Hampshire as early as 1810. Using a new form of business structure (the corporation), these textile entrepreneurs made fortunes quickly (gazelles tend to do that), moved into Bulfinch-designed mansions in Boston high status neighborhoods, and by the 1830’s not only lived alongside the codfish aristocracy, but increasingly married into it. The Boston Brahmin, the Frankenstein-like fusion of these two elites, resulted.[14] The Brahmin Elect carried with it the old Winthrop-Elect mission:

 

[an] … obligation on the part of older families to the welfare of “their town” and new determination to participate actively once again in local political affairs … Boston could be saved if members of the “better class” took over their responsibilities and regained positions of social and political leadership in the community….Pitching their appeals to the Boston working class [they] emphasized the responsibility of “the happy and respectable classes” to watch over those laws that affected “the less prosperous portions of the community”. Their obvious desire for political control of Boston carried with it a sense of responsibility for the prosperity of the town and the welfare of its less fortunate classes–a sort of moral stewardship, a form of noblesse oblige–that would continue to be an integral part of Boston’s political heritage.[15]

 

The transition from raw Puritanism to an Unitarian Elect through an evolution of distinctive business elites injects two very important elements into our model: (1) the potential existence of different types of business elites and (2) their importance in transmitting political culture across time periods. Elites are critical to the successful adjustment and transmittal of Boston’s culture across generations. Yet, Philadelphia’s style of Privatism removed any possibility that a dominant-Elect style business community would lead in Philadelphia. By encouraging its Quaker wealthy to stay away from politics and governance, Penn’s Privatism left Pennsylvania government to the vicissitudes of a laissez-faire merchant business community unfettered by and Puritan-style moral obligation and motivated to create community prosperity through economic growth through business expansion[16]. If so, it would appear that all “growth coalitions” and business communities may not be identical—but now we digress? Back to the early nineteenth century!

 

Ironically, and contradictorily, this early Boston style of Progressivism entrusted policy-making to a business elite, but sharply divorces private business profit from government/ policy-making as harmful to the overall community good and a bane to the community’s disadvantaged. In essence, the Brahmin must put aside corporate greed and individual interest when it makes public policy. Leaving aside the reality that this is a difficult needle to thread, Boston’s early Progressive style rested  upon the general population’s deference to rule by the moral business-Elect Brahmin[17]. For Baltzell, the power of this elite business class is the distinguishing difference between Philadelphia and Boston.

 

(M)y central thesis … is that the egalitarian and anti-authoritarian principles of Quakerism produced a confusion in class authority from the very beginning in Philadelphia. At the same time the hierarchical and authoritarian principles of Puritanism insured in Boston from its founding to the close of the nineteenth century at least, a tradition of class authority and leadership not only in the local community, but throughout the state and  [indeed] the nation….[18]

 

No doubt, deference to a class hierarchy is made easier through a New England town democracy which permits municipal level governance to be democratic and open to all classes/groups. Towns were intended to govern themselves and entrusted with significant enforcement, control of schools and real estate powers, and especially in matters of tax and spending—a Puritan style polis with Athenian-style direct-democracy[19]. “Everyone is supposed to participate, and there is no greater outrage than to manipulate the political process for private gain” at the expense of the community[20].

 

Josiah Quincy: Strong Mayor in an Era of Weak Mayors

It was thirty years into the New Republic before Boston petitioned the state legislature to change from a town into a city. In 1820 Boston was still a town with a New England town government. During that time Boston had grown into a thriving cosmopolitan trading city, and its population (about 18,000 in 1790) had grown to 43,000 in 1820 (Philadelphia was nearly double). The physical condition of the old city was distressed; the city badly needed modernization and upgrading. Older Puritan-built sections of the city were collapsing and newer neighborhoods, some with distressed residents, needed new services. New industries needed to be accommodated, and the older fishing industry needed its harbors and wharfs to be rebuilt. Boston had developed an economic development agenda which had been ignored by its town government.

 

So its Brahmin Elect (recently thrown out of Washington D.C. by Madison’s Democrats and in 1824 by Andrew Jackson prompting the demise of its Federalist Party after the War of 1812) advocated and secured state legislation to convert Boston from a town to a city, and centralize Boston’s municipal authority in the hands of a single executive, a mayor. In 1822, the city of Boston[21] was officially chartered by the state legislation. It was governed by a bicameral city council and a strong-Winthrop-style mayor in whom “the administration of all the fiscal, prudential and municipal concerns” were vested. Boston’s second mayor[22], the Brahmin Josiah Quincy was elected to the office (1823). He would subsequently serve six terms in office.

 

In a dramatic demonstration of how an upper-class Federalist mayor could work for the welfare of the “less prosperous” classes of the city, Quincy set to work rescuing the oldest part of the city from decay and ruin. Refusing to be handcuffed by the obstructionist tactics of old town board members who objected to the new mayor stepping on their administrative toes, Josiah Quincy took whatever municipal powers he needed to accomplish his purposes. By appointing himself chairman ex officio of all executive committees, he assumed a controlling voice in all municipal activities and decisions. By appointing professional administrators who reported to him personally, he established a system of direct accountability.[23]

 

While Philadelphia brandished its business-led, Privatist inspired, weak, committee-dominated municipal government which, by the way, neglected its public functions and services, Quincy’s Boston was hiring teams of sweepers to remove six tons of “dirt” from the city’s streets, establishing municipal garbage pickup service, setting up municipal level police and fire departments, creating a department of corrections for youth offenders, acquiring control over the city’s sewers and minimizing the pollution which emanated from them–oh, and in case you missed it, conducting a municipal-level urban renewal program–building in the cleared land the very first Faneuil Hall-Quincy Market[24]. No wonder Sam Bass Warner was so dissatisfied with Philadelphia. The city of Boston that Quincy left behind in 1828 was then rated as the healthiest city in America–and the most indebted[25].

 

With the reader’s permission, if we were to travel on a time machine to 1898, we could see Quincy, this time Josiah Quincy IV, as the Democratic Party’s mayor of Boston. “Quincy believed in the extension of the powers of government and in the rights of organized labor and as mayor employed settlement worker Robert A. Woods, the social worker Alice N. Lincoln, and the founder of the playground movement, Joseph Lee. Quincy traveled to Europe seeking new ideas on urban government. When the British Fabians Sidney and Beatrice Webb visited America in 1898 they were most impressed with Quincy… [as]’ Quite the hero from the pages of a novel’… [Quincy] made Boston’s city government for a brief time the cutting edge of urban reform in America.[26]Josiah Quincy IV was indeed a chip off his grandfather’s block and certain evidence the old man had represented a strain of urban governance of some durability.

 

Observations: Boston (Yankee) Style Progressivism Contrasted to Philadelphia Privatism

There is no mistaking Boston and Massachusetts for Philadelphia and Pennsylvania—that is one reason we chose to contrast them in our opening presentation of the two ships, Privatism and Progressivism. The Boston brand of Progressivism placed great value on local governmental executive leadership, the pursuit of the greater good for the community, an emphasis on education and human/people related services both as a credential for leadership and a core plank of public policy. Called “Yankee” by Woodard, these Progressives “have the greatest faith in the potential of government to improve people’s lives … and a vital bulwark against the schemes of grasping aristocrats, corporations, or outside powers …. For more than four centuries, Yankees have sought to build a more perfect society here on earth through social engineering, relatively extensive citizen involvement in the political process and aggressive assimilation of foreigners”.[27] Woodard concludes by describing them as “secular Puritanism”.

 

The combination of a the Progressive faith in government and the ends to which they put government—to assist the immigrant, the downtrodden, the disadvantaged will be cornerstones of our Progressive approach to economic development. Their discomfort with unbridled capitalism, potential or real conflicts of interest, with corporations and private profit, and their insistence on involvement of disadvantaged in public policy further distinguish the approach. “Government … could defend the public good from the selfish machinations of moneyed interests. It could enforce morals through the prohibition or regulation of undesirable activities. It could create a better society through public spending on infrastructure and schools”.[28]

 

Among the other aspects of the Boston brand of Progressivism is its sense of “mission”[29], its propensity to “impose its ways on everybody else”. “For the Puritans didn’t merely believe they were God’s chosen people, they believed God had charged each and every one of them to propagate his will on a corrupt and sinful world”.[30] This sense of mission will overlap into professional economic development “Policy World”, largely academic in nature, which will be attracted to the more intellectual-humanistic “Yankee” approach to economic development—setting it apart from the Privatist “Practitioner World”.

 

A perhaps not-so-obvious lesson to be learned from our discussion of Philadelphia and Boston is the variation, cultural heritage, and segmentation of the participants in their respective economic development policy process. That economic development is a policy area vital to the business community would seem obvious; the business community comprised the core participants of the economic development policy process in both. But the business community, at least as observed in Boston and Philadelphia, was far from identical. The business community contains multiple segments with different perspectives, values and desired goals—and cultural heritage. The desire of the business community to make profit, while undoubtedly correct, is too broad a brush to describe their participation in economic development policy.

 

The Boston Elect were rich businessmen who, however imperfectly, set aside their private goals to pursue community-disadvantaged enrichment goals. In return, the Boston Elect received deference from other potential participants in their community’s economic development policy process. The Philadelphia business community, however, delivered economic and population growth to their jurisdiction—while admittedly doing little to help the disadvantaged—yet, policy-making in Philadelphia was supposedly the most democratic and open in America at that time. This seeming contradiction exposes the importance of political culture and the diversity of values and expectations that so profoundly shapes the outcomes of the economic development policy process. Policy and economic development policy, in particular, could legitimately pursue different ends in different cities and states–simultaneously. Simply demonstrating that serious participation by business elites in economic development policy exists does not justify any conclusion that the outputs of such policy-making will be identical across cities.

 

Culture’s role in the policy process is to put in place several critical factors of jurisdictional policy-making (expectations, legitimatize policy participants, clients, beneficiaries, and outcomes), and to define  goals for public policy initiatives and strategies. Also, since each community occupies a differently perceived place on the urban hierarchy, instinctually the jurisdiction’s policy culture will also include perceptions on how well the community is doing, or should be doing, in this competition. Important to economic developers, culture captures and shapes the community’s reaction to the opportunities and threats arising from the forces unleashed by creative destruction in a community’s economic base and the larger, macro-global economy. Culture, therefore, is the transmission belt of local democracy—carrying with it the energy of peoples’ values, perceived wants, needs, and desires. In this respect culture is far from rational; culture includes a great deal of irrationality and subjectivity.

 

[1] Winthrop served twelve terms as Governor of Massachusetts (he was never Mayor of Boston which as a town did not possess such an office). If Winthrop has an image today, it is as an inflexible, sexless, conservative Puritan. In  his day, however, Winthrop was a moderate authoritarian (tending toward micromanagement), not mean-spirited (he warned Roger Williams secretly and helpfully to get the heck out of Salem, and he was also criticized for being too moderate with Anne Hutchinson —each “founded” a new state (Connecticut and Rhode Island respectively)). He outlived five wives, and I estimate,  was father of eight, maybe nine, children-many of who sadly died young –as did his first four wives. When you land at Logan Airport, think of Winthrop—he owned the land.

[2] John Winthrop, “A Modell of Christian Charity” quoted in Thomas H. O’Connor, The Hub: Boston Past and Present (Boston, Northeastern University Press, 2001), p. 8. This quote that has been used often and is often associated with Ronald Reagan (used to justify American exceptionalism in his Farewell Address). The first part (Christian Charity) of Winthrop’s message, however, conveys the purpose behind the city upon a hill, is infrequently mentioned. The expression “city on a hill”, it is believed, was originally drawn from the Sermon on the Mount.

[3]A second difference between Pennsylvania and Massachusetts was  the Puritan commonwealth (state government) set up by Winthrop rested upon a strong, unified state level government, which, unlike the famous New England town democracy, was composed solely of the Elect. That contrasted sharply from Penn’s decentralized municipal-driven Pennsylvania, which reflected the minimal role the state of Pennsylvania played in Philadelphia’s municipal governance. The primary unit of governance differed between these two states, suggesting a second variation in policy systems in Progressivist and Privatist political cultures. Our history places considerable value on state SSS and the activism of the state in economic development will prove to be an important variable. Also, the distinction that municipalities should be governed “for its shareholders” through a New England direct town democracy—and a state governed by elites who represent the will of God as much as the desires of its voters.

[4] Interestingly, the Massachusetts General Court restricted its members to the established religion. The powers of that legislature were respectful of the powers of the Governor and his staff—the existential expression of the Elect.

[5] Approved by the Massachusetts General Court in March 1636 which set up a decentralized town government system enfranchising the “freemen of every towne”. Cities were latecomers to New England. New Haven was the first in 1784, Boston, 1822, New Hampshire in the 1840’s and Springfield in 1852. Hartford is a curious city/town consolidation.

[6] David J. Russo, American Towns, op. cit., pp.49-52 and pp. 7-10.

[7] See Donald L. Robinson, Town Meeting: Practice of Democracy in Rural New England (Amherst, University of Massachusetts Press, 2011).

[8] E. Digby Baltzell, Puritan Boston and Quaker Philadelphia, op. cit., p. 148.

[9] The Moravians, also religious refugees, sought to construct settlements exclusively for themselves. They carefully planned their towns, the first being Bethlehem in Pennsylvania in 1741 (followed by several other Pennsylvania boroughs) and a second set in North Carolina, the town of Economy in 1753 and Salem in 1766—others followed. See David J. Russo, American Towns, op. cit., pp. 10-11.

[10] Unitarianism first appeared in Lithuania and, of all places, Transylvania,  in the mid-1500’s  It traveled to London and then to New England where it was first preached in Boston’s King Chapel in 1784. Inclined toward Deism (which rejects religion as a source of authority, but asserts that through reason and science the existence of a God can be discovered), Unitarianism attracted from its earliest days the wealthy and the intellectual. In 1805 Harvard taught its first course in Unitarian theology. As New England Unitarianism evolved,  it quickly took the form of “transcendental Unitarianism” (which developed from German liberal theology) which we associate with Emerson and Thoreau. Transcendental Unitarians stressed the essential goodness of mankind and adopted a more intellectual, semi-secular humanistic approach.

[11] E. Digby Baltzell, Puritan Boston and Quaker Philadelphia, op. cit., p. 199.

[12] E. Digby Baltzell, Puritan Boston and Quaker Philadelphia, op. cit., p. 199.

[13] E. Digby Baltzell, Puritan Boston and Quaker Philadelphia, op. cit., p. 199. Baltzell’s observation was supported by no less than John Adams who wrote in his Defense of the Constitution: “Go into every village in New England, and you will find that the office of justice of the peace, and even the place of representative, which has ever depended only on the freest election of the people, have generally descended from generation to generation, in three or four families at most” (Baltzell, p. 170).

[14] Samuel Eliot Morrison described this elite fusion as the marriage between “the wharf and the waterfall” and in an 1861 novel,  Elsie Venner (1861), Oliver Wendell Holmes Sr. dubbed the new composite business elite the “Boston Brahmin“. Holmes’s novel characterized this elite as “harmless, inoffensive, and untitled”, with houses by Bulfinch, their monopoly on Beacon Street, humanitarianism, Unitarian faith in the march of their mind, Yankee shrewdness, and New England exclusiveness“. Our presentation of the transformation of the Boston model from Puritanism to something else is borrowed from O’Connor’s, the Hub, in his chapter “From Town to City“.

[15] O’Connor, The Hub, op. cit. pp. 87-88.

[16] This in the argument advanced by E. Digby Baltzell in Puritan Boston and Quaker Philadelphia, op. cit—see, for example, chapter 18: The Governing of Men: Deference and Defiant Democracy.

[17] Baltzell asserts that of the sixteen Boston mayors elected between 1822 and the Civil War, six were members of the Brahmin class and three others were upper class wealthy businessmen. Each of the nine graduated from Harvard and only five had no college, but were self-made businessmen. The Brahmin’s ruled in an unbroken series from 1822 to 1840. Philadelphia, on the other hand, only six of the fifteen mayors during his period were college graduates—half the Boston rate. Only one Philadelphia mayor could be described as a Philadelphia first family. Most of Philadelphia’s college grad mayors came from out of town,  most were Yale/Princeton graduates. Also to be remembered is that the centrality of the mayor’s office to the policy system differed  greatly between the two cities—with the Boston mayoralty the stronger. Boston’s electorate has been characterized as “deference” and  Philadelphia as arguably the most vibrant, populist and volatile in America; E. Digby Baltzell, Puritan Boston and Quaker Philadelphia, op. cit., pp. 373-374.

[18] E. Digby Baltzell, Puritan Boston and Quaker Philadelphia, op. cit., p. 20.

[19] A sort of Delian League if one stretches the ancient Greek metaphor a bit more.

[20] Colin Woodard, American Nations, op. cit., p. 60.

[21] Philadelphia was incorporated as a city in 1701–one hundred twenty one years before Boston. Town governments afford more control by the state over municipal affairs.

[22] After a one year term, the first mayor, having been more or less drafted into that position, left due to political conflict. Quincy, a Congressman for many years, a strong Federalist and a stolid Brahmin, was quite the charismatic personae. Yes, he is related to John and John Quincy Adams. Abigail’s mother was a Quincy. More to the point, Quincy had devoted his little Brahmin life to politics—he was a member of the political class—a rarity in the Early Republic years in which most American mayors were businessmen on temporary duty as a mayor or politician.

[23] O’Connor, the Hub, op. cit. p. 93.

[24] Ironically, Boston’s first commercial urban renewal project conducted by Logue in the 1960’s was to modernize the first urban renewal project of Josiah Quincy. Ca plus change!

[25] When Josiah Quincy left City Hall, denied a seventh term by political opponents created during his six years  he went directly to Harvard and stayed seventeen years as its President. One of his seven children, Edmund, would be Vice-President of the first Anti-Slavery League and his son and grandson would be future mayors of Boston.

[26] E. Digby Baltzell, Puritan Boston and Quaker Philadelphia, op. cit. p. 373.

[27] Colin Woodard, American Nations, op. cit., p. 5.

[28] Colin Woodard, American Nations, op. cit., p. 60.

[29] There is a negative side to this sense of mission—those who do not conform are expelled, or worse. For example, New England which is broadly considered to be “Yankee” and hence Progressive exhibits variation within that approach. Connecticut’s Roger William’s style Puritanism, for example, was harsher, more intrusive into individual behavior than even the stereotypical Massachusetts Puritan; Rhode Island was also harsher as well.. Settlers to Maine, on the other hand, besides often being French-Canadian, also consisted of Massachusetts folk fleeing from intrusive town/church governance. Styles of governance, i.e. variations in policy processes and policy systems, were virtually inevitable in a mobile America which was ruled by a remote English crown or a decentralized state-dominated federal system. Americans began sorting themselves out residentially long before Bishop’s Big Sort.

[30] Colin Woodard, American Nations, op. cit. p. 61.

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The Post-War Formation of the Progressive State Sub-State Economic Development System (SSS)

At this juncture we refresh in the reader’s memory that we wish to demonstrate and explain the character of Massachusetts’ approach to deindustrialization–is it Progressive or Privatist? Let’s observe the obvious at this point that of the three alternatives Massachusetts had clearly rejected the Privatist model in its debate and legislations during the decade following World War II. It was not even close–for almost a decade Massachusetts and all the other New England states for that matter never crossed within a country mile of adopting a Privatist solution to deindustrialization. Even led by Republicans the Massachusetts response to the collapse of the textile industry went out of their way to avoid any form of “retrenchment”, business climate reforms or cost minimization. Why? The explanation behind the New England model of IDB contains a major part of our answer to this question. What’s more, the explanation will directly address a number of the prime purposes of this history. In short, the following discussion is meant to be one of the most fundamental in the entire book.

 

Let’s not mince words and instead summarize the argument so we are doubly clear what we are presenting. Massachusetts and its MBDC and the other New England states had written state constitutions some of which were written as early as 1789. These state constitutions contained or were amended to include provisions, relevant to economic development, which were later interpreted by state courts in ways which carried over, sometimes a hundred years or more after the court decision, to 1950’s (and contemporary) economic development legislation, programs, tools, and activities. These earlier constitutional provisions and court interpretations precluded the possibility that any economic development legislation, strategies and tools would be Privatist in character and that instead they would more closely follow principles we have associated with Progressivism.

 

In the case of the IDB, the type of lending practiced by MBDC and other Maine-style development capital corporations, were the closest the state constitutions and court precedential interpretations permitted. The IDB in Massachusetts could never have been identical to the IDB contained in the BAWI Mississippi model or even the Oklahoma model.  Bluntly, this is one of the ways that political and philosophical principles of a population that lived hundreds of years earlier continue to the present day. They are embodied in state constitutions and court decisions. Our contemporary policy-making still reflects, reinforces and perpetuates these values and perspectives[1].

 

Our discussion begins with identification of a concept key to government involvement in economic development: when can the public sector, using public funding assist a private individual (corporation)?[2] In particular, how does one define the “public interest” in providing assistance to the private sector? The rationale involving public assistance of private activities is by its very nature quite versatile and the drawing of a line quite subjective. The world view of those who make such distinctions will certainly come into play as will politics and the facts at hand. Decisions regarding this concept, embodied into law by precedent, will shape subsequent interpretations and policy definition-formulation for years to come–until they are overturned or reset.

 

In the early years of the American Republic the public and private sectors, embracing two forms of Privatist thought (federalists and Jeffersonian anti-federalist-Josiah Quincy and Massachusetts being included as federalist) state government got involved in a number of canals, roads, railroads, banks and a wide variety of business-governmental speculative partnerships. The results were frequently not pretty. The public reaction, like a steamroller, swept over states over the next half century. Constitutional amendments or revisions pertinent to regulation public involvement with private ventures was a very frequent vehicle. Prompted by numerous defaults, bankruptcies and evidences of corruption exposed by the effects of the Panic of 1837 the reaction set in. “Led by Rhode Island in 1842 one state after another adopted provisions which precluded the investment of tax revenues in private enterprise or the lending of the state’s credit for the proscribed purposes”. By 1918 an estimated forty four states had some sort of constitutional restriction regarding contracting of debts or loans by the state[3]. These state constitutional restrictions remain and are frequently referred to as “gifts provisions”.

 

The degree of the severity of in separating public financing of private purposes varies in very meaningful ways across the states. Reflecting different periods of time and different catalysts, not to mention different political cultures, the original gift provision in state constitutions takes many forms and subsequent exemptions and interpretations offer huge opportunities for a variety of distinctions, many quite subtle, to emerge over the years. Another set of public reactions/constitutional amendments/judicial interpretations followed the municipal and state debacles which followed the Panic of 1873. It was in this environment that a critical decision-interpretation (Lowell v. City of Boston, 111 Mass. 454 (1873) by a Massachusetts state court defined the limitation of “public purpose” necessary for public funds to finance private activities. The decision established a precedent that affected Massachusetts economic development over the next one hundred years[4].

 

The 1873 Lowell decision and several subsequent decisions were summarized. updated and restated in a 1958 judicial opinion:

 

It is a fundamental principle of constitutional law frequently declared that money raised by taxation can be used only for public purposes and not for the advantage of private individuals… The paramount test should be whether the expenditure confers a direct public benefit of a reasonably general character … to a significant part of the public, as distinguished from a remote and theoretical benefit. [5]

 

This is a very restrictive definition of public purpose[6] and according to Tilden “the power of eminent domain and the use of public credit were quickly brought within the orbit of the public purpose doctrine” and as would be expected exerted considerable impact on Massachusetts’ 1950’s reaction to deindustrialization and the interstate IDB competition-diffusion. The 1953 legislation creating the Massachusetts Business Development Corporation effectively limited a “Massachusetts-style” New England IDB to a state guarantee of a private financing.

 

… it is apparent that the Massachusetts decisions have recognized this distinction between the economic assistance to the community at large and benefits to individuals.[7]

 

The funds used by MBDC for direct lending were acquired through pooled loans from private banks and insurance firms–not public dollars. Later in this chapter, a case study of City of Boston urban renewal will elaborate upon Boston’s inability to secure court ratification of its first commercial urban renewal initiative[8]. In the same case study with the City of Atlanta’s urban renewal program we will comment upon Georgia court rejection and a subsequent state referendum to amend the state constitution. The irony, of course, is that in these instances the gift provision as interpreted and amended by these two states led to two polar opposite policy consequences. These are all examples of a nation-wide phenomenon that is fundamental to the shaping of economic development policy and structure.

 

A brief review of Maine’s treatment of its gifts provision reveals how subtle nineteenth century distinctions can significantly affect the content of twentieth century economic development. The Maine counterpart to the Massachusetts Lowell v. City of Boston was the 185 Jordan v. Woodward. Jordan v. Woodward concluded that:

 

Strictly speaking, private property can only be said to have taken for public uses when it has been so appropriated that the public have certain and well defined rights to that use secured, as the right to use the public highway, the turnpike, the public ferry, the railroad, and the like. But when it is so appropriated that the public have no rights to its use secured, it is difficult to perceive how such an appropriate can be denominated a  public use,[9]

 

In 1871 the Jordan decision was used to deny Maine’s sub-state jurisdictions the authority “to pass laws enabling towns, by gifts of money or loans of bonds, to assist individuals or corporations to establish or carry on manufacturing of various kinds ….[10]. A year later in Allen v. Inhabitants of Jay the court took it a restrictive step further in denying assistance to a manufacturing firm saying that once a loan with public funds has been made

 

… the bonds and money raised from their sale become the bonds and money of the person borrowing, and subject to his control. The town has lost all power over the use and disposition of their loan[11].

 

But court decisions in the twentieth century distinguished the definition of the public interest in regards to taxation from the definition of public interest for eminent domain. A 1914 City of Portland bond to obtain land for and build a city auditoriums (a City Beautiful initiative) was sustained as a legal use of tax dollars. In 1954, a Maine court supported eminent domain for removal of slums, but declared in 1957 that a Bangor industrial development act which permitted a taking of land for the purpose of industrial development was unconstitutional. The consistent thread which underlies these seemingly diverse decision is that …

 

public benefit or interest are not synonymous with public use, and that in a broad sense it is the right in the public to an actual use, and not to an incidental benefit [and so the public] … cannot use a plot of land leased to ‘x’ Manufacturing Company.[12]

 

The approval of eminent domain for slum removal was separated from this limited public purpose definition and instead eminent domain (urban renewal) approval’s public purpose was linked to the state police power to secure public safety and health …

 

The clearance of the ‘blighted area” in our view is the use of property for purposes of public health, morals, safety and welfare. The ‘public use’ within the meaning of our constitution lies in the removal of breeding grounds of disease, juvenile delinquency, and other social evils.[13]

Our Maine case study more clearly, in our opinion, how a section of the state constitution can be interpreted to permit economic development activities which are justified in terms more compatible with the values of a Progressive political culture. To the extent that economic development activities support the community at large, the use of key economic development powers of taxation, bonding, and eminent domain can be justified. When such powers are used for the benefit of a private individual or corporation and the ability of the public and community is indirect and “theoretical” than such powers cannot be utilized. This will, of necessity, shape the structure of EDOs and influence the definition and formulation of economic development public policy strategies and tools as well.

 

Conversely, in that these examples cited in the past few pages have served to explain how in the critical post-second world war period states with a Progressive orientation responded as they did to the reality of deindustrialization and inter-state IDB and business climate competition, we can logically asset that something similar was going on in states with different varieties of Progressivism and most obviously something different was likely occurring in states with Privatist political cultures. In essence, as economic development rose in importance in this period, each state in its own way developed those economic development programs, strategies and tools, laying the foundation for its own particular state sub-state economic development policy system (the SSS).

 

In that eminent domain (upon which slum clearance and urban renewal ultimately rested) and state credit and bond issuance (upon which the IDB rested) shared a common foundation in the specific, historical definition and evolution of the state constitutional restriction of public purpose and public interest in public “gifts” to private corporations, the heritage of past political cultures, surprisingly still very accepted by elites and presumably masses, a hundred or more years later, was the prism by which mid-twentieth century economic development structures, programs, tools  and strategies were approved. An obvious consequence of these state constitutional restrictions was the indirect encouragement of a particular EDO-type, the public authority–or as we call it, the quasi-public EDO. The quasi-public EDO will in this period leap into prominence as the key organizational form of sub-state economic development.

 

Lest we forget another important concept which is also fundamental to our history. We did not draw much attention to the Department of Commerce’s delivery system. The Department of Commerce placed a major emphasis on local municipalities (towns and cities in New England) to establish their own EDO and to assume responsibility for managing their own growth; “to this end they advised existing groups and pushed for the formation of new ones”[14] Also a notable emphasis of MBDC was to make loans to local EDOs to allow them to rehabilitate obsolete and vacant existing space for new users. The state of Massachusetts was leading the way to encourage local governments and communities to provide for their own economic development activities.

 

The latter involvement and leadership by the state government in economic development will be the norm of our American economic development system. What programs and how those programs are structured will vary from state to state and within each state can vary by periods of time. This is how the fifty individual state sub-state economic development systems (the SSS) will be established. In the time period in question, (1945-1960) often revolving around the IDB and the Urban Renewal empowerment state after state will set up empowerment legislation and authorize, subsidize or occasionally almost require the formation of local EDOs. Again, the reality that the state policy and structural decisions will reflect the dominant political culture at the time of the state constitution and those state court decisions which subsequently interpreted that state constitution is yet another way by which our two ships of economic development contentedly continue sailing into the present time.

 

[1] The reader should clearly understand that the following discussion regarding state constitutions and the interpretation of key economic development related constitutional sections and concepts by state courts is only one (a) piece of the policy-making puzzle. The same can be said of our assertion this discussion is relevant to the transmission of political culture, our two ships, through generations. There is nothing casual or determinative about these factors. We assert only that we believe them to be important, meaningful and a part of the explanation. Also, by implication this perspective is without doubt state-based and inherently will display considerable variation and some diffusion over time and geography. This perspective will need additional study to be complete. It is evident to the Curmudgeon that verification of this discussion will not be statistical or even math-based as these methodologies are not sensitive to the distinctions, definitions and the passage of time.

[2] The concept is certainly critical to tax abatement, eminent domain, and public lending and business climate and structurally the involvement of private sector in economic policy-making is also affected.

[3] Robert J. Tilden, “Public Inducements of Industrial Location: A Lesson from Massachusetts” Maine Law Review, p. 14; see also David E. Pinsky, State Constitutional Limitations on Public Industrial Financing: A Historical and Economic Approach, University of Pennsylvania Law  Review (1963), pp.. 277-284 and Columbia Law Review, Volume 59 (1959), pp- 619-623. A more recent legal review of gifts provisions in state constitutions cites that in 2011 forty six states had some form of a gift provision in their state constitution. See Nicholas J. Houpt, “Shopping for State Constitutions: Gift Clauses as Obstacles to State Encouragement of  Carbon Sequestration”, Columbia Journal of Environmental Law, Volume 36, Number 2 p. 379ff–see footnote 117; see also, Richard Briffault, The Disfavored Constitution: State Fiscal Limits and State Constitutional Law, Rutgers Law Journal. Volume 34.  907 and Ralph  L. Finlayson,  State Constitutional Prohibitions Against Use of Public Financial Resources in Aid of Private Enterprises, Emerging Issues in State Constitutional Law, Volume 1 (1988).

[4] Tilden, op. cit. p. 15.”… the application of the rule has grown in vigor through the years, so that it continues today as a controlling force in dealing with the expenditure of public funds”… In it lies the key to understanding the position of the commonwealth toward business inducements”. The original Lowell decision involved eminent domain.

[5] Opinion of the Justices, 337, 781, 150 N.E. 2d 693, 696-97 (1958)-Tilden, p. 16.

[6] An even more restrictive definition was included in the Washington state constitution approved in 1889 included Article VIII, sections 5 and 7, “prohibit the state and its political subdivisions from loaning state money or credit, and prevent the gifting of public money or property, to any private entity, unless necessary to support the poor and infirm”. David d. Martin, “Washington State Constitutional Limitations on Gifting of Funds to Private Enterprise: A Need for Reform”, Seattle University Law Review, Volume 20, p. 200. This is without doubt a more perfect expression of Progressivist values in a state constitution.

[7] Tilden, op. cit. p.3.

[8] The “Back Bay Development Corporation” as Opinion of the Justices, 332 Mass 769, 126 N.E.2nd 795 (1955)

[9] Robert E. Beck, “The 1965 Maine Municipal Industrial and Recreational Obligations Act”, Maine Law Review, p. 25.

[10] Opinion of the Justices, 58 Me. 590-91 (1871) found in Beck, op. cit. p. 27.

[11] Allen v. Inhabitants of Jay, 60 Me. 124, 133 (1872), found in Beck, op. cit. p. 28

[12] Beck, op. cit. p 32.

[13] Beck, op. cit. p 32.

[14] Koistinen, “Public Policy” op. cit. p. 342.

==============================

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. The New England, especially Massachusetts and Rhode Island cotton and textile industry by 1946 was not only in shatters, but what little remained was imploding fast. 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 and lived with the residue of the closed facilities for decades after.

 

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 chapter, we will assess the policy (and political) responses to this problem in the decades following World War II. 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 an 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 it is becoming increasingly apparent that the bottom is dropping out of New England’s textile industry manufacturing. At the end of the war, with soldiers returning home in the millions, unemployment was steeply climbing and shortages existed for virtually everything. In this environment, for its own reasons, Maine was the first state to respond to deindustrialization and post-war manufacturing losses by adopting economic development initiatives. The seeming prod behind its response was its awareness and sensitivity to the IDB-focused inter-state business attraction debate which was trigged by the first postwar IDB diffusion discussed in the last chapter. It is worth observing in passing that Maine, following its stereotypical image, goes its own way yet seems quite observant of what is going on elsewhere—more so than many of its New England neighbors[4]. Maine’s pioneering answer, forged to accommodate its state constitutional strictures and precedential judicial interpretations, was the development capital corporation (DCC).

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Maine approved the first DCC in 1949 and through the fifties Vermont, Connecticut, Massachusetts, New Hampshire, and Rhode Island approved and established their own DCCs. The DCC model was a sort of quasi-EDO, almost private EDO hybrid (it was outside of the state governmental system) which secured private funds and made direct loans to private firms which were indirectly guaranteed by hedge-like state mortgages. Essentially, the DCC let the private sector with minimal governmental support fend off inter-state business competitive pressures. This semi-private variant of the DCC was found almost exclusively in New England (major exception was 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.

 

Which of our three alternative scenarios will best fit Massachusetts, the dominant economy and state of the region–and ground zero of textile deindustrialization? The perceived prospects for Massachusetts’ competing successfully in the peacetime US economy generated sufficient concern that Democratic governor Tobin filed a bill in the Massachusetts legislature to form a new state department to foster economic development principally in manufacturing. At that time, the only economic development state agency in existence, the Massachusetts Development and Industrial Commission established in 1929 at the height of the first textile war, was considered both chronically underfunded and ineffectual.[6] The proposal got nowhere, despite chamber support. The Massachusetts Association for Manufacturers opposed it fearing that if successful it 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 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 ones 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 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] Impressionistic this may well be, we are suggesting a cultural distinction in Maine’s reaction (which we believe has been persistently repeated since the fifties) in which Maine, with both Progressive and Privatist subcultures arrives at its own distinct path, usually not that of its southern neighbors, but related. Maine’s IDB policy review process during the forties and fifties is much more open to other’s innovation—but adapts such innovation to perceived Maine realities and needs. All states do this to be sure, but Maine’s response is more akin to developing a hybrid Privatist-Progressive solution.

[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.

========

A large element in the wave perspective revolves indirectly around what academic’s call subsidies which is a code word for private sector incentives, and practitioners call tools and programs. Waves differ on the configuration and beneficiaries. We would agree at one level, but not others. The incentives would not have had much effect before 1975 and employment growth slowed noticeably post-1975, peaking in 1985. In any case, the bulk of Route 128’s employment growth had been achieved before 1973. The claims of Michael Dukakis, elected in 1975, as being responsible for the Massachusetts Miracle is even more suspect. Gov. King– Still, despite the resumption of federal defense contracts, defense spending never came close to levels funded during Route 128’s more golden years. Between 1965-1980 the share of high tech business conducted for the federal government fell from 60 to 25 per cent in Massachusetts. This Route 128 (and the Pacific version, Silicon Valley) don’t neatly fit into these rather rudimentary distinctions

 

Even still. Massachusetts soon after encountered a serious property tax rebellion. Prop 2 1/2  principal benefits of accrued to the elderly homeowner. It was not clear how technology firms benefited.

Massachusetts had over the past decade implemented business climate reforms.

 

Post 1985 Aftermath–Other non-Route 128 based technology, including biotechnology, robotics, material, and artificial intelligence reshaped both overall state and New England numbers. 3x faster than all other sectors combined Business services, computer services, data processing services and software grew at a faster rate (95%) and accounted for 30% of all new service sector jobs.[1]

The fairly widespread perception, supported by subsequent literature and employment data, business commentary and simple public perception is that Route 128 did not sustain its initial advantages. This is hotly contested by the locals, who are simply tired of defending themselves, and who allege, correctly, that the Massachusetts technology sector  (led by bio-tech, clean and green tech, and some “cloud” applications) is still a powerhouse that most other regions and communities would kill to have. It is also descriptive that the location of current Massachusetts high tech agglomeration is less Route 128 than the geographies surrounding Cambridge and downtown Boston and to some extent the North Shore up to Southern New Hampshire.  Geographically, the Massachusetts Miracle did help areas around Boston and up through New Hampshire, but the remainder of the state was essentially stagnant. Rosegrant and

Lampe conclude:

… the lesson of the Massachusetts experience is that these firms developed here not by design but because an elaborate complex of institutions and traditions gave them a reason to grow. Knowledge had become Massachusetts most prized resource. In addition to providing local entrepreneurs with ideas to take to the marketplace, the expertise represented by the area’s academic institutions and its high tech infrastructure has become a key attraction for research and development operations of companies based elsewhere, particularly from Japan or Europe. Massachusetts benefited particularly because one of the technologies developed in the region–the computer– unexpectedly proved to have enormous international market potential. Not only did this create a wealth of new manufacturing jobs in the region, it spawned a host of related high-growth businesses, ranging from software to data processing.

…. no individual or organization from business, academe, or government can claim credit for consciously engineering this development. It happened by itself, fostered by a remarkable combination of favorable conditions from the particular culture of the region and by chance[2].

Route 128 employed 85,000 workers in 1970 and Silicon Valley about 60,000.  By 1975, Route 128 employed about 100,000 workers–Silicon Valley about 110,000. At no point after 1975 did Route 128 exceed employment levels of the Silicon Valley. By 1990, Silicon Valley employed 255,000, Route 128 about 150,000. Route 128’s peak employment was 1985, around 160,000[3]

[1] David R. Lampe, The Massachusetts Miracle (Cambridge, MIT Press, 1988), p. 13

[2] David R. Lampe, The Massachusetts Miracle (Cambridge, MIT Press, 1988), pp. 17-18

[3] Saxenian, op. cit. Regional Advantage, Figure 1, p. 3. 1959-1990 County Business Patterns

 

==================

Massachusetts (From Book)

“Taxachusetts”! State/local per capital taxes doubled between 1965 and 1971–third in nation behind New York and California. Between 1968 and 1971 state bureaucrats increased by 33000 to 268000. State energy costs were among the highest in the nation (dependent on oil in an oil crisis). Its textile industry shattered, leaving behind crushed local economies, depressed machine tool sectors, and empty factory complexes. A huge decline in federal contracts and competing increasingly in price sensitive consumer markets forced Route 128 firms to “continuously innovate”, and reduce costs—both impeded by the state’s hostile business climate. State taxes on the insurance industry inhibited that industry’s performing its then-honored role of serving as venture capital for new technology firms. An inability to attract key skills became a serious policy concern among Route 128 firms. Engineers needed to be recruited for the semiconductor industry; there were none locally—MIT did not offer semiconductor-relevant programs). Massachusetts was shooting its gazelles.

 

Massachusetts approved in 1971, formation of Massachusetts State Department of Communities and Development, headed by Atkins, former Boston City Councilman and mayoral candidate against White—he served in the Republican Francis Sargent’s administration (1969-1975). Arguably, under Sargent Massachusetts finally developed a true state/local IRB, overcoming the judicial and state reluctance to embrace direct financial assistance to private corporations. In 1971, the Industrial Development Finance Act which led to the formation of EDOs such as the Boston Industrial Development Finance Authority (1972). Finance Authorities similar to BIDFA issue tax exempt and taxable IDBs, Enterprise Zone bonds and participate in various other public-economic development projects. The state in 1978 created the Massachusetts Industrial Finance Agency (predecessor to the present MassDevelopment Finance Authority) to finance industrial projects, tax exempt bond financing for small companies and blighted downtown areas designated as commercial area redevelopment districts (CARDs) which have since evolved to be a core Massachusetts state and local economic development program.

 

Economic collapse goaded the “historically aloof business and banking community” into action. Its concerns cataloged in a 1972 pamphlet, “Look out, Massachusetts” (Bank of Boston’s chief economist, James Howell). The pamphlet urged tax reduction and incentives to stimulate business investment in much-needed plant and equipment (Lampe 8-9). Francis Sargent (Republican) made “Look out Massachusetts” an issue in his campaign, promising to triple investment tax credit from 1-3% and eliminate inventory tax. He won. Incentives were approved in 1973, plus $500 tax credit for hiring welfare workers. The legislature, beyond Sargent’s control, also approved anti-redlining legislation and consumer and environmental legislation that made Massachusetts a national leader—and a business pariah. Sargent’s successful efforts, however, brought him little popularity. The economy continued its spiral down. Unemployment (1974) was 50% higher than the national average reaching 11.2%. The state deficit topped one-half billion.

 

Time to elect a new governor. In 1974 Michael Dukakis, a “new breed” progressive, anti-business, ethnic Democrat from affluent Brookline and Harvard Law, was elected. Dukakis was a “child of Vietnam”. Not a Tip O’Neil labor union FDR Democrat; he belonged to McGovern’s wing–elected as an outsider to clean up the state. Confronting a deficit that threatened state default, he increased taxes (largest in state history), and put the “meat cleaver” to state programs, especially human service[i]. To address ED concerns (in 1975 Fantus ranked Massachusetts business climate as 46^th of 48 states), he assembled his Development Cabinet, putting Lowell’s planning (and ED) director, Frank Keefe in charge—Keefe operated from the Governor’s Office of State Planning.

 

In August 1976 Dukakis released his “Economic Development Plan for Massachusetts“–with one hundred initiatives for controlling costs, and providing capital finance for firms. “Its greatest significance was that it made economic planning and development a clear responsibility of state government for the first time” (Lampe 11). Dukakis first administration, however, did not cultivate the business community. His first ED action blocked a Pittsfield developer from developing a mall in a suburb—“Forget about your development. We just won’t permit it” (Osborne 11).

 

In the meantime, his first administration attempted probably the most thoughtful coherent state-level CD approach yet devised. What followed from this initial approach, not at all what anyone expected, was that over the next decade a hybrid CD/ED state-level economic development system evolved, arguably one of the more sophisticated in the nation—and one of the very earliest.

 

Dukakis Capital Formation Strategy

Two strategies developed from the first term’s approach to ED/CD policy. “The first is … new financial institutions to promote economic development and the second is the governor’s strategy of geographic targeting” (Ferguson & Ladd 36). Central to both strategies was “Gap Financing” which became both a rationale and a tenet of “entrepreneurial state” financing initiatives. To start it off, Dukakis’s close ties with the “Wednesday Morning Breakfast Group” (led by Mel King, Boston’s most prominent neighborhood community organizer—two election opponent of Mayor White[ii])–WMBG was a who’s who of Boston’s black and progressive communities—which had recently blocked Interstate-95 expansion of the hated Southwest Corridor”. King urged the formation of a Capital Formation Task Force to inject capital into Boston’s ghettos. Composed of his ED cabinet and forty-one academics (our deindustrialization scholar, MIT’s Bennett Harrison served), WMBG members, labor officials, and business/chamber CEOs, the Task Force met through 1976 and issued a final report in January 1977.

 

The Task Force recommended a CDC/program (CDFC) to provide loans/equity finance to firms in low-income areas where conventional financing was unavailable. They proposed creation of three CDCs to provide “gap” financing in low-income, minority areas—in effect creating a CDC lending system restricted to EDZs. The money came from state-issue GO bonds. A CDC was created to help people navigate the complicated and nebulous process. The Task Force also recommended IRBs be restricted to distressed area commercial districts. Approved by the legislature, the legislation was not funded– the bottom line was nothing came from the Task Force except the concept.

 

As the Task Force deliberated, a parallel process, a second task force organized by the New England Governor’s Regional Commission, (NERCOM) met and proposed a Regional Development Bank and other policies to remove bottlenecks, “gaps”, in the capital and labor markets. The [Massachusetts’] insurance industry seeking relief from a crushing industry-specific tax, supported the NERCOM report (Ferguson & Ladd 40). WMBG, on the other hand intensely opposed any pro-insurance initiative. Yet, the insurance industry and Dukakis agreed to the industry’s formation of a Massachusetts Capital Resources Corp (MCRC) in exchange for removal of the tax. The insurance industry would fund MCRC (a private EDO, operated by the industry) $100 million to fund unsecured (mezzanine) loans to small businesses unable to secure financing elsewhere under affordable terms—gap financing. As of 2016, MCRC lent over $640 million dollars to 300 companies. Eisinger cites MCRC as the nation’s first state “Developmental Credit Corporation”—and interestingly the approved, but unfunded, CDFC as the nation’s first state “Venture Capital Corporation”, (Eisinger 250-1, Table 10-1).

 

Geographic Targeting

Dukakis, along with others, strongly believed the normal mechanics of the private capitalist market system “did not always produce socially optimum outcomes” (Ferguson & Ladd 46). To overcome these “gaps” in private market operations, government should target areas needing the greatest help (high unemployment, physical blight, and declining jurisdictional economic bases). Targeting included steering development from areas where additional development would produce unwanted consequences (sprawl). Dukakis administration geographic targeting was defined and implemented by his Office of State Planning (OSP).  OSO launched (1975-1978), a “Growth Policy Process” and produced a 1977 report, “City and Town Centers: a Program for Growth”. Thirteen bills subsequently were approved by the legislature to carry forward its recommendations.

 

The core legislation, the 1975 Growth Policy Development Act, provided for, but did not require, Local Growth Policy Committees in each city and town. The committees would hold open meetings and develop a “statement” to be submitted to OSP. Review by regional planning bodies was included. “The consensus in the local reports was that the state’s policy should be to support and encourage growth in the state’s older cities and towns, rather than suburbs and outlying areas.” (Ferguson & Ladd 47). Two examples of the geographic targeting that resulted are the Lowell Heritage Park and the Siting of Public Facilities

 

Lowell Heritage Park: Keefe, Lowell’s former planning director, prepared the concept paper for what proved to be a Dukakis signature initiative: the Lowell Heritage Park. His concept paper “called for a state heritage park, “a historic theme park to preserve the historic canals and other structures that tell the story of the development of the textile industry in downtown Lowell” (Ferguson & Ladd 48). Dukakis loved the idea; his campaign manager/economic development department head (Alden Raine) solidified the concept into $10 million (state/federal) program that led to designation as a state park, and in 1978, a national park included the National Park Service portfolio. The Heritage Park proved an anchor for revitalized tourism and cultural museum. In the 21^st century it has promoted architectural and historic preservation in neighborhoods adjacent to the park (Stanton).

 

Siting Public Facilities: Executive Order 134 (1975) required that moves/expansion of state facilities be within the central city. This reversed the previous public facility criteria which stressed such facilities be located “where the people are”—and where they are moving—suburbs. While the state had no formal decision-making power over location of local public facilities (new schools) the Dukakis team jaw-boned (“We did everything we could to retard the use of that money for … sprawl) locals. Thus a Lowell high school, adjacent to the Heritage Park, was renovated in lieu of a new school—and a bridge was built to link it to the park. North Shore Community College was located in the center of depressed Lynn instead of Route 128, and Roxbury Community College built on WMBG’s cleared Southwestern Corridor land. Depressed Fitchburg’s downtown got three parking garages, rehabbed commercial space, an expansion of GE’s industrial facility (now closed), housing developments, a transit terminal, and a park with jogger’s paths.

 

Dukakis Limps into the Election

At the last meeting of the Capital Formation Task Force in January 1977, Dukakis was invited to receive the final report. He arrived late, preoccupied, he left after a few minutes. The CEOs of two large technology firms, members of the Task Force, were infuriated—to them it confirmed the Dukakis administration unwillingness and inability to take the private sector and ED (as opposed to community development) seriously. Believing something had to be done with the Massachusetts business climate and unimpressed by the tangle of CDCs and bureaucracy created to implement CDFC recommendations, they organized other high-tech firms to press for tax reduction and business climate reforms. In that year the Massachusetts per capita tax burden was 11% higher than the national rate.

 

In October 1977 they announced formation of “Massachusetts High Technology Council” (MHTC). The Council’s membership by 1979 grew to 85 firms employing 140000.  MHTC drew up a nonbinding ‘social contract’ promising 60000 new high-technology jobs, and an additional 90000 manufacturing and support jobs if the state would take ‘substantive’ steps to cut taxes and establish a ‘healthy’ business climate.” (Lampe 14). In 1980, the Council intensively participated in the massive and successful anti-tax Proposition 2 ½–regarded as being critical to its passage[iii]. The Council went on to become one of the nation’s premier technology councils—responsible for a good deal of that state’s reputation as a leader in various technologies.

 

In the gubernatorial election that followed Dukakis faced an internal rebellion within his Democratic Party—divided over budget cuts and “anti-business” administration. Edward King—who of all things was a professional economic developer—won the primary and subsequently the general election. During the campaign, Dukakis’s CD was pitted against King’s ED.

 

King’s career, as Massport’s (the state’s powerful Port Authority) comptroller (1959), than its CEO (1963) modernized/expanded Logan Airport (using urban renewal). Like all good ED CEOs, he got fired (1974). His next position was chairman of the New England Council, a multi-state Chamber, funded by private membership whose initiatives included resisting the Legislature’s anti-business environmental restrictions and lobbying the feds for a solar energy research center. In October 1977, King announced his gubernatorial candidacy as a pro-life and death penalty, pro-offshore drilling/nuclear power/solar energy, less business regulation, and sympathetic to Prop 2 ½. His bottom line ED position reflected in an interview: If you are anti-business, you are anti-people” (Ferguson & Ladd 50). King signed MTHC’s compact scaling down the war between the business and government that dominated the past decade.

 

The Economic Developer as Governor

In 1980 Prop 2 1/2 anti-property tax referendum was approved overwhelmingly.  King presided over an administration that froze taxes and cut benefits, programs, and services. By 1987 the Massachusetts tax burden was 10% below the national rate. Dukakis fought against Prop 2 1/2. In its wake Prop 2 1/2 left a divided Democratic Party—this late fostered a Dukakis comeback. But first, the King Administration.

 

King hired economic developers who thought as he did. Byron Mathews (mayor of Newburyport) became his Secretary of Communities and Development, and his Secretary of Economic Affairs, George Kariotis was a CEO of a microwave manufacturer; Mathews bought into Dukakis’s Growth Policy Process. Under King, Massachusetts IRB issuance was limited to distressed areas, and levered with UDAG grants (the sole exception to this was Fenway Park luxury boxes). Mathews helped preserving HUD’s Small Cities Block Grant and his assistant, John Judge, designed the state’s small business program into a program that became a national model (Ferguson & Ladd 52). Dukakis’s Heritage Park program was continued. Yet, King’s very first action was to eliminate Frank Keefe’s Office of State Planning (King reportedly said “Planners are those who plan to see that nothing is done”). King, like all good economic developers, possessed a knack for alienating those around him. King (1) worked well with private state-level MHTC and MCRC, and created two mainstream ED state-level EDOs, the Mass Technology Park Corporation and the Bay State Skills Corporation.

Mass Technology Park Corporation (MTPC). MTPC was created to address gap between “innovation” and “commercialization”. King was prodded into action by North Carolina’s Governor Hunt’s Research Park initiative jumping into chip-making. Kariotis fashioned a bill (1982) with equal funding from private and public; competition from other states provided legislative votes. MTPC, whose board included academics, technology CEOs, and public officials, pursued three programs. The first set up CAD capacity/programs and courses in the state’s public and private university system. Secondly, six “clean rooms” were funded for job-specific/management training and experience for students. Finally, a shared clean room, centrally-located was set up to manufacture cutting-edge integrated circuits. Private funding exceeded the bill’s match requirements, and university acceptance of the initiative was robust.

 

Bay State Skills Corporation (BSSC):  King’s signature ED initiative, the little-known Bay State Skills Corporation (BSSC) flowed naturally from MHTC’s need to find engineers for Massachusetts’ exploding tech industries. Kariotis turned to Northeastern University who proposed a public/private partnership whereby firms, if they paid 50% of the cost (the state the other 50%), Northeastern would found and operate a training center. The entity, a quasi-public EDO with public/private governance, was defeated by the legislature in 1980. King shifted money from his emergency fund to start the program immediately. In 1981, he reintroduced the bill, called technology industries “growth industries” and packaged it as an “educational” support program—it passed.

 

BSSC moved on to new target industries, including in its initiatives welfare recipients and displaced homemakers. In 1985 BSSC received a JTPA demonstration grant to develop BSSC into a national model. Dukakis would later link BSSC to his Center for Excellence initiative. BSSC became a national model, acting “as a venture capitalist in the training area, providing matching grants as a way to get corporations and universities to set up new training programs” (Osborne 206). Interestingly, Pennsylvania’s Ben Franklin Partnership and California’s MICRO program approved in 1982, a year after BSSC, followed a similar venture capital matching grant design. Skills training for key targeted industries was an early state-led ED strategy—a key incentive in gubernatorial business attraction.

 

Politicization

These two Democratic Administrations—night and day: Dukakis CD versus King’s more classical ED. King the more successful, had not repudiated Dukakis CD, but instead integrated it into his own, resulting in a hybrid state ED—CD economic development policy system. A shared feature of both, however, was heavy-duty politicization of state-level economic development. Other states where genuine two-party politics existed, resulted in partisanship as well as politicization. State level ED was, arguably, inherently highly politicized. ED/CD as a policy area was central to both Governors and prioritized. Dukakis chief economic developer was his campaign manager (Raine); he probably lost his renomination as much for his CD/lack of ED strategy as anything; King was an economic developer; Mathews was a former mayor and King’s ED Department Head, Kariotis, later ran for Governor (and lost). Later both King and Kariotis changed party affiliation. Planning departments were CD’s natural ally at the state level, and an impediment to more Privatist ED. No one would ever argue that municipal-level ED/CD was non-political—but state level ED/CD had politics, partisan/ideological politics at its core from Day One—even in a predominately one-party state.

 

Dukakis Second (and Third) Administration (s): 1983-1991

King exhausted his welcome within the Democratic Party. Dukakis returned to favor and was reelected to a second term (1982. The economic backdrop, however, had changed radically. These were the years of the so-called “Massachusetts’ Miracle”. Route 128 finally produced jobs and prosperity—Dukakis claimed credit for it. [Hindsight consensus asserts neither Dukakis nor King played a significant role in the Miracle]. Dukakis consistently opposed further Prop 2 1/2 tax cutting. But a vigorous public campaign, with MHTC still very much in the fray, continued urging restrained taxes, welfare and government payrolls growth. This was not going to be a warmed-over CD anti-business administration.

 

If Dukakis wanted things done, he had to change his style; negotiate and compromise, In regards to CD/ED, however, the same team was back in place (Raine and Keefe), and he returned to a CD stressing targeting distressed geographies. Dukakis incorporated the previous administration’s ED initiatives into his own. BSSC was sent a Dukakis Employment and Training Choices Program, offering training and jobs to women with children on public assistance. MTPC was pressured to build its integrated circuits center in a targeted area (Taunton’s) Miles Standish {Heritage] Industrial Park (he was unsuccessful). His MassBank initiative (a financing authority to fund infrastructure) also failed, but he crafted a compromise between labor and business on early notification of plant closings (firm notification was voluntary, but if no notification was made the state responded to assist displaced workers—ironically making it more charitable not to announce future closings). In 1984, the Office for International Trade and Investment was established.

 

Geographic targeting continued as important aspect of Dukakis’s CD strategy. Growth should be promoted by the state in areas devastated by deindustrialization. Five areas were demarcated as “Targets of Opportunity”. Southeastern Mass was really hard hit (Taunton) and he made it his chief target. Back in 1976 the state turned over to the city a closed-down mental institution for conversion into an industrial park. UDAG funds were used for infrastructure, and King in 1982 funded an interstate off-ramp. Taunton’s Miles Standish Industrial Park captured media attention, resulting in GTE moving in. During Dukakis’s two administrations, however, growth in the overall Target of Opportunity Program was slow. Something had to be added to targeting. In 1985 he pressed for Centers of Excellence whose purpose was for the state to create a “knowledge-based economy” to compete globally. The idea, initially proposed by Dukakis’s Secretary of Urban Affairs, Evelyn Murphy, in 1983 (a Commission on the Knowledge-Based Economy) went nowhere.

 

Centers of Excellence

Murphy pivoted from the Knowledge-Based Economy Commission and called for Centers of Excellence. Visiting each of his Target of Opportunity centers (six by 1985), Dukakis argued the state’s future economic success rested on developing and commercializing new technologies. A huge one-day conference expanded on the theme and enlisted a constituency to support it. The approach constituted a fundamental departure in the role of state government in that the State chose those technologies it deemed as critical for future growth—targeting went beyond geography into “sector-picking” for the state’s jurisdictional economic base. “Strategically important sectors” essential to future interstate and global competition were asserted based on academic studies. Targeting individual sectors within industries, however was another departure. The assertion growth in these industries was “knowledge-based”, yet another. Legislation was approved in 1985. The Policy World had developed the support necessary for the State’s targeting and sector-picking[iv].

 

Centers provided partial funding for partnerships between business and universities to develop commercial products in polymers, biotechnology, marine sciences, solar energy, and “advanced manufacturing”. The first round of grants commenced in 1986. Eligible activities ranged from incubators, applied research grants (SBIR-like), shared equipment, academic-business liaison programs, export marketing, technical education centers, and academic uses such as distinguished professorships and conferences. The Centers initiative relied on universities and formalized their role in a community (or economic?) development growth program. Incubators were intended to be “meeting grounds” between researchers, risk-taking entrepreneurs, students interested in a specific technology to be developed into a cluster that would spur that region’s future growth (Ferguson & Ladd 78).

 

Centers had two separate goals. “The first is to create the conditions that will introduce sustained growth of industrial clusters in the four targeted technologies and regions (emphasis added}. Each of the regions is already home to small concentrations of firms and research institutions in their respective technology. … The other major goal … is to build the state universities in these regions into integral components of their regional economies” (Ferguson & Ladd 78-9). It is not our intent to assert Massachusetts was “first on the block” to innovate knowledge-based economics, clusters, and sector targeting (it may be close) our point is that by the mid-1980’s the strategy was formulated, defined, approved, and being implemented in Massachusetts. The main outlines of a “Blue State” hybrid CD/ED state economic development policy system were in place by 1985.

 

Commission on the Future of Mature Industries

Textiles had gone down for the count, but much of Massachusetts’ older manufacturing still functioned. Hand tools, industrial machinery, paper, shoes, plastics, and clothing, mostly concentrated in western and southeastern cities and towns still employed over a half million workers. These mature industries were his Targets of Opportunity. The inspiration and drive for this program did not originate from business, but from labor and its allies in academia, and citizen groups like Massachusetts Fair Share (Ferguson & Ladd 65). The proposal had been pushed by labor during the King administration. The initiative served his larger political constituency, and complemented his negotiations on plant closing legislation. The initiative was a key element in his campaign platform—put there by the Mass Labor Caucus. In his second administration (1983) Dukakis formed his Commission on the Future of Mature Industries. There were many birds killed with this stone. The Commission served as recipient and administrator of plant closing notifications. No politician wants to receive, be forced to announce, and then be responsible for job losses. The thirty eight folks appointed to serve on the commission were charged with handling whatever “opportunity” there was in plant closings.

 

One initiative that emerged from the Commission was the Product Development Corporation, a public/private EDO that financed firms diversifying their product lines. Copied from Connecticut’s similarly-named EDO, pushed by the Labor Caucus and a key legislator, the entity was lodged under Evelyn Murphy’s department, and located in the umbrella Industrial Services Program. That program included a mélange of business assistance, workforce, and business retention monitoring programs. Workforce programs were directly linked to business assistance (i.e. traditional ED) programs under a common leadership. The intense pressure associated with plant closings had inspired greater coordination of preventive business assistance, inclusion of skilled labor and workers in decision-making, and JTPA Displaced Worker funds (Ferguson & Ladd 67-9).

 

 

See Department of Economic and Community Development and contrast MassDevelopment versus Governor’s Office

 

[i] While we relied primarily on R. Scott Fosler, also of help was David Osborne, Laboratories of Democracy (Cambridge, Harvard Business School Press, 1988), pp. 21-35

[ii] King ran a program in MIT’s Department of Urban Studies and Planning.

[iii] Eisinger attributes the MTDC’s (sic) formation to the first Dukakis administration, but observes that its initial capitalization came in part from EDA (as did NY’s and Utah’s); Eisinger, the Rise of the Entrepreneurial State, op. cit., pp 259-60

[iv] Eisinger reports that similar centers in some form were created during this period in New York, Michigan, Virginia, Ohio, Pennsylvania and North Carolina; Eisinger, the Rise of the Entrepreneurial State, op. cit., pp. 283-5.