NOT YET READY FOR PRIME TIME ENTREPRENEURIAL STATE
Be prepared! The cards reshuffled, the tectonic plates of ED policy-making shifted. Our history is repositioning state government into its position as the dominant player in contemporary state and local ED/CD. The increased role/importance of state government—and, by the 1970s, it can’t be ignored—is a major-league shift in our professional and policy history. New strategies, goals, programs, relationships, actors/ EDOs and modifications of past observations: a quite different policy system/process appeared on the stage after 1980.
In this chapter, the “story of the state” appears but does not assume final form. Part of the reason for this is that states do not magically “enter stage right on cue”—but instead speak their lines loudly, softly, dribble and stumble through the 1990s. State leadership of the sub-state system is not unequivocal until after the turn of the century. Even then, it is a question of degree—many states allow substantial ED/CD decentralization. In any case, the “state–sub-state system (SSS) that emerged is a tension-filled network of EDOs, competing strategies, programs and tools; an ever-shifting locus of decision-making and a sorting out of responsibilities/goals by level of government.
What is clear is that the states assert and are thrust into leadership roles, starting in the seventies and picking up steam thereafter. They increasingly crowd out the heretofore dominant sub-state. States responses vary because of their history, political cultures, state of jurisdictional economic bases and their region. State governments originally settled by the Yankee Diaspora, most of which were former Big City hegemony states, seem most affected. This history cannot hope to cover the varied timing and content of state governments in these transition years; it is too large a task. Fosler (1988) provides the best sense of state diversity, but Eisinger (1988) captures the shift to new strategies and concepts.
In regard to state ED/CD agendas, Massachusetts was a leader. It was by no means the only state to do so, but it was among the very first to develop a reasonably formed “model”—built around more Progressive and Privatist values. The Massachusetts case study below documents the rise of state government in these years as a pioneer in trying to figure out how to deal with the issues raised by the Great Reindustrialization Debate—and home to Bluestone and Harrison. The extended description provides the reader with a sense of the complexity, experimentation and two steps forward one step back that nearly all states exhibited in these years. The detail is our counter to the smush and the fog of history that sadly is pervasive in our CED/CD World.
New Role of American States in ED
Since the New Deal, but especially after 1950, states modernized, upgraded structural and policy capacity and developed sufficient resources “to play ball.” Most rejiggered New Deal state planning entities into postwar ED-relevant state EDOs. These entities typically focused on attraction and retention; they were aggressive IRB/BAWI participants in the 1950s and 1960s. States were dragged into sixties/seventies’ economic/social disruption: inflation, stagflation, energy disruptions, unemployment, deindustrialization, regional change and shifting sectors—global opportunities and competition were commonplace. States were hard hit, expenditures went up, revenues down, taxes up and taxpayer revolts followed. Disruptions elevated economic development to a top priority in political/policy agendas. The implosion of Big Cities, the Federal Government pullback, and the diffusion of a polycentric metro area transformed them into a natural leader.
Pulled into economic development action, states experimented. State ED during the seventies and eighties ventured haphazardly along their own individualized paths— pulled in directions that politics, political culture and economic/political pressures shoved them. Lacking an instruction manual some states tried to write one (a plan); most, however, jotted down a few notes, issued reports, hired experts and mostly improvised strategies, EDOs, programs and tools as they went along. There was no single paradigm that emerged. There were huge regional and state variations. Former hegemonic Big City states, however, tended toward what we call in the twenty-first century “blue state” ED/CD. Massachusetts is one these. Blue States picked and choose from many of the various strategies developed out of the Great Reindustrialization Debate, and they were affected by the rising community development approach. That some of these strategies competed with each other was a reality that usually was not appreciated—in many cases it still is not. The thrust of the twenty-first-century Blue State, however, was its reliance on an activist state government assuming responsibility to promote entrepreneurialism and rejigger local economic bases to foster innovation and knowledge-based ED, new clusters or agglomerations (the concepts differ widely). The forerunner to this was Eisinger’s late twentieth-century “entrepreneurial state.”
The entrepreneurial state focused on the “entrepreneurial function,” moving away from supply-side incentives (direct assistance to firms and industries) toward demand-side market/product creation—led by, indeed created by, an activist state (and local) government (Eisinger, 1988, pp. 7–12). The entrepreneurial state was fuzzy at its edges, more coherent in the classroom than the streets. It ignored the ED rage of the period—the reindustrialization of America (a Privatist ED strategy)—completely. Many states, notably those that subsequently were labeled “Red States,” relied on old-style (first- and second-wave) goals/strategies, not the politically correct post-industrial, information age, demand-side goals. But entrepreneurial states did capture, in my opinion correctly, the rise of states in ED, and an increased involvement in local ED. The activist state was real. What states did, how they did it and why—is another matter entirely.
States defined growth and ED in different ways and tasked their new programs accordingly. In no way were the states on the same page—although they all seemed to have many of the same programs and used much the same rhetoric. ED was reconfigured to include other policy areas, admitted new actors/players into its policy processes, redefined economic growth and addressed its own perceived problems through the prism of its political cultures. The competitive global urban hierarchy constantly intruded in the form of a post-Bretton Woods currency-defined comparative advantage whereby defeated nations, such as Japan/Germany, upset our internal competitive hierarchies with foreign direct investment (FDI) while American firms “disinvested” in America to make investments in foreign markets. Into this hopeless tangle intruded the turbulence of Big City ghettos, black mayors (or wannabe mayors) important to state governor elections and governance. Potentially, rising ghetto CD introduced a version of CD appropriate to the state—a version that could redefine growth and redirect it towards CD, low-income minorities. Privatist ED, however, could and did resist.
To help understand this state-level ED/CD cattle stampede and how it evolved over the better part of two decades, our history describes Massachusetts as a proxy for how states experimented. In Massachusetts, we see the rise of the not yet ready for prime-time hybrid ED/CD state.
MASSACHUSETTS
“Taxachusetts”! State/local per capita taxes doubled between 1965 and 1971—third in the nation behind New York and California. Between 1968 and 1971 state bureaucrats increased by 33,000 to 268,000. 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.
Economic collapse goaded the “historically aloof business and banking community” into action. Its concerns were cataloged in a 1972 pamphlet by the Bank of Boston’s chief economist, James Howell: Look Out, Massachusetts. The pamphlet urged tax reduction and incentives to stimulate business investment in much-needed plant and equipment (Lampe, 1988, pp. 8–9). Francis Sargent (Republican) made Look Out Massachusetts an issue in his campaign, promising to triple investment tax credit from 1 to 3 percent 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 percent higher than the national average, reaching 11.2 percent. 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 services. In 1975 Fantus ranked the Massachusetts business climate as 46th of 48 states) so Dukakis 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 100 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, 1988, p. 11). Dukakis’s 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, 1988, p. 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’s 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 and Ladd, 1988, p. 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 was Dukakis’s close ties with the “Wednesday Morning Breakfast Group” WMBG, led by Mel King, Boston’s most prominent neighborhood community organizer (and two election opponent of Mayor White).3 WMBG was a who’s who of Boston’s black and progressive communities and 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 41 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 general obligation (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 that 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 (RDB) 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 and Ladd, 1988, p. 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, a private EDO operated by the industry) in exchange for removal of the tax. The insurance industry would grant MCRC $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 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” (1988, pp. 250–51, 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 and Ladd, 1988, p. 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). The Dukakis administration’s geographic targeting was defined and implemented by his Office of State Planning (OSP). In 1975–78 it launched 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 the 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 and Ladd, 1988, p. 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 and Ladd, 1988, p. 48). Dukakis loved the idea; his campaign manager/economic development department head (Alden Raine) solidified the concept into a $10 million (state/federal) program that led to designation as a state park and, in 1978, a national park included in the National Park Service portfolio. The Heritage Park proved an anchor for revitalized tourism and cultural museum. In the twenty-first century it has promoted architectural and historic preservation in neighborhoods adjacent to the park (Stanton, 2006).
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 locals: “We did everything we could to retard the use of that money for … sprawl. 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 joggers’ 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’s unwillingness and inability to take the private sector and ED (as opposed to community development). 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 percent higher than the national rate.
In October 1977 they announced the formation of the Massachusetts High Technology Council (MHTC). The council’s membership by 1979 grew to 85 firms employing 140,000. MHTC drew up a nonbinding “social contract” promising 60,000 new high-technology jobs and an additional 90,000 manufacturing and support jobs if the state would take “substantive” steps to cut taxes and establish a “healthy” business climate (Lampe, 1988, p. 14). In 1980 MHTC intensively participated in the massive and successful anti-tax statute Proposition 21⁄2—regarded as being critical to its passage. MHTC 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 in his career as comptroller of Massport (the state’s powerful Port Authority, 1959), then as 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 21⁄2. His bottom-line ED position was reflected in an interview: “If you are anti-business, you are anti-people” (Ferguson and Ladd, 1988, p. 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 a Prop 21⁄2 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 percent below the national rate. Dukakis fought against Prop 21⁄2. In its wake Prop 21⁄2 left a divided Democratic Party—this last fostered a Dukakis comeback. But first, the King administration. King hired economic developers who thought as he did. Byron Matthews (mayor of Newburyport) became his Secretary of Communities and Development, and his Secretary of Economic Affairs, George Kariotis, was CEO of a microwave manufacture. Matthews 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). Matthews helped preserve HUD’s Small Cities Block Grant and his assistant, John Judge, transformed the state’s small business program into a program that became a national model (Ferguson and Ladd, 1988, p. 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 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 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 sectors; 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. Second, 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
King’s signature ED initiative, the little-known Bay State Skills Corporation (BSSC), flowed naturally from MHTC’s need to find engineers for the state’s exploding tech industries. Kariotis turned to Northeastern University, which proposed a public/private partnership whereby it would found and operate a training center if firms paid 50 percent of the cost (the state the other 50 percent). 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, 1988, p. 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’s CD versus King’s more classical ED. King, the more successful, had not repudiated Dukakis’s 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’s 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, Matthews 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’s 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 21⁄2 tax cutting. But a vigorous public campaign, with MHTC still very much in the fray, continued urging restrained taxes, welfare and government payroll 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 regard to CD/ED, however, the same team was back in place (Raine and Keefe), and Dukakis returned to a CD emphasizing 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 mothers on public assistance. MTPC was pressured to build its integrated circuits center in a targeted area: Taunton’s Myles 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 an 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 (Taunton) was really hard hit, and Dukakis 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 Myles Standish Industrial Park captured media attention, resulting in GTE moving in. During Dukakis’s two administrations, however, growth in the overall Targets 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 (a Commission on the Knowledge-Based Economy)—initially proposed by Dukakis’s Secretary of Urban Affairs, Evelyn Murphy in 1983—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 one departure—the assertion that 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.
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 and students interested in a specific technology to be developed into a cluster that would spur that region’s future growth (Ferguson and Ladd, 1988, p. 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. 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 and Ladd, 1988, pp. 78–9; emphasis added)
It is not our intent to assert that 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-1980s 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 Dukakis’s 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 and Ladd, 1988, p. 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 38 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 and Ladd, 1988, pp. 67–9).
Assessment: Rise of the States: Fosler and Eisinger
Our Massachusetts case study of two gubernatorial administrations collectively spanning 1975 through 1991 was important for our purposes. The issue for us was not only the “what” but also the “when,” and to some degree the “how and why.” Fosler (1988) asserts the role American states developed during this period is “not a departure” from the past. He sees continuity in state reactions to early industrialization when states created an economic climate supportive of innovation, and protected it from the onslaughts of foreign imperialism (Great Britain) and raids from other states. Attraction and business climate were chief strategies in those years. That may have been true then, but I am not so sure that Massachusetts once it industrialized has ever been attracted to business recruitment—and until the 1970s never obsessed itself with its business climate. Our history provides ammunition that states were more reactive—driven by forces.
Fosler and I agree, however, on an essential and important point: variation. Variation, of course, will not be evident from our case study of one state. Massachusetts followed an ad hoc path motivated by the “instincts” of state leaders—in our words the consequence of a policy-making struggle among conflicting actors over two decades. Fosler in his more exhaustive summary of seven states observes that there was no single path and no single end point common to the seven states at the end of this period. They were all bushwhacking through their own policy jungles. The similarity, which I agree, is that they redefined state climate to foster economic growth and, in so doing, forged new economic/community development state strategies such as seed and venture capital, gap financing, education and training, and removing regulatory barriers. In the case of Massachusetts (and California), we ought to throw in tax cuts forced on them by their business communities and taxpayers.
Fosler differentiates an old-style “business climate” which dwells on the costs imposed by state (and local) government on business enterprise and entrepreneurism and “economic climate,” much more broadly defined to include quality of life, capital formation, sector innovation, environmental protection and Eisinger’s demand-side workforce and labor. The latter cuts across a number of policy areas not always included in ED’s traditional Venn diagram. Inevitably, this enlarged the economic development policy process to include universities for example. One similarity that does emerge is that states in the post-1970 economic policy system enlarge the scope of policy areas relevant to economic development. They do so because they also share a belief, as Fosler asserts, that states can shape the economic future. He comments that California believed it could create or invent the future. Indeed! There is nothing reactive about that.
Our history has attempted to incorporate our two approaches: Privatist “mainstream” or “traditional” (Fosler labels them “core economic development programs); and Progressive evident in the dominant approaches to community development. The Massachusetts case study provides ample evidence that states tried both—and more often than not created hybrid policy systems. In any case, as years went by and administrations rolled over the dam, community and mainstream development strategies, programs and EDOs accumulated, coexisted and were often turned to suit the prevailing approach of the administration in power. After the turn of the century, states sort of “sorted themselves out” into Red and Blue States and our Contemporary Era commenced and developed its peculiar dynamics—an important theme in our next work.
Ron W. Coan 