Saul Kaplan: No Silver Bullets for R.I. Economy
October 25, 2007 | Print this page | Share This | Email this page
The following editorial appeared in the Providence Journal on Thursday, October 25, 2007
I have been having flashbacks to a day early in my career. I was a newly minted manager arriving to work at corporate headquarters one morning to the news that the company's lead new product was being pulled from the market for safety reasons. It was a disaster and the firm's survival was a question on all of our minds.
The president called his managers into a meeting. You could have heard a pin drop. I will never forget his words. He looked each of us in the eye and said, "It is easy to lead during good times. Now we are going to find out who the real leaders are and who can take this great company forward."
We are about to find out who the real leaders are in Rhode Island and who can work together to take this great state forward. We are at a tipping point and today's actions will determine the kind of Rhode Island we leave for our children and grandchildren. Repositioning our economy will not be easy and there are no silver bullets. It will take strong leadership that will not back down in the face of vested interests that prefer the status quo.
There are many who think we can bring a 20th Century industrial economy back to Rhode Island. The industrial economy is long gone. We cannot continue to invest our energy and resources on defensive moves that try to hold onto the past. The truth is that Rhode Island's industrial economy has been replaced by a lower-wage service economy that has forced many Rhode Islanders to seek taxpayer-funded support programs. This is not sustainable. We need to play offense and stick with our strategy to create a high-wage knowledge economy that produces better jobs for all Rhode Islanders.
We must get our state's fiscal house in order. Last year, personal income tax receipts, the money you and I pay for state spending, increased by more than 10 percent. We can deliver high-value services with these resources. We don't have a revenue issue. We have a spending problem. Our budget deficit prevents us from making necessary investments to improve our business climate, strengthen our education system, and fuel a stronger economy.
We have serious work to do to improve our business and tax climate. Recent changes to create a flat-tax option, lower capital-gains taxes, cap property-tax increases, and phase out the car and inventory tax are all good steps. We need strong leadership to continue to lower our taxes and to resist the temptation to solve our budget issues with tax increases.
While improvements in our business climate are essential, they are not enough. There will always be places where the cost of doing business is significantly lower. We must compete with our brain power and by leveraging the unique advantages of being in the Northeast. We must compete by creating an education system that provides all Rhode Islanders with the skills they need to get good jobs. We can't compete on costs but we can compete on innovation. Ideas, new products and services, and new ways to deliver value are the life blood of a stronger economy and the only path to better jobs.
There is no silver-bullet solution for creating a high-wage knowledge economy. One strategy we've heard a lot about proposes to turn Rhode Island into a distribution hub with a deep-water container port at Quonset. Drive down to Quonset and you will understand why this idea doesn't make sense. Some 8,200 people come to work at Quonset every day. There are more than 150 companies located in the park. The Port of Davisville is the 14th largest auto port in North America, with more than 100 ships carrying 120,000 cars into the port each year. There are only 535 acres remaining to be developed at Quonset and the largest single parcel is less than 50 acres.
We have evaluated the economic and environmental impact of a deep-water container port. Conservatively, it will cost at least $500 million to build and another $100 million for further freight rail improvements. To justify the investment and create significant jobs, we would need to attract enough containers to fill a two-mile long train going out of Rhode Island every day. Visit Boston and see how they are struggling to get enough market-share to make a go of their container port.
Continued growth at the port is important, but there is no scenario where Quonset - park or port - provides a full-scale repositioning of our economy. We need an economy that produces high-wage jobs in industries that will be here for the long haul. We must leverage our location in the knowledge corridor between New York and Boston and pursue growth in sectors that offer all Rhode Islanders an opportunity to move up the job ladder.
Our target high-wage sectors include health and life sciences, financial services, IT and digital media, marine and defense, and consumer and industrial products. These are sectors where Rhode Island has real strengths and opportunity for growth. We are working to modernize our financing and business-development programs to align them to these sectors. We are replacing outdated programs with those that improve our ability to attract entrepreneurs and create new companies. And we need to make certain that our workforce is well trained and ready for the challenges of the new economy.
This is our strategy for increasing prosperity (and our tax base). It is starting to work. In the past 12 months our economy produced job and wage growth in every county in Rhode Island. Staying on strategy will require decisive leadership, deep collaboration, and the courage to forgo short-term fixes. It will be difficult, but for the sake of our state's future, we cannot afford to fail.
Saul Kaplan is executive director of the Rhode Island Economic Development Corporation.
