November 12, 2019
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Maine needs to overcome curse of natural resources

BDN File | BDN
BDN File | BDN
Madison Paper Industries will close in May.

The state’s lack of economic development leadership and vision was on open display Tuesday as Republicans and Democrats sparred over who had done the least for the workers at the Madison Paper Industries mill, which will close in May.

There is plenty of blame to go around, but focusing on insults and simplistic solutions detracts from what Maine has been lacking for years — a clear, ambitious and sustained plan for growing the state’s economy. Instead of debating and developing economic growth strategies, time is spent arguing over reforming welfare and reducing taxes, neither of which will lead Maine to prosperity.

Gov. Paul LePage has long touted lowering taxes, energy prices and government regulation as the key to improving Maine’s economy. In a Tuesday letter to House Majority Leader Jeff McCabe, the governor also said more wood needs to be cut. These weren’t the driving factors behind the closure of five Maine pulp and paper mills over the last three years. With declining demand for paper in the United States — many of you are reading this on a screen, not a printed page — and the growth of lower-cost production in other countries, it didn’t make economic sense for corporate owners to keep these Maine mills open.

Despite the obvious downward trend in papermaking, Maine leaders have done little to transition the state to a new, less natural resource-dependent economic future. There have been numerous reports on the need for a larger, better-educated workforce. Voters have backed bonds to fund research and development. Maine public schools are revamping their curriculum to ensure a high school diploma means a student is ready for college or work.

The problem is sustaining interest in — and funding for — these efforts. R&D bonds, for example, have become smaller and less frequent, and the money has been spread over too many projects to make a noticeable difference. LePage has championed early college programs and career training but hasn’t put forth a focused plan to help these programs grow. Lawmakers are considering a delay in requirements for proficiency-based high school diplomas.

In addition to making too little investment in preparing workers for and easing them through this transition, the state has devoted tens of millions of dollars each year to business tax incentives, forgoing significant tax revenues to prop up declining industries.

Researchers have dubbed this the curse of natural resources. Economic growth in countries with abundant natural resources lagged that of countries without them between 1970 and 1990. One reason cited by the researchers credited with the curse theory, Jeffrey Sachs and Andrew Warner, is that an abundance of jobs in the natural resource sector discourages workers from seeking education to improve their skills and opportunities. The opposite is true in the manufacturing sector, where highly skilled workers are more valuable than those with less education and skill. In their 1997 paper, the authors also warn of the power of special interests to maintain the status quo.

Further, heavy reliance on natural resource-based industries leads to a sense of complacency and even a hostility to competing industries, according to Jim Damicis, senior vice president of Camoin Associates, a consulting company. As an example of what he terms “false polarity,” Damicis cites the resistance to developing the state’s tourism industry for fear of diminishing the forest products industry.

Like Maine, North Carolina had a 20th century economy based on natural resources and textile and furniture manufacturing. Decades ago, the state invested heavily in its universities and research and development and sought new, large businesses using economic incentives. Its transition to an economy that focused on technology, health care and small-scale manufacturing was hailed nationwide.

Even before the recession, however, North Carolina’s hot economy had cooled down. A major concern is that population growth is outpacing job growth. North Carolina Vision 2030, created by the North Carolina Chamber, offers an economic roadmap for the state’s future. Its first priority is a highly educated workforce to win “the race for talent.”

This week, voters in North Carolina approved a $2 billion bond, backed by the chamber and Republican Gov. Pat McCrory, that directs nearly $1 billion to the University of North Carolina System and $330 million to the state’s community colleges to grow the number of highly skilled graduates and workers.

Maine doesn’t have North Carolina’s financial resources, but it can follow its lead by developing a focused and ambitious plan to invest in its people.


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