It is the season for giving thanks, and we in Northern New York have much to be thankful for. Times are not good, but they could be worse — and are worse in some other places. We are facing the highest unemployment rates since 1992, but things are recovering slowly. There is little reason left to expect a second helping of national recession, and we actually made a profit on the Troubled Asset Relief Program bailout of the financial industry.
I am most thankful, however, for the conclusion of elections and the end of a disgusting campaign season. Now that we have a new slate of elected officials, they can quit calling each other names and get on with the business of delivering on their campaign promises.
To the winners at the federal, state and local levels, I congratulate you — but I want to warn you about some issues that lie ahead.
Local candidates' campaign promises mostly seemed to involve bringing jobs back to the north country or "jump starting" our economy in some way. You differed on your methods rather than your goals. Regardless of your position or your plan, you will find it more difficult than you might imagine.
The unemployment and lack of economic growth in our regional economy is structural. That means it happens because of where and who we are, not as a result of any government policy. That also means that changing policies won't change the nature of our economy. Things like stimulus packages — where you spend government money to create demand — will create jobs, but only as long as the stimulus money lasts. When you quit spending, things go back to their normal state.
Likewise with loans and tax incentives for new businesses. There are already lots of lenders in the public and private sector operating in our region, and any creditworthy business that wants to borrow to expand can do so already. By putting more money into the system, you just attract less creditworthy businesses.
As we saw with the attempts to restart the Deferiet paper mill, it is easy to attract a marginal business when they can use your money to invest. Once the incentives are used up, however, we are left with a business that probably won't survive, and which will take our money with it when it goes.
We lack investment capital for businesses that want to grow without adding debt. There have been a couple of attempts to organize a regional venture capital/equity investment fund, but they always break down in the face of our limited markets and deal flow. Investors in these funds can normally find better returns and lower risks elsewhere, so the only investments in a local equity fund are driven by charity, not business. It is not a sustainable model.
OK, so what does work? What can you do to improve the region's economy?
n Stimulus spending won't last, but infrastructure will. Public investments in new roads, sewer lines and fiber-optic networks will help the economy grow over time and create new jobs. Of course, that will happen slowly and the new jobs will not be clearly related to the infrastructure investments, so it may be difficult to claim credit for those jobs in time for the next election.
n Tourism infrastructure is a double bonus. Things that make life better for tourists can also make life better for local residents, and that could help attract people to our community who will then start businesses or help existing businesses grow.
Austin, Texas, saw phenomenal economic growth around a hot music scene. We could do something similar around natural outdoor beauty and recreation. Investments in snowmobile trails or water recreation could be more valuable than new roads or water lines in many cases.
n Investments in education are always good for an economy, as they boost the value of human capital.
So as not to sound too self-serving, however, I will encourage you to tie benefits to the colleges and universities in the region to a demand that they step up their engagement with the region's business and other communities. Before you decide to support a program, I strongly encourage you to spend some time with students and faculty in our schools. Please let me know if I can help set up a meeting.
In the near term, however, there is one thing that offers more economic promise than any other choice. It may not be politically palatable, but it is important. Get Wall Street back on its feet!
I realize that many of you campaigned on a sense of outrage over the excesses of Wall Street and accused one another of pandering to the interests of greedy Wall Street fat cats. That may have been what got you elected. You may have an honest sense of disgust at the greed that drives the corporate culture of many financial companies. Get over it.
Before the subprime mortgage fiasco and the near-collapse of many Wall Street firms, state taxes on Wall Street profits and bonuses generated roughly 20 percent of our state tax revenues. The sooner we can get Wall Street and its fat cat traders and brokers back to profitability and obscene bonuses, the sooner we can get out of our statewide crisis in government spending.
None of us really wants to see New York state spend less (just less on other people's interests — more on our own), nor do we want to pay higher taxes or assume larger debts. Growing our state revenue sources seems to be the only choice left, and Wall Street is the most promising source. Cracking down on the excesses of Wall Street is good politics for an attorney general but less so for a governor who has to provide services to his constituents in a time of limited resources.
Congratulations on your election win and good luck. Most of what happens to jobs and business growth in the north country will happen in spite of you, not because of you — but you can still make a difference. Business people in our community tend to be hard-working and resilient, accustomed to earning narrow profit margins in tight markets. If you ask them, they will tell you what they need from government. Please don't forget that those businesses, not government, are the real source of jobs in our community.
Greg Gardner is an associate professor of business at SUNY Potsdam. His column on business issues in the north country is published monthly in Money Matters. E-mail him at email@example.com.