The Moldy Massachusetts Miracle
By Joel Kotkin
Amidst the coverage of John Kerry’s nomination in Boston last summer, the region that produced him—New England—received remarkable little intelligent scrutiny. For the most part, the area was portrayed as quaint, idiosyncratic, and brainy, a kind of screwball seafood stew of Harvard, the Red Sox, and ethnic diversity spanning Yankees, Italians, Irish, and a host of more colorful recent newcomers.
Some suggested that New England also provides a compelling economic model for the rest of the country. “What New England has achieved economically,” gushed Newsweek’s usually sensible Robert Samuelson, “is precisely what Democrats aspire to do politically.”
There is a long tradition of looking to New England as an exemplar of what is best in America. This is particularly marked among the Eastern elites, many of whom have fond college and graduate school memories of the region. Yet as one looks at contemporary America—more Southern, more Western, and less Eastern than at any time in its history—New England may be an odd place for a national party to search for role models.
This is all the more true since New England isn’t exactly booming. Over the past quarter century, John Kerry’s native land has created far fewer jobs than the rest of the country, many of its people have moved elsewhere, and it has lost its position as high-tech Mecca to other parts of the country.
Massachusetts is particularly troubled. Between May 2001 and May 2003, Massachusetts alone lost over 110,000 jobs. Just since 2002, some 40,000 workers have dropped out of the Boston job market. After enjoying a small population gain in the 1990s, the city itself has been losing residents since 2000.
In most of the country, such developments would have local elites in a state of panic. But in New England, particularly around Boston, the response has been along the lines of “What, me worry?” Doug Fisher, director of economic development for Northeast Utilities, one of the region’s primary providers of electrical power, traces this odd phenomenon to the fact that the area’s dominant leadership, including the university-centered intelligentsia, are getting along just fine.
“The sad fact is that there is little room for upward mobility here,” laments Fisher, whose firm is headquartered in Hartford and covers some of the region’s more decidedly blue-collar areas. “Our situation here is not sustainable. There are storm clouds coming in, but it’s hard to get the leadership to pay attention.”
Many local economists and business leaders, Fisher adds, increasingly do not focus on job creation, but on creating as much wealth per capita as possible. This notion, described by Case Western Reserve economist Paul Gottlieb as “growth without growth,” represents an economic politics suited for the entrenched professoriate, land-owning gentry, media types, and stock market operators who increasingly dominate the finances of the Democratic Party.
“The real argument here is between jobs and income,” believes Fisher. “We still have plenty of money, and people think that’s all that matters. We are becoming an economic development cul-de-sac and a lot of people like that.” The idea that that would resonate with Democratic tradition, however, seems peculiar at best.
The prescriptions now pushed by most New England Democrats favor regions with little population growth, particularly those with a dearth of children—the little tykes have quite a negative impact on per capita income. The ultimate hell-holes, by their standards, are places with strong rates of in-migration and family formation, like Phoenix, Houston, Las Vegas, or San Bernardino-Riverside.
As a California Democrat and Bush opponent, I find it distressing to see this kind of perspective gaining currency in my party. At its heart, New England-style economics replaces more traditional populist notions such as commitment to expanding opportunity for families and small businesses with an ethic that favors instead the environmental, cultural, and economic preferences of people who already have wealth and property.
Such politics seem self-destructive—and unlikely to have much attraction in those parts of the country, such as the West and the South, still experiencing major population growth. It may appeal to those who already have achieved a wonderful lifestyle and simply want to maintain it, but it does nothing for those who still seek to create their own American dream.
For much of American history, New England served as a crucible for economic progress. In colonial times, when most Americans lived off sustenance farming or from the export of tobacco or cotton, New Englanders were plying the seas for fish, exporting timber, dealing in slaves, rum, and salt. Despite the intellectual and spiritual pretensions of their assumed “betters,” New Englanders were primarily a commercial people.
Leadership in the region fell increasingly to a new independent mercantile class, whose dissatisfactions with imperial oversight helped spark the revolution. Southern gentry might have resented parliamentary interference, but for the Boston merchant, taxes were the most intolerable affront.
By the time of the Revolution, Boston was no longer the nation’s largest city, outdone by both Philadelphia and New York. These cities’ climates were milder, and their rivers led directly to the expanding West. New England became increasingly isolated within a sprawling nation.
After a period of decline, though, New Englanders used their greatest resource—their entrepreneurial spirit—to reshape their region, and in the process the nation. Using technology stealthily acquired from Great Britain, New England began to develop powerful textile and other manufacturing industries. By 1836, near 5,000 people—mostly farm girls from surrounding communities—worked in the spinning mills of Lowell alone.
By the 1850s, however, New England’s locational disadvantages and the greater allure of other cities—not only New York and Philadelphia, but new cities such as St. Louis, Chicago, and Cincinnati—were again diminishing the region’s economic allure. It remained the “Athens of America,” its most prolific intellectual region, but was relegated to a secondary role to the new Rome evolving further south.
Boston’s decline accelerated early in the twentieth century. An often vicious class and ethnic warfare broke out between the old Brahmin Protestant establishment and a restless immigrant population, largely Irish. In the 1920s and 1930s, particularly under the demagogic Mayor James Michael Curley, Boston turned on its arrogant and overweening Brahmin elite. Calling the Anglo-Saxon population “a joke,” Curley created a vast municipal welfare state and did much to chase away business.
“Curley did to Boston what Marion Barry later did to Washington,” notes urban historian Fred Siegel. Certainly, the Curley legacy placed Boston further at the periphery of American economic life. For nearly a half century, Boston and New England in general declined, as New York, Chicago, and the sprawling sunbelt cities assumed national leadership.
Then in the 1960s New England began to reinvent itself yet again. In part, this reflected a triumph of assimilation. The children and grandchildren of rough-edged Irish immigrants and ward bosses now had attended elite schools and colleges. The Kennedys, of course, epitomized this trend, and served as models for many others, including de-scendants of other European immigrants from Italy, Greece, Russia, Portugal, and Quebec.
It was largely from among these second and third generation hyphenated Americans that the “Massachusetts miracle” found its life. Edson de Castro, Modesto “Mitch” Maidique, George Hatsopolous, An Wang, Amar Bose—all were prominent figures in this remarkable turnaround which married the region’s traditional intellectual strength with the ambition and drive of relative newcomers.
By the 1980s, at a time when New York State and the industrial cities of the Midwest were suffering from industrial obsolescence, New England was leading the nation into the information age. The explosion of technology companies along the Route 128 corridor outside Boston, and the development of a strong financial service segment in the city, led to a broad revival of the region.
Boston, a city that had eschewed the first phase of high-rise construction in the early part of the century, now boasted towers that reached the sky. Once a net sender of talent to other cities, New England, particularly Boston, now attracted educated people from around the country, including New York City. Indeed, former New Yorkers dominated many of the most exciting locally based enterprises, including Inc. magazine, where I worked for five years and which emerged as the Bible for the entrepreneurial revolution of that decade.
By the end of the 1980s, the notion of the “Massachusetts miracle” was attractive enough to help nominate its governor, Michael Dukakis, as the Democratic candidate for President. Dukakis may have been lambasted by the Republicans as a typical tax-and-spend liberal, but in Massachusetts terms, he was seen as a reformer of the state’s archaic government system.
The 1988 election, however, demonstrated the limitations of the Massachusetts model. Running against George H. W. Bush, himself a New Englander turned Texan, Dukakis’s plea for economic rationalism in the Massachusetts mold seemed oddly out of touch and elitist, and lacked the broader appeal of sunbelt oriented, low-tax, small-government doctrine that Bush inherited from President Ronald Reagan.
Yet for the future of the Democratic Party, the Dukakis nomination may be seen as decisive, its influence growing even after the man himself became an asterisk. Over the next decade, Dukakis-style elitist liberalism replaced the industrial-union theology—based largely in the Midwest, and increasingly corrupted and anachronistic—that had dominated the economic views of Democrats previously.
Soon a whole host of academic and planning gurus, mostly based at elite New England schools, was anxious to tutor Democratic politicians and teach the nation lessons from the Massachusetts playbook. The new party gurus were men such as Harvard’s Robert Reich and MIT’s Lester Thurow. They embraced state-directed capitalism, which they insisted was working brilliantly in Germany and Japan.
In his most prominent works, Reich, who now advises Senator John Kerry, dismissed much of the American individualist tradition in economics, in favor of an “industrial policy” which would allow academics and government officials to steer the American economy. America’s relatively unorganized and free-form economic culture, Reich argued in 1983, made it “ill-prepared” for the new high-tech era, particularly compared with competitors with activist governments.
These ideas had been widely adopted by Massachusetts Democrats like Dukakis. Later on, they were picked up, half-heartedly, by Reich’s old friend Bill Clinton. But Clinton’s keen sense of politics, and perhaps his background as a Southern governor, ultimately made him less enamored of statist models.
In Massachusetts, though, such ideas never went out of favor. The idea of rule by the best and brightest has had a long tradition in New England. Governors, both Republican and Democrat, embraced ideas such as cultivating higher-end industrial “clusters” and pouring state funds into higher education. Appealing to Ph.D.s had become the sine qua non for the regional economy.
The “Massachusetts miracle”—and its growing appeal to liberals elsewhere—reflected a major shift in Democratic class politics. Modern Massachusetts-style economic liberalism had none of the populist touches pushed by earlier icons like Walter Mondale and Hubert Humphrey. That’s one reason why John Edwards had to be melded onto the Kerry ticket. Epitomized by Dukakis, Reich, and Thurow, the Massachusetts economic ethos focuses heavily on high-pay sectors and their workers. Think of it as “trickle down” economics legitimized by academic credentials.
This form of economic liberalism, not surprisingly, appeals to members of the elite media, many technology company executives, investment bankers, venture capitalists and, perhaps most of all, the professoriate, particularly those who make money as “consultants.” Those groups now also make up a large part of the Democratic Party financial base. Their elite neighborhoods, including the leafy suburbs of Boston and other cities, are now as integral to the party’s lifeline as the black inner city, and arguably much more influential. It is from this world, with its epicenter in Massachusetts, that we can expect a Kerry administration to draw its domestic agenda.
The problem with Massachusetts-style economic policy lies in its statist presuppositions. The industrial policy approach so eagerly embraced by the Bay State intelligentsia has failed miserably in Europe and elsewhere. Instead of racing ahead of the U.S. cowboy capitalists, countries relying on state “industrial policies” have eaten American dust for more than a quarter century. Bill Clinton quickly gave up on his original idea of fashioning new government-directed economic plans along the lines of Germany.
But one needn’t look abroad for cautionary examples. Massachusetts’ role as a high-tech model must also be viewed quite critically. After its ’80s boom, the tech-driven Bay State economy went deeper into the tank than any other part of the country. Not only did its old industrial base contract, but large parts of its spiffy “new” economy dissipated. As a region, New England suffered among the worst effects of any place in the country. It would not be until the mid- to late-1990s that the New England economy would show strong signs of growth.
In some senses, the early 2000s represent a repeat of the previous New England recession. After a rapid run-up in the dot-com era of the late ’90s, the Massachusetts economy has again slowed far more damagingly than the national average. Even more than before, the downturn is centered in the very pride of the economy—its high-tech and financial-services industries.
Conservatives and Republicans tend to blame New England’s problems on the relatively high taxes in the region. Yet, as noted by Michael Goodman, an economist at the University of Massachusetts’ Donahue Institute, the notion of “Taxachusetts” as an anti-business hellhole needs to be re-thought, in part due to a long recent period where business-minded Republicans have held Massachusetts’ governorship. (The rest of the government remains overwhelmingly Democratic.)
New England’s gravest problems, Goodman suggests, actually lie in geographic and demographic issues. “By the 1990s the nature of our problems really changed,” Goodman believes, “from being one of the cost of business to the cost of living.”
Throughout the 1990s, Massachusetts lost 83,000 more college-educated residents than it attracted—among the worst rates in the country. Although young people continued to swarm to the region’s excellent schools, when they hit their 20s and 30s, they tended to leave for neighboring New Hampshire or places like California, Colorado, Florida, Texas, or North Carolina.
Behind these numbers lies a broader demographic decline. Simply put, New England, especially Massachusetts, is not producing future citizens. Boston, in particular, is rapidly becoming a “childless city” (like Seattle and San Francisco).
For an area whose greatest asset is its youthful brainpower, this population erosion suggests a deepening crisis. Like many European countries, the region, Massachusetts most of all, seems unwilling to expand its job base, its communities, and its stock of housing enough to keep prices within reason. Be-cause of limits to growth, the cost of housing continues to soar in New England even amidst a weak economy. That’s good for tenured professors who bought their homes in Brookline 20 years ago, but terrible for others just getting started.
If New England wants to prosper again, it may have to eschew the elitism of the “Massachusetts miracle” and focus on rebuilding its economy not on a narrow set of industries determined by the cognitive elite, but on a broader, more expansive basis. By dismissing most older industries and favoring the notion that it is only the much ballyhooed “creative class” that matters, New England is turning its back on people who, although they lack Ph.D.s, can be good workers, citizens, and business generators in a local economy.
“Energy accomplishes more than genius,” Victorian moralist Samuel Smiles observed. To succeed, New England needs both—well-trained minds and hungry, grasping people whose work ethic and street smarts allow them to produce economic bounty. The region’s newer immigrants in particular, though they may lack “information age” skills, need the kind of opportunities for upward mobility that they now find in places like Houston, Los Angeles, or Florida. If given more freedom to be productive they can become engines of fresh prosperity.
Unfortunately, New England’s looming demographic crisis “is not defined as a problem” in most of the region, according to Goodman. In fact, some of the area’s intellectual elites would welcome population decline and job stagnation. Life in a “cul-de-sac” with little new traffic coming in or out has its appeal to those whose bank accounts are already full. “This has be- come a center of myopia and arrogance,” believes Mike Levin, editor of New England Development, a local economic newsletter.
New England’s liberal elites—many of them enjoying inherited wealth or assured positions in academia—will barely notice as jobs, and young families, leave their states. Such a reversal will not affect the people who enjoy homes on the Cape or Beacon Hill, or those who collect their annuities, cash state paychecks, or reap huge consulting fees. Showing off their degrees and pedigrees, they will continue to present themselves as the nation’s natural leaders.
And they will do so until the rest of America stops listening or caring.
Joel Kotkin is Irvine fellow at the New America Foundation. He is the author of The City: A Global History, to be published early next year.
