History Drives us

Seventy years ago, New England Council President John S. Lawrence warned his colleagues in the business community: "No problem is of greater importance to New England than that of transportation." Some would make the same argument today. Without question, we move goods and services faster than we did seven decades ago. But as the adage goes, the more things change, the more they stay the same.

Indeed, the issues that dominated the New England business community's agenda in the 1920s are remarkably familiar: transportation, but also international trade, environmental impacts, federal funding for research and job skills training.

The six-state region was expected to spend $50 million on construction and improvement of highways in 1928 alone, and growing aviation services created demand for new airports.

A scramble was on to land some of the federal government's $420,000 in agricultural research. And New England textile mills too small to maintain research departments sought newly available technical advice through organizations such as the National Association of Cotton Manufacturers.

Boston businesses were even beginning to consider the economic significance of environmental conditions, as a national study showed the Hub had the cleanest air of 23 cities investigated.

But the '20s also saw New England companies-especially textile and shoe manufacturers-moving to Southern states in droves, attracted by cheaper prices and warmer weather. The New England Council was established in 1925 when a group of New England business leaders joined with the region's governors to develop a joint strategy for arresting an exodus of jobs from the region.

The business leaders and New England governors who created the council recognized that the six New England states shared more than a common culture and history. They also shared an economic interdependence that argued for collaboration on issues that crossed state lines and challenged businesses of all types, as well as on the development of federal policies that would strengthen New England's economy. Over the next seven decades, issues ripe for collaboration would include costs of doing business, especially energy and environmental costs, quality-- of-life considerations and, perhaps most notably, transportation and brainpower.

Going places

In its early days, the council forged new partnerships with trade groups to create uniform standards for distribution and sale. The council proposed a uniform marketing bill in 1927 to authorize the commissioner of agriculture in each state to establish grades and standards for farm products. The council worked to establish the New England Dairy Conference Board to encourage closer cooperation within the dairy industry. Also in 1927, council members met with the economic staff of the Metropolitan Life Insurance Co. to begin a study of research in relation to the region's economy, particularly how research might widen markets, adapt products to changing demand and develop substitutes for products in declining demand.

The council also took an immediate interest in strengthening the region's transportation system, most notably by promoting airport construction. The cost of moving freight was a constant issue in 1920s New England. With the success of Charles Lindbergh's first solo nonstop transatlantic flight in 1927, aviation emerged as a new growth industry. New England's business leaders wanted to be in the forefront of this new mode of transportation and the manufacturing industry associated with it.

By the late 1920s, New England was home to two distributors of seaplanes and one distributor of rebuilt planes. Pratt & Whitney of Hartford, Conn., was making airplane engines, while other manufacturers around the region made instruments, fabrics, cements and glues and other parts needed in airplane manufacturing. In 1928, Bourdon Aircraft Corp. of Hillsgrove, R.I., built the first New England-- made airplane. The region was also growing a variety of support industries related to the booming aviation field, including contract air mail, aerial dusting, aeronautical engineering, instruction, insurance and airplane servicing.

In those early days of aviation, New England businesses were particularly concerned with the region's airport capacity. In 1927, New England counted 45 existing or proposed landing fields out of a national total of 4,000. One year later, the region claimed 69 landing fields, including new ones in Manchester, N.H., Hartford and Danbury, Conn., and Caribou, Maine; an additional 68 were in the proposal stage.

Again, the connection to the 1990s is striking. Today, the New England Council is leading an effort to better use New England's existing system of regional airports. Already, 25 million passengers use Boston's Logan International Airport annually-and between 12 million and 20 million new passengers are expected to join them each year over the next decade. In 1996, the council began working with the Massachusetts Port Authority, the Federal Aviation Administration and the region's major jet-service airports on a New England Regional Airport Initiative. The initiative aims to explore ways to lessen the burden on Logan and improve the regional economy by promoting increased usage of regional airports in cities such as Warwick, R.I., Manchester, N.H., and Worcester, Mass.

Indeed, a recent study commissioned as part of the initiative found that 5 million Logan passengers-about 25 percent of the total at Logan-live closer to one or more of New England's regional airports than they do to Boston. Of this total, close to 2.1 million passengers could be recaptured by the regional airports if additional routes were offered at competitive prices. In addition, more than 4 million passengers who live near Hartford or New Haven use the larger, but more distant, New York airports.

Ground transportation will also remain important to the regional economy. The introduction of high-speed rail on Amtrak's Boston-- New Haven route is slated for completion in 1999. This project will cut the Boston-to-New York trip to three hours from the current four hours-plus-with enormous potential economic benefits. Recognizing this impact, the council has consistently supported federal assistance for railroads.

The federal Intermodal Surface Transportation Efficiency Act (ISTEA) of 1990 offers additional evidence of transportation's importance to the region. The legislation has provided billions of dollars to improve and maintain New England's aging infrastructure. But the money has not flowed to New England without a struggle.

The energy and commitment of the New England congressional delegation and the vigilance of the region's business community has been needed to stave off efforts by Southern and Western states to alter the federal transportation funding formula and redistribute money in their direction. Recently, Congress reauthorized ISTEA, providing for $1.4 billion per year for the next six years for New England.

Brainpower

New England's economic fate has been tied to the ingenuity of its people and the location in the region of some of the world's best universities. These institutions have consistently captured a disproportionate share of research and development (R&D) funding from federal agencies such as the Department of Defense, the Department of Energy, NASA and the National Institutes of Health.

All told, New England businesses, universities and teaching hospitals received $4.8 billion in federal R&D funds in fiscal 1994 -- about 7 percent of all federal R&D support, according to the latest available data from the American Association for the Advancement of Science. The Defense Department was the largest funder, providing $2.8 billion.

Moreover, alumni of a single New England research institution, the Massachusetts Institute of Technology,, have founded 4,000 companies worldwide, accounting for 1.1 million jobs and $232 billion in sales in 1994, according to a BankBoston study.

Nationally, at least 50 percent of U.S. economic growth derives from R&D investments. But R&D is particularly important in New England, and the region once again will find itself in competition with other parts of the country, as lawmakers consider plans to reduce federal R&D funding over the next six years.

Recently, the council convinced all 23 New England members of the House to send a letter to House Speaker Newt Gingrich and House leadership, emphasizing the importance of maintaining R&D funding.

Acting regionally

The New England Council's membership includes large and small companies, educational institutions and nonprofit agencies. These organizations come together not only because of the common issues they face, but also because of the regional identity that unites them-a concept that may be difficult to imagine given the image of the fiercely independent New Englander.

In recent years, it has become increasingly evident that key economic issues are being decided on the basis of regional voting blocs. Indeed, the council, the lead regional organization in Washington, D.C., is also closely identified with the New England Congressional Caucus.

A look at the changes on Capitol Hill reveals why this activity is so important.

In 1910, Congress set the number of seats in the U.S. House of Representatives at 435. At that time, New England sent 32 members to Washington. Texas, Florida and California together sent 33.

By 1940, New England's representation in the House fell to 28 seats. Texas, Florida and California collectively sent 47 members to Washington.

Following the 1970 census, New England sent 25 House members to Capitol Hill. Texas, Florida and California sent a combined 88 members to serve in the House.

Currently, New England elects 23 members to the House. Texas, Florida and California elect 105.

And some of the current population projections suggest that New England, and many of the Northeastern states, continue to lag behind the nation in population growth. The region could see a declining share in members of the House.

No one state delegation can succeed in passing legislation without the support of colleagues. Having 12 U.S. senators advocating a position that's good for the region is much stronger than having two. In essence: there is strength in numbers.

Seventy years ago, an early member of the New England Council, Connecticut State Farm Association President Henry Trumbull quipped: "North America is divided into two parts, New England and the other 42 states."

Yet in recent months, the council has formed partnerships with other states outside New England that share common agendas. For example, in the area of transportation infrastructure funding, the council has worked with the New York City Partnership to help form an agenda of common interests for the Northeast region.

On Capitol Hill, if New England can count among its allies the delegations from the Northeastern states-New York, New Jersey, Pennsylvania, Delaware and Maryland-we could count an additional 74 members, bringing the regional total to 97 members.

When the council was in its second year, local newspapers were reporting a lack of regional identity and a low self-image on the part of New Englanders. The Tribune of Cambridge, Mass., called these factors "hindrances to this section's development."

The council's newsletter quoted from the Tribune: "There is another thing in which New England has been lacking and that is in optimism in regard to itself. The West has always seen its present and its future in bright colors; it has not undervalued itself; it has not had to be converted to a faith in itself as it seems New England has had to be. The West has backed its faith in itself with labor and with money; it has advertised itself and through its advertising has caused to grow its spirit of optimism. The two go hand in hand. Optimism leads to the speaking of self and community, and sectional advertising arouses optimism."

Regional unity is much more popular when the economy is flat, taking a downturn or facing a particular challenge. One issue that brought the business community together in such a way was the credit crunch of the late 1980s. As the combination of recession and increased federal regulation of the banking industry led to a severe tightening of available credit for small businesses, community banks began having difficulty attracting the new capital needed to meet federal standards without calling in existing good loans. This further tightened available credit and hurt New England worse than other regions.

Indeed, New England savings and commercial banks experienced a 25 percent decline in capital from the fourth quarter of 1988 to the fourth quarter of 1990, compared with a national decline of less than 3 percent, according to Federal Reserve Bank data. Meanwhile, business failures in New England increased by 193 percent from 1989 to 1990, compared with a national increase of 15 percent.

New England's business community was obviously troubled. The council provided a regionwide, nonpartisan forum for business, financial and political leaders to address the problem. Together, they helped develop the federal Small Business Recovery Act of 1991, which infused private capital into banks and reinvigorated lending to creditworthy small business owners, easing the credit crunch and stimulating job growth.

Today, another looming issue could be as devastating as the credit crunch. New England's labor force shrank by 2 percent between 1990 and 1996 and since has grown very slowly, due in part to the region's high cost of living, according to Northeastern University's Center for Labor Market Studies.

New England's economy demands more skilled employees than ever before for high-end positions in fields such as information technology, engineering and biotech. But even entry-level positions require higher levels of skills, particularly knowledge of computer software. With more than 90 percent of college graduates employed, the region's business leaders and others must address the skill levels among the six out of 10 high school dropouts who are in the job market.

Cognizant of New England's current shortage of skilled labor, the council last fall began working with Training and Development Corp. of Maine on a new model for the Job Corps program, which helps provide training and career direction for people with multiple barriers to employment, ranging from learning disabilities to histories of abuse. The council worked on establishing a network of companies to help provide jobs and hands-on training for those enrolled in this novel Job Corps program.

The business, education and political communities need to work together to improve literacy, increase vocational training focused on job-specific skills, support incumbent worker training and create more avenues for job access. These are the tactics that will help close the gaps between people and jobs and mitigate the labor shortages that many companies are facing in their search for skilled workers.

If labor needs are not met, some companies may leave New England. And we may find ourselves in a position similar to the conditions that inspired the formation of the council in 1925.

James T Brett is president and CEO of the New England Council.

Copyright New England Board of Higher Education Summer 1998
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