A Lesson for the Fed’s Intended Involvement in Rhode Island

The other day, Kate Bramson had a curiously headlined article in the Providence Journal about the Boston Fed’s intention to help Governor Gina Raimondo with her project of telling Rhode Islanders what their state’s vision should be and then twisting our arms to make it happen: “R.I. to benefit from Fed’s cities program.”  Given the headline, one would expect the report that follows to provide evidence that it is, indeed, a fact that the state will “benefit” from the program.  About the closest Bramson comes to substantiating such a claim is her final line:

[Federal Reserve Bank of Boston President Eric] Rosengren cited Lawrence, one of six cities involved in the first round of the Working Cities Challenge in Massachusetts, as one community showing economic progress since the Boston Fed’s involvement.

One supposes this must be true, inasmuch as the Boston Fed began its involvement with Lawrence in recent years, and the entire country is still emerging from a recession that hit nearly a decade ago.  Even so, the actual grant award  wasn’t announced until January 2014, and its goals are set on a 10-year time frame.

It’s very premature to be citing this project as a success (and, frankly, it’s going to be very easy to spin it as a success in a decade no matter what actually happens).  Folks who are suspicious of government planning, the public education bureaucracy, and the labor union control thereof might also be interested to know that the Lawrence plan is to leverage the city’s public schools as community hubs for parent training and community involvement, which will somehow “increase parent income by 15 percent.”

With Rhode Island’s Unified Health Infrastructure Project (UHIP) in mind, one can’t help but wonder how much of that increase in “parent income” will actually come from increased access to public welfare programs.  That predictive question picks up a thread that might make Lawrence an excellent case study for Rhode Island in how we got to our current lamentable position and give context to our discussion about how we should move forward (or “faux-wood,” as John Loughlin likes to say).

According to a brief history provided by a local non-profit deeply involved with the Boston Fed’s project, Lawrence CommunityWorks, in the mid-1800s, manufacturing entrepreneurs located in Lawrence to take advantage of the water power available from the Merrimack River.  The jobs drew workers from the area and from Europe, giving the area the highest proportion of immigrants in the country by 1912, at which point they led the nation’s first major strike and won a variety of benefits, although CommunityWorks suggests that working conditions didn’t really improve.

A decade later, presumably with improved mobility and energy technology, the manufacturers began pulling up stakes and heading to the South, where they could still find non-union labor.  Then, after the “forty year period of relative stability” spanning the Great Depression, World War II, and the early stages of national recuperation, the businesses began relocating again, this time to other countries.  Those that remained chose the opposite strategy and effectively began importing less-expensive workers from the Hispanic regions to the South of the United States, which “continues today.”  According to the 2010 Census, in a state that is 76% white-non-Hispanic, Lawrence is 74% Hispanic.

The “economic progress” of which Rosengren speaks has gotten the city’s unemployment rate down to 8.8%, in comparison with Massacusetts’s overall 4.7%.  According to the Boston Fed’s page about Lawrence, the city’s 3% increase in jobs over the last decade is largely attributable to a 30% increase “in health care and social assistance” jobs.  Indeed, in federal fiscal years 2010 through 2014, organizations located within Lawrence’s three zip codes received a total of nearly $100 million in federal grants and other awards, much of it to government agencies and most of it for housing, healthcare, and other social services.

The Lawrence story touches on many of the areas of public policy that starkly divide the left and the right — from labor to immigration to welfare — but the big picture runs along the intersection of political philosophy and economics.  People once moved to Lawrence because there was work there.  However “unbearable and exploitative” their working conditions may have been (per CommunityWorks), that option was better than the poverty they expected elsewhere, including outright famine in some European nations.

Disparities were unfair and had to change, but the method by which changes were accelerated locked in a system that prevented adjustment when the world changed around the city.

Either the jobs left, or the people who were offering the jobs strove to reach around their neighbors to change the nature of the local workforce.  Now that doing that is proving not to be enough, the social services industry — the inside interests that generate no wealth of their own and are entirely dependent on location — is becoming the area’s defining industry through its ability to draw in outside resources.  The Lawrence-Methuen-Salem area has added just 7,200 jobs since 1990.  Twenty-one percent of them were direct government jobs.  Even more: The increase in jobs in education and healthcare was 9,300, meaning that a service industry heavily reliant on government funding accounted for all of the gain and made up for losses in every other industry.

In the long run, this will be a major problem.  We’re setting up what amounts to a system of regional redistribution that siphons off the work of New Englanders and Americans who are still able to make their regions function, economically, in order to keep people in regions that cannot function by reducing the incentive for them to leave and to go where the work is.

The do-gooder central planners structure these subsidized initiatives with the claim that they are helping the local population get up and running again, perhaps to find their niche.  More likely, of course, the central planners — like the rich industrialists before them — will tell the locals what their niche should be and force them to work toward that “shared vision.”  Either way, it’s a foolhardy objective.  Those who do  find their feet through such programs will tend to take their new skills and resources to areas in which they will best profit by them.

The natural advantage of places like Lawrence and Rhode Island is not what it used to be.  It may remain very high, particularly in the case of the Ocean State, but not high enough to support the level of government regulation, welfare programs, union labor bureaucracy, and general social control and self-serving corruption to which the insiders have become accustomed.

To compete with the rest of the world in the long-term, those costs must be reduced, so that the advantages of the area can emerge from their murky waters again.  Those advantages may simply be the ones we already know exist (location, geography, history, and so on), or perhaps some enterprising Rhode Islander will find an as-yet-undiscovered gem of opportunity that is beyond the ability of local legislators and bureaucrats to imagine or approve on speculation.

The alternative of bringing in outside money until some miracle happens is founded in nothing more substantial than wishful thinking, and it leaves Rhode Islanders vulnerable to the winds of the national economy.  When things turn down, other regions will draw in the resources that they currently allow to flow outward.  The Obama stimulus, with its massive debt and created money, may have softened the blow last time around (if only for governments and their satellites), but that calf has been slaughtered, that sprouting tree chopped down.

What Rhode Islanders need is an infusion of freedom to make their own way and to redefine their state in a way that suits them individually, and those who cannot do so are being set up for a hard fall by efforts to keep them in a place with no opportunity.

(Featured image from the Bureau of Labor Statistics unemployment map for New England for August 2015.)

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