Was the Greenhouse Compact Right?

In the recent flurry of activity related to RhodeMap RI, I came across an essay on GoLocalProv by urban-development writer Aaron Renn that very much clarifies a fundamental difference of thought between the left and the right.

Renn’s basic assertion, as captured in the essay’s title, is that “The Greenhouse Compact Was Right.”  It wasn’t.

The Greenhouse Compact, in brief, was an elaborate plan put forward in Rhode Island in the 1980s, spearheaded by our treasurer-elect’s father, Ira Magaziner.  Basically, it was an “economic development” plan in the spirit of RhodeMap RI.  The main difference was that, rather than insinuating its way into state law, like a policy variation on Uriah Heep, the Greenhouse Compact’s implementation gave voters a point of decision, based on a bond referendum, and the voters rejected it dramatically.

Here’s the instructive part of Renn’s analysis:

Fast forward 30 years and what has history shown? The predictions of the Greenhouse Compact have been entirely vindicated and the [laissez-faire] approach of Feldman and company has perpetuated the economic ruination of the state. Rhode Island’s post-recession bump wasn’t a real recovery; it was a dead cat bounce.

The Greenhouse Compact had said, “Overall, prospects are bleak. Industries which are likely to lose employment or at best stay stable far outweigh those with growth prospects. Those companies with growth prospects often plan to expand out of state….Given the current structure of Rhode Island’s economy, these jobs are unlikely to emerge.” This report included a sector by sector analysis in which it concluded that with the exception of eds and meds, the future didn’t look bright. And while it may have been off in some details, clearly history has borne out the Compact’s central claims.

It certainly possible that the Greenhouse Compact’s recommendations would have failed to stem the tide. But it’s hard to see how they could have made things much worse, thus pursuing the strategy likely made sense on option value alone.

The missing piece, a gap that Renn simply ignores, is that laissez-faire didn’t characterized the government of Rhode Island in the run-up to the Greenhouse Compact, and it has hardly characterized the government of Rhode Island these past thirty years.  “The current structure of Rhode Island’s economy” is built in the spirit of the Greenhouse Compact, only piecemeal.  The compact didn’t arrive as a dangling socialistic escape ladder in the darkness of a free-market economy; it was the descending darkness written into explicit policy.

Renn goes on to accuse “the ultra-purists on the right” of failing to recognize “that creative destruction is real,” and that places will fail, just as businesses do.  On one level, that’s nonsense.  Our place is a segmented piece of land on the East Coast; it may cease to support what we’ve been doing, but that doesn’t mean it won’t support something else.  It’s the government enterprise overlaid on that piece of land that is failing.

Although they’re correct to suggest that Rhode Island must “reinvent” itself, the planners blithely skip past the reality that the most sure path toward reinvention is to set the people free, so that each of us can go out in search of the opportunities that our place and our community best support.  Ultimately, we’re failing because the planners only want those opportunities that preserve their priorities and their power.

Maybe their Greenhouse Compact would have performed better than the incremental tightening of the noose that we’ve experienced, but the real question is: Performed better at what — picking a new direction that Rhode Islanders would have to follow, or consolidating power for people who think they know what everybody else needs to do?

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