for women and minorities, and the proposed creation of the Rhode Island Academy of Sciences and Engineering to help coordinate and direct scientific and technical expertise toward complex economic and social problems. Dollars and Sense (Sept. 1984), analyzing the defeated compact, says “the battle is not yet over. Both its opponents and supporters agree that the compact has opened the door for future discussions of a positive, more wide-ranging role of government in the state’s industrial development." The exciting thing is that Rhode Island decided to tackle the problem of development boldly, head on, looking within itself rather than searching for saviors from outside. MINNESOTA’S WELLSPRING In 1982, as the recession continued unabated, Minnesota Governor Rudy Perpich assembled an alliance of business, labor, government, education and agriculture called Minnesota Wellspring and created a series of Economic Recovery Commissions. Each was assigned to a different sector of the state’s economy, to analyze the traumatic declines suffered in the recession and then recommend both short- and long-term solutions. Among the proposals were the deregulation of financial institutions, the plan for a world trade center, development of effective responses to plant closings and productivity concerns, plans for use of renewable resources (peat, biomass) as a source of energy and the recommendation of a state research and development grant program. While it’s still too early for more than a few of these recommendations to be drafted into law, the way seems clear for all of them. Those implemented by the 1983 legislature were a series of tax credits recommended by the Task Force on Technology. They provided a capped income tax credit for corporations which transfer their technology to small businesses, a 30% tax credit for equity investments in start-up companies, and a 50% credit for individual and corporate contributions to non-profit offices which offer aid to entrepreneurs in creating new enterprises. The Task Force also got a $6.7 the best faculty of Oregon’s universities, ernment to place and efficiently use technology in elementary and secondary schools. Edward Hunter, Minnesota Wellspring’s executive director, writes in The Entrepreneurial Economy (Dec. 1983): “These commissions have resulted in the development of a cadre of persons knowledgeable about the strengths and weaknesses of each sector of the Minnesota economy. This expertise has and will continue to be a valuable resource to the Governor and to others concerned with the future direction of the Minnesota economy.” LUMINARIES Massachusetts has pioneered in the use of locally-controlled Community Development Corporations (CDCs). Though results have been mixed, they’ve identified the kinds of programs which have proven most successful and redoubled their efforts in those cases. In specific, the greatest successes have occurred with CDCs which grew out of organizations created around community concerns, which then focussed their energies on economic development. Groups created specifically to take advantage of grant monies tended to remain inordinately dependent on state funding. California and North Carolina are the standouts in devoting the resources necessary to create research and development bases for high technology. Delaware, Maryland, New York, Illinois and Michigan have supported worker buyouts of “failing” enterprises. They may be failing by multinational standards, but serve the local economy and provide jobs quite well at their low profit levels. And these and other states have pioneered in innovative and conscientious investments of public employee’s pension funds in local concerns and low-cost housing. Each state has devised programs according to its own needs and visions. None have chosen a single solution, but have instead tried to define a varied and overlapping approach with especial focus on locally created, or maintained, enterprises and employment. The use of the financial resources of the state is a key element in many of these approaches. TURNING A GOOD PROFIT “It’s not fair to gamble pension funds that belong to employees and risk them on business loans that banks won't touch.” —Gov. Atiyeh in response to Ted Kulongoski’s proposal to invest pension funds locally. In a briefing before the 1983 legislature, University of Oregon labor professor Steven Deutsch said Oregon would do well to consider drawing its almost-$4 billion in pension and connected funds (SAIF, veterans) away from common stocks and into in-state housing and investment construction where possible. Regionally, union pension funds have been drawn into the Pacific Northwest Construction Finance Forum (the Supertrust) to fund local construction projects. Oregon's investment of pension funds is governed by the "Prudent Person" rule, which says that the rate of return is the sole criterion for determining investment. House Bill 2618, sponsored by the Committee on Aging and Minority Affairs, would expand the criteria to include the strengthening of the state’s economy and the promotion of "other interests of the investment fund beneficiaries and citizens of the state.” It would also oppose racially discriminatory investments, such as in South Africa-based firms. As mild as it is, Deutsch says, it's a reform which has little chance of getting by Atiyeh apd the 1985 legislature. “It’s not a liberal-conservative, or partisan issue,” he says. “Neither is it a question of reckless investment, and the impli O N THE HO M E FRO NT: Buy O regon’ s Bootstraps Buy Oregon was created "early in 1983 as a local response to a very devastated economic situation in timber-dependent Lane County. While other parts of the country felt a rebound, Lane County was still reeling from the slam-dunk inflicted by the Reagan administration’s dynamic duo of high interest rates and double-digit unemployment. Program Director Alana Probst, working from an alcove above Eugene’s Red Barn, a whole food store and organic meat market which was the first project of Buy Oregon’s sponsor, the Neighborhood Economic Development Corporation (NEDCO), has taken a skeleton budget of $35,000 and parlayed it into the creation of $1,735,000 in local business in one year’s time. That is money that previously was exported out of staje to buy the self-same goods, and represents, with the savings realized by avoiding shipping and other costs, a 5300% return on the initial investment in Buy Oregon. It works like this. The staff contacts a local business, reviews with them items they currently purchase elsewhere, and for those they consider obtaining locally a search announcement is prepared which is extensively circulated throughout the county. In some cases, a local business which never thought to offer its services produces an item it’s already set up to create. Other times, a firm recognizes an opportunity and modifies its production capacity or buys new technology to produce the needed goods. The largest match was between Chef Francisco, a Eugene firm producing meals for the airlines, and Willamette Poultry of Creswell, for cooked chicken which heretofore had been imported from Arkansas. Willamette Poultry is investing $1.5 million in new facilities which will create up to 80 jobs in Creswell. As Probst states, “80 new jobs in Creswell is like somebody discovering gold.” Needless to say, this kind of success has drawn the ribbon-cutters like Gov. Atieyeh, all eager to claim a piece of this action. Not pay for it mind you. Recently Buy Oregon has joined forces with Coos-Curry-Douglas Development Corp, and Willamette Community Development Corp. (Linn and Benton Counties) to extend the experiment to the 6-county area. But other programs, primarily recruitment-oriented, received the most recent state allocation of monies for development. Those with more traditional agendas and budget turf to defend are both jealous and critical of such success. The three groups are now trying to raise funding in their home counties. Ideally, a commission from the matches themselves would provide sustained funding, but that element of the program hasn’t been solidified. The program has been criticised as simply an exchange of laundry between neighbors by some, or as protectionist (by the Oregonian, among others). Jane Jacobs, author of the respected The Economy of Cities, in a letter to Ms. Probst says it isn’t so: "If Oregon replaces imports, it isn’t going to import less than it otherwise would. It will shift its purchases to different imports instead ... It isn’t an inferred barrier. It won’t work unless it is inherently economically constructive and thrifty to replace imports, which is totally different than arbitrarily barring them.” While the name Buy Oregon sounds chauvinist, the concept is applicable anywhere. "The Buy Oregon program is essentially an information service,” states Ms. Probst. “Buy Oregon is systematically seeking to plug some of the leaks in the economy where a product or service now imported can better be supplied locally — keeping the money and jobs at home .. .This approach is building a strong economy from the bottom up.” Buy Oregon was selected as one of the “10 Innovative Ideas" from programs nationwide by the Joint Legislative Committee on Trade and Development, whose Executive Officer Joseph Cortright called it “an attempt to bridge the information gap that disadvantages new and small firms ... this ‘import substitution’ has the same multiplier effect one gets from attracting new fimrs to locate in Oregon from elsewhere, while encouraging Oregon entrepreneurs." So Buy Oregon struggles to survive, works on extending the network and tries to make those matches. The most recent connected the University of Oregon Marching Band with McKenzie Bend International Corporation, for a collaboration to produce uniforms unlike those made anywhere else. With most uniform manufacturers located in the Midwest, this raises the possibility of a large new market for the Eugene firm. "Do you realize,” Ms. Probst enthuses, “there are over 300 marching bands in just Oregon?" Such a program must be coupled with a wide range of efforts to ultimately pull Oregon out of its doldrums. Lamentably, most money and energy continues to focus on development from the outside, and on large scale solutions, when it’s small business that still provides the lion’s share of employment. “Oregon's challenge is to develop markets in which Oregon's firms have an economic comparative advantage,” Probst concludes. “Oregon’s own backyard is clearly one such place. It should not be overlooked.” cation that it is is sheer rhetoric. Even the rate of return on the conventional investments Oregon has made in recent years hasn’t been all that great. I am truly puzzled why this governor doesn’t join other governors, Democrats and Republicans both, in rethinking such policies.” Oregon, once a leader in innovative pension fund investments, has fallen to the back of the pack. Given the often cited multiplier effect, an investment in local housing construction, say, would provide not just the jobs created in building the specific units, but would also reverberate in the economy several more times, buying services and providing additional employment opportunities where none existed before. It would also stimulate the local timber economy, which has been largely devoid of federal incentives from this defense- oriented, high interest Reagan administration. LOSING IT “Every place that’s had significant economic development in the past 10-20 years has had some association with higher education.” Dr. Richard Hersh, Dean, UO Graduate School The State System of Higher Education has undergone painful cuts almost across the board during this recessionary period. Schools from across the country have become formidable competitors for the best faculty of Oregon universities, and the state’s response has been to cut budgets even deeper. The cuts are all the more painful, Hersh says, because the UO has such a good academic record: an Association of American Universities member, with eight National Academy of Science members on its faculty (more than the entire state of Ohio), it gets zero dollars for research. “Zero! A university which earned its high status largely on its own, to the benefit of the state, over a period of a hundred years or so — suddenly losing it in a period of five years, losing a good name and quality that will take another forty years and forty million dollars to restore if we don’t act soon.” Hersh is quick to point out that the UO, for its part, is acting with initiative and vigor. He points with pride to the Advanced Science and Technology Institute set up between UO and Oregon State University, an organization created to provide businesses access to UO/OSU research; to four federal grants totalling $612,000 the UO has won to do high tech research; to successful increased activities to attract private donations. He's proceeding in this spirit hopeful that the state will eventually acknowledge the value ofr such work with its support. The recent creation of a High Tech Consortium, largely by Portland-area electronics firms and the State System of Higher Education, is seen by Hersh and others as a drop in the bucket compared to the broad kind of vision and state support needed for research and development. It’s seen as another example of undue trust in the electronics industry as an economic panacea. And it does not provide resources for the equally important fields of biotechnology, medicne, laser and agriculture, which are the strong suits of the state universities not located in electronics-rich Portland. We need to build on all our strenghts. We need to act fast. A decision put off today will cause problems much sooner than similar lassitude 20-50 years ago. Faculty attracted by Oregon's earlier academic reputation, and by the image of the state’s liveability, will not stay put in institutions falling behind the times, unable to pay even a modicum of salaries offered elsewhere. WHERE TO NOW? Though the people of the state are resilient and the land largely remains fertile, we are up against forces that call for courageous and thoughtful action. The same dynamic which only yesterday had us on the cutting edge of social and political change needs to be resuscitated. First and foremost is a decision to use the financial resources of the state in the state, creating and preserving jobs, and thereby increasing private capital for other local investments. Other key commitments we need to make include: 1) giving our universities and public facilities the support they need, de-em- phasizing recruitment and letting the market and all of the research and development determine what fields will grow; 2) promoting tourism more vigorously by supporting the arts and crafts, making our cultural and historical attractions tourists “musts,” and renewing efforts to preserve the environment;; 3) once again leading the nation by legalizing and taxing the biggest cash crop in the state — marijuana; and 4) continuing to develop our Pacific Rim trade policy, with particular emphasis on dealing sensitively with the immense new market of the People’s Republic of China. Since it’s clear that many states have taken the lead in crafting new develop- ■ment policies that are designed for their needs, we have much to learn from their experiences before we forge ahead on our own. But forge we'll eventually have to do, for timidity is an outmoded game plan. Creative action will require political wherewithal long absent from the state scene. What it comes down to once again is leadership, not just of politically inclined individuals but of the entire progressive sector of our state. We need to begin exploring and debating options, and then bring imaginative, workable programs before the public. And we must build the political muscle needed to implement them. Otherwise the stand-pat forces our governor so beautifully represents will carry the day long after he’s been laid to rest. That should be incentive enough for all of us. Mike Heffley is a writer living in Eugene who is a friend of the yew. Tim Braun is a Portland artist. 12 Clinton St. Quarterly
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