The Un-Great North
Shlaes, Amity
THE UNIREAT NORTH N PBY AMITY SHLAES
icture two rocky, northern
outcrops on the far edges of
prosperous regions. Despite
great natural beauty, neither of these
remote places seemed able...
...Maine, though, remains a backwater...
...Nor are these differing fates an acci dent...
...THE UNIREAT NORTH N PBY AMITY SHLAES icture two rocky, northern outcrops on the far edges of prosperous regions...
...Modern highways replaced poor roads...
...But one answer is that it never grasped the point about relative competitiveness...
...Or so we are told...
...Over the course of twenty years, Ireland transforms itself into a global growth model...
...In both places, a needy populace consumed a lot of pricey social services...
...Measured by an index of three components-labor market flexibility, size of government and tax burden-Maine ranks 49th among the 50 U.S...
...Local workers and entrepreneurs now had an incentive to stay put...
...Most troubling of alland counter to the global trendhigh-technology jobs are disappearing in favor of unskilled ones...
...Maintaining rural infrastructure, after all, requires a lot of cash for road-building, power supplies and so on...
...In the 1980s, Charles Haughey, the taoiseach, slashed the size of the Irish government from half of GDP to 40 percent...
...Yet there is still the conviction in Maine that colder weather, longer distances, poorer people-in short, the northern syndrome-excuse Maine from competition and explain all...
...Crucial to its birth was the recognition of the importance of relative competitiveness-that, to succeed, Ireland had to provide an environment that was more than "all right" or "like the UK...
...Despite great natural beauty, neither of these remote places seemed able to over come poverty.Their history was rich, their people were resourceful, their potatoes were famous...
...This summer, for example, brought the hard news that Gateway is cutting its Irish computer manufacturing operations...
...A study by Fred McMahon of the Fraser Institute, Canada's free-market think tank, rates Maine as one of the worst places to do business in North America...
...Only Alaska is worse...
...The result has been an environment hostile to the entrepreneurial Everyman...
...Corporate taxes came down and the spending restraint continued throughout the 1990s...
...Maine, by contrast, shunned the smaller-government model...
...But, econom ically, both were regarded by others as permanent problem territories...
...Both were learning that tourism alone, however enthusiastically promoted, cannot sustain a northern economy...
...The Ireland of today may suffer setbacks...
...Precisely why Maine so consistently has rejected the smaller state model is hard to say...
...Taxes stayed high...
...Maine lawmakers tended-and tend still-to insist that Maine is simply not comparable with lower-tax states to its south...
...so was Maine...
...The result was the double-digit growth that created the Celtic Tiger...
...They cut state spending and taxation dramatically...
...And Maine has stayed, in the words of its governor, "ambivalent" about courting investors from outside...
...Budgets increased each year.Washington funneled more cash...
...business incubators were duly established...
...It had to offer more...
...Politicians often excuse their inaction with a line like the following: "Our government is large, but it is not so large as Canada's...
...The results of Maine's do-nothing policy have, in any case, been devastating...
...Consider.Two decades ago, Ireland and Maine faced similar challenges...
...We'll call these places Ireland and Maine...
...This argument might be believable-if Ireland hadn't happened...
...But a retreat to the sort of undeveloped poverty Ireland once knew is unlikely...
...states...
...But now comes a change...
...But Irish leaders, both politicians and labor unions, took an additional, courageous step.They gambled that a nation that shed the burden of an overlarge government would have a better shot at competing globally...
...Manufacturing jobs are disappearing...
...It would be naive-and rather unMaine-to assume that tax changes could turn Maine around, one economist assured me recently...
...And Ireland became a tax haven, instead of a tax pariah...
...In fact, the changes in Irelandand the lack of them in Maine-illuminate the limits of some government policies and the value of others...
...Both sought and won heavy subsidies from distant wealthy capitals-Ireland from the European Union in Brussels, Maine from Washington...
...With its timber industry disappearing and no Dell or General Motors arriving to build new factories, northern Maine is seeing its population drop...
...Today, government spending equals about 30 percent of GDR This is a dramatic cut-how dramatic becomes clear when you consider that neither of the West's two great free-market radicals, Ronald Reagan and Margaret Thatcher, came near to matching it.The change altered Ireland in two key ways...
...Matters are not helped by the fact that the Pine Tree State shares a border with a place that maintains an even larger government: Canada...
...People were at home with the Amity Shlaes is a columnist for the Financial Times, from which this is adapted...
...idea of extensive services for another reason: they had come to believe in what might be called "the northern way" or, to be less charitable, "the northern syndrome...
...This is the idea that the best move for poorer northern regions is to retreat to the comfort of the Scandinavian model...
...Ireland was a high-tax area...
...Enormous subsidies went to youth training...
...30 THE AMERICAN SPECTATOR • SEPTEMBER/OCTOBER 2001...
...For a time, politicians in both places pursued similar economic policies...
...Both were hemorrhaging young people, who routinely emigrated...
Vol. 34 • September 2001 • No. 7
