New England's Economic Plight

...South Australia and Western Australia...

...Yet, most interesting is the fact that while New England is demonstrably suffering from regional competition it still is, on the national stage, a favored area...

...While inter-regional collaboration is ordinarily emphasized in discussing the U.S...

...Although it is not always true, very frequently when an area (or nation) embarks on industrialization much emphasis is placed on textiles, as New England did in its time...

...New England is, within the United States economy, a decidedly old industrial area...

...In spite of utilizing the sources of tax revenue available to all states in full, the claimant states cannot provide the money to keep their services at a level considered a national minimum...

...More recently, the woolen-textile industry has shown evidence of following suit...

...In determining the amounts to be so granted, the ruling idea is the wish to equalize the basic standards of service of all the states of the federation...

...It has been these many years, as the record shows, and one is tempted to say that it always will be as long as the national economy is dynamic...

...There is even some evidence that it is over-industrialized, and there is conclusive evidence that its dependence on factory jobs is greater than the national average...

...Actually, though, like the rest of us, Professor Harris realizes that, while particular injustices may be assaulted through policy changes, regional competition cannot be finally "solved" in that fashion...

...But where is the remedy...

...On the same argument, the South certainly still has a claim for getting more from Federal spending than it contributes in taxes...

...economy and a huge and marvelously articulated structure it is Harris's preoccupation leads him to emphasize the less appreciated, but inevitably complementary, theme of regional competition...

...is the South's anti-union complex, as against New England's studied tolerance...

...This commission grew out of an effort to correct alleged inequities in the impact of the Federal tariff on states with little secondary industry...

...Yet, textiles still remain the greatest single employment resource of the section, although there are signs that this will not be the case much longer...

...Even if all the Southern practices which Professor Harris regards as wicked were done away with...

...Historically, New England has had fairly constant experience in regional competition...

...He certainly shows that the Federal Government takes more in taxes out of New England than it puts back, and that the reverse is decidedly the case in the South...

...So also is it true that the habit of Southern communities of building tax-free industrial plants to attract industries is unfair...

...For instance, it is calculated that if the present rate of shrinkage continues unabated, zero will be reached within a decade...

...It is a very dramatic one, of course, though perhaps not as exciting as petrochemicals, chiefly because the growth of textiles in the South is not so much a net expansion of a great industry in the nation as a transfer of the seat of an industry from one section to another...

...Hence the special money allowances...

...The South is immensely keen to industrialize, and the pace of development there is fast...

...But I wonder if Harris has correctly described his hare...

...In Australia, to use but one example, the financial relations of the Federal Government and the states are enormously complicated, but one focus of them is the Grants Commission...

...Oddly, the rise of textiles in New England was in its time an effort to adjust to an earlier consequence of regional competition...

...Its story is one not only of collaboration in developing the national economy (as well as the national mind...

...Quite rightly, they are more likely to be fascinated with immediate practical measures to compensate for current pressing difficulties...

...But New England's leaders are not likely to be consoled by proof that their area has done very well in spite of the insecurities engendered by the regional competition of past times...

...Cannot New England's Senators and Representatives manage this...

...But somehow Professor Harris seems quite assured in his conclusion that the existing situation, which reflects pretty much what the equalizing argument justifies, is unfair...

...Any visitor to New England who is interested in the economy, whether from other sections of this country or abroad, will want to see Professor Seymour Harris of Harvard, Chairman of the New England Governors' Textile Committee and author of The Economics of New England (Harvard University Press, 1952...

...These have become known as the claimant states Tasmania...

...but also of adjustments to the consequences of its collaboration in economic development beyond its borders...

...New England is, for all practical purposes, ceasing to be the center of this particular type of manufacture...

...In pursuit of these, Professor Harris and his committee have started a hare familiar to students of other economies which are, like ours, governed federally...

...All this Professor Harris points out in passing...

...In fact, it contains no reference to how the point he examines is handled in other countries...

...New England would still be on the defensive as an economic region...

...New England's problem can only be solved in its own back yard as a new response to a perennial challenge, undoubtedly by a process which Professor Harris indicates is not doing too badly today: by increased concentration on high-value-added, super-skilled labor industries, which, as an old industrial area with a trained labor force, it is particularly fitted to support...

...This is true taken by itself, of course...

...The gathering in of the textile industry, however, is only a phase of the activity...

...He alleges that the lower standards in social security are part of the South's unfair competitive position, to be coupled with its lower wages, etc., etc...

...Its per-capita income is above the national average, its social-security provisions are very good far better than the South's, etc., etc...

...Thus, the textile decline in New England (and in the North generally, as a matter of fact) is not a decline of its proportionate share of an expanding national industry, but an absolute decline...

...He then argues that this is cruelly unfair to a section disadvantaged by regional competition, and he therefore concludes that New England should conquer its dislike for Federal spending and try for more of it for itself in the form, say, of flood-control projects and Federally built hydroelectric schemes to bolster the economy...

...So, too...

...Professor Harris's paper does not utilize this approach at all...

...On any ordinarily accepted grounds, then, New England should still be contributing through Federal taxes to the equalization of the nation's well-being, even to its competitor in cotton (and perhaps woolen) textiles...

...He has included in his report a long paper entitled "Taxes and Treasury Disbursements, Regional and State Differences," prepared with the help of electronic calculators...

...Loss of industries to the South poses stern challenge NEW ENGLAND'S ECONOMIC PLIGHT By C. Hartley Grattan It is common knowledge that New England has suffered greatly from the migration of elements of its long-established cotton-textile industry to the South...

...Since the United States exports only about one-twentieth of its total production, and is not a heavy importer by comparison with other countries, almost all American competition is internal...

...Surely advocating that New England make a more astute and persistent play for a larger share of Federal money isn't going to correct the situation (however New England may otherwise be benefited by Federal expenditures...

...New England money is today going into Southern textile mills...

...In short, the gradual raising of Southern standards as a consequence of its economic progress could be speeded up a bit, perhaps, by a little judicious pressure from Washington...

...This is not the place for a close analysis of the report, but some of its ideas and suggestions are worth discussing...

...What Harris is seeking is a measure of what the Federal Government takes out of the states (and regions) in taxes as compared with what it puts back via various Federal spending programs...

...To them the Federal Government makes special grants, determined annually, over and above any money that reaches all the states otherwise...

...Professor J. A. Maxwell of Clark University in Massachusetts is an expert on these operations in both countries, as well as on the pattern of Federal-state financial relations in the United States...

...The South today is also an illustration of this, though not an entirely perfect one...

...But Professor Harris seems to be saying that, because the social habits and fiscal vagaries of the South add up to unfair competition with an older industrial area whose social habits are better and whose fiscal practices are more conventional or even weighted toward severity in real-estate taxation, the excess spending of the Federal Government in the South is in fact a subsidy to an injustice of which New England is the prime victim...

...In Canada and Australia, this discussion has led to much legislative and financial action to correct alleged inequities...

...This is a political-economic crime of federalism...

...As I say, it is highly improbable that the trend will be followed to the bitter end, but stability is apt to be at a very low level...

...Textiles developed to compensate for the decline of farming in New England under competition from the better lands to the west, brought into production in part by migrant New Englanders...

...Although it is improbable that cotton and woolen textiles will ever cease to be produced there, any more than farming ever wholly disappeared there, these industries will probably continue to shrink, at times with marked rapidity...

...Now the unequal distribution of Federal activities among the several divisions of a federal nation is a problem that has been much discussed...

...Is not the remedy to be found (1) in the slow erosion of the unfair practices, as the North-South wage differential is being slowly eroded by Federal legislation and union pressure, or (2) in Federal pressure against unfair manipulations of property taxes (if this is feasible) and in favor of more reasonable standards of social security...

...Indeed...

...In a February 1956 Committee report entitled New England Textiles and the New England Economy, Harris covers almost every facet of the area's economic predicament, even though the focus is always textiles...

...The rationale is one that seems to many people very convincing...

...This constant need for adjustment to a changing national scene, extending as it has from the basic economic factors to the higher intellectual subtleties, seems to have some relation, thus far unexpounded to my knowledge, to the strain of pessimism in the New England mind (beautifully illustrated by Henry Adams) on the one hand, and to the constructive powers of that same mind on the other...