The News Journal had a very good piece on Delaware’s economy in today’s paper. The article can be found here. Regrettably, there is nothing in the article that I haven’t been saying, publicly, for over 3 years. Let me go through some of the points…
“There’s no doubt we had a lot of eggs in the financial services sector, in the auto sector,” Levin said. “These are all things that we thought would never go away. Yes, we still have the financial services sector and they are still a strong, very viable part of our economy, but we cannot rely upon them to be the growth factory they were.”
Actually, many of us (including the Governor) did think that these sectors would go away — shame on those that didn’t. The credit card market peaked a decade ago and has been in cost-containment/consolidation mode ever since (even then-candidate Markell said as much). What happened to First Chicago, Juniper, First USA, Bank One, etc? They were consolidated and their costs rationalized (i.e. people were laid-off). The auto industry has been closing plants in the northeastern United States for 30 years. Delaware had 2 of the last 3 plants. They are all now closed.
Six to eight months ago in a conversation with a Chamber of Commerce lobbyist, this lobbyist expressed confidence that Delaware always leads the nation out of recession. I asked him, “What industry in Delaware is going to do that? Credit Cards? Nope. Automotive? Nope. Basic Chemicals? Nope. Specialty Chemicals? Nope. Pharmaceuticals? Nope. Delaware’s industrial base has been destroyed. We will trail the nation out of recession.”
(As an aside, I congratulate DEDO Secretary Levin and Governor Markell on the Fiskers investment at Boxwood. They have clearly worked hard on this.)
While the economic output of Maryland, Pennsylvania, New Jersey and Virginia continued to grow even through last year, Delaware’s declined. Nationwide, only Delaware, Michigan and Ohio saw a real-dollar reduction in their gross state products between 2005 and 2008… •Delaware’s economy contracted faster last year than every state except Alaska.
No one in the Markell Administration should be surprised by Delaware’s lackluster economy. The Governor was on DEFAC for many years and as State Treasurer for 10 years had first hand opportunity to see the economic collapse within the State that many of us have seen and experienced. In his campaign Blueprint for a Better Delaware, then candidate Markell said “Even in the Financial Services Industry… employment has dropped during the last decade.”
In addition to recognizing Delaware’s changing business landscape, the then-candidate proposed creating 25,000 new jobs in Delaware through his program, TIME (Turning Ideas into Meaningful Employment). That program has changed to “his small-business strategy as an effort to let 1,000 flowers bloom.” What has been the impact of the change of slogans?
Although officials with Crowell and White Optics have expressed disappointment at progress to date, Markell regularly touts White Optics as a promising example of a new, homegrown entry into the energy and conservation markets. He cites the company as an example of how renewable energy and green industry hold great promise of the state’s economy.
It is this kind of disconnect between what government thinks that it is doing and what the businesses are actually experiencing that has been a signature of Delaware’s government failures.
In my experience, there has been one government entity that has been singularly successful in keeping Delaware’s businesses open, successful, and eventually, thriving – the Delaware Manufacturers Extension Partnership (which is budgeted under Del Tech) and “Lean Manufacturing”. And this success is mentioned only in passing in the article:
Marty Miller, the Bridgeville company’s owner, said that DEDO and other state officials helped the plant adopt new “lean manufacturing” methods that minimize waste, expenses and high inventory and paperwork costs.
I have long advocated and pushed that the State implement the same “Lean” principles that help small and large companies (like Toyota, the creator of “Lean”) get more efficient. Much of my businesses success can be credited to our work on “Lean”. However, through ignorance or lack of political will, the Governor refuses to use these existing tools to make government more efficient. Only Senator Bonini had a plan that would, cost-free, reduce the size of government without laying off employees. Matched with a “Lean” implementation, we could save 15% without dropping service levels. (I’ve blogged about this before).
Without any economic opportunities and without a plan to make government for efficient, the Markell Administration decided to double down on gambling.
The governor’s emphasis on gambling as a bright spot earlier this year has faded markedly. Court rulings quashed hopes for a near monopoly on sports betting and surrounding states are grabbing a piece of slots and table game action.
“Gambling was never going to be the centerpiece of our economic development efforts,” Markell said.
I learned a long time ago not to read a politicians lips, but rather, to watch their feet. Are they walking the talk? In this case, the Governor’s words don’t ring true. No one with a truly broad view of economic development aimed at small business would have pushed for an increase in the gross receipts tax in the midst of a recession. Gambling was the main bet… One which the Governor lost and so did Delaware’s small business community.
Delaware’s unemployment rate, at 8.3 percent in September, is still well below the national and New Jersey average of 9.8 percent or Pennsylvania’s 8.6 percent. Maryland at 7.2 percent and Virginia at 6.5 percent both are doing better, though.
“It was pretty much unprecedented to lose jobs at this rate, but it’s also unprecedented to gain them at that rate,” said George Sharpley, senior economist for Delaware’s Department of Labor. “It’s pretty unlikely that we’re going to have job gains as rapid as the losses.”
It is true that our unemployment rate is currently below some other States’ and the national rate. However, we have no growing industry (a legacy of Minner/Carney). In short, our unemployment rate will reach the national rate in the not too distant future. Delaware will no longer be an employment leader in our country.
“We’re not going to win the battle too often by being willing and able to write a check” for aid or subsidies to lure businesses away from Pennsylvania, New Jersey or other states, Markell said.
The Governor is absolutely correct. However, it is interesting to note that economic growth in New Castle County peaked at the same time as the passage of the Unified Development Code (UDC). Furthermore, there are two successful groups of entrepreneurs in the City of Wilmington – Pastors (whose Constitutional Protections and existing buildings make them free from taxes and a lot of government regulation) and drug dealers (who ignore government regulations). With Federal and International Law beginning to eat away at Delaware’s corporate tax bonanza, our only way to compete is to allow individuals and businesses to thrive in an efficiently-run, low-regulation environment. This policy view is not a centerpiece of the Governor’s plans.
“We are now in a place where we have to think about what the Delaware economy is going to look like for the next generation,” Bullock [Delaware’s Secretary of State] said.
My confusion with Mr. Bullock’s statement is the following quote from the first paragraph of the Introduction to the Governor’s Blueprint for a Better Delaware, his Gubernatorial campaign’s tome:
This is a policy book. It comes from years of studying, talking with experts, creating successful government initiatives—and lots of listening to the concerns of Delaware citizens. The result is an in-depth analysis of the health of our state that identifies short-term and long-term opportunities and challenges and lays out creative ideas to secure increased prosperity for all Delawareans.
Mr. Bullock is at a place where he wants to start thinking? Hasn’t he read the book? Let’s start doing…