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Masters of Our Domain
Since the demise of the New Haven Colony more than three centuries ago,
south-central Connecticut has struggled for an identity. What ought it to be?
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Business New Haven
7/13/1998
By: BNH
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Is New Haven part of a discrete Connecticut region, or simply a minor satellite in metro New York's orbit? Is its economic destiny controlled locally, or by decisions crafted elsewhere? Can improved air service in fact generate more economic activity, or is it merely an expensive, distracting chimera?
To plumb these weighty matters and more, BNH assembled a panel of Big Thinkers: Michael Morand, assistant vice president of Yale University and a former city alderman; Nancy Hadley, director of the Community Foundation of Greater New Haven; John S. Lapides, president of the United Aluminum Corp. of North Haven; Douglas W. Rae, Richard Ely professor of organization and management at the Yale School of Management; Frances T. (Bitsie) Clark, executive director of the Arts Council of Greater New Haven Inc.; and Matthew Nemerson, president of the Greater New Haven Chamber of Commerce.
When our state slid into the deepest trough of the recession in the early '90s, 'growth' became the universal mantra, because the state's economy was contracting and the population shrinking. Now that the economy is growing anew, should stimulating greater growth continue to be our god, or should we be paying attention to other priorities, secure in the knowledge that the economy will continue to improve regardless of what we do? Your thoughts, please.
Rae: Who's against economic growth? I think there have been some errors in the central city [New Haven] about trying to preserve the size of the city when its population is down 20 percent. There's no reason any city has to retain a population equal to [that of] its industrial peak. But I see no reason why the region as a whole need not grow.
Lapides: Growth is a high priority. It's growth that creates the employment opportunities that allow people freedom to conduct their lives in accordance with what they think is valuable. People with jobs have a chance to conduct their future in a way that's meaningful to them, as well as provide role models in the community. Not just [high-end] R&D jobs, but jobs at the lower end of the scale, creating a path for people to move into higher-skill, higher-paying jobs. The crisis of the inner city is in part in education, and in education relating to job opportunities.
Morand: Economic growth remains a priority - both because it's possible, and because it's necessary. It's possible both because there remains great upside in biotechnology and related fields - if we get the kinds of transportation improvements I'm sure we'll be talking about more this morning. But it's also necessary, because while unemployment is at historically low levels in the nation, the state and the region, there still remains in our city and others people who are not connected to jobs who need them. We have good signs with Shaw's [Supermarket] and with the Omni [New Haven Hotel at Yale] of how that can be done in connecting people, but still there is a need for a number of people to have both opportunities for employment and to have the linkages to that employment.
Clark: The constituency that I work with, the arts [community], have started to be seen as potential assistants in economic growth. For many years the arts were marginalized in this area, but now the work done by the Arts/Business Roundtable, the regional plan and the work that the Connecticut Commission on the Arts has done in terms of [the arts'] economic impact, have begun to help the whole community see that the arts can be a major factor in bringing in tourism, developing jobs - doing all sorts of things that help in economic growth. We are looking at, and utilizing, the arts in different ways than before.
Nemerson: While growth is important to the economy, if you look honestly at communities, the most important thing is population growth of educated people in certain age brackets. Ultimately what we want is sustainability, and there's a big competition all across the country for people who graduate from high school, come to an area to go to college, and when they graduate from college - do they stay in that area? Do they go somewhere else to get their graduate training, and when they get their graduate training, where do they go? The engine of the economy is not biotech; it's people in biotech. It's not software; it's people in software. When you look at a Seattle, an Albuquerque, an Atlanta - what you see is a flow of educated people in their prime years. What they do is create jobs, and then bring people up. It's not just about capital; capital tends to flow to where the people are. The great competition is for people, and we aren't winning that competition. Creating a competitive advantage is not creating companies, but creating the ambiance to attract the people - and keep the people - who create wealth. Because wealth now isn't about a drill press; it's about an idea. A tiny fraction of the people in this country create the wealth and will be creating the wealth in this country for the next 30 years. And we have to make sure we have the ingredients to attract those people. If Bill Gates had stayed in Albuquerque, where he started his company, Albuquerque would be the center of the software world. If he had been born in New Haven, would he have stayed in New Haven? The best people from Yale are leaving Yale when they graduate and going to Seattle. That's a shame.
Hadley: The issue for the region is: growth in what? What are the economic niches that we want to be absolutely excellent worldwide in? After that targeting comes an education system. After that comes a transportation system. After that comes a whole philanthropic community that says, 'We need scholarships; we need ways of connecting [economic development] all the way down to the child that's being born today. As I raise my children, I want to be sure this is a region that's competitive so that they will get educated and come back and live here and have a next generation be in this state and in this region.
Lapides: My view is that Connecticut actually is not well-positioned and is very high-cost, and we're not getting there the right way. Connecticut is still a turnaround [case]. We have lagged growth in the nation as a whole, and we will probably see the worst of a recession when it hits - and we will see it first. The reason is that we are high-cost. Why did UPS go to Atlanta? Why did GE move its operation transformers out of Pittsfield, Mass.?
Nemerson: Wait a minute: Atlanta is not that much lower-cost than Orange. And when Saab[-Scania] moved from Orange to Cobb County, they said the reason they moved there was that General Motors, at the strategic level, did not feel they could get world-class designers and marketers to move to Connecticut because they didn't think it had the environment that young people were looking for. It had nothing to do with costs. Look at the Money magazine index: Suburban New Haven isn't that much more expensive - in fact, it's cheaper - than Seattle. That doesn't stop any software company from moving to Seattle, because that's where the talent is.
Clark: The state itself isn't not really set up to be helpful. Last year I went to a board meeting of the Regional Growth Partnership when they had somebody come down from the state to describe how wonderful they were going to be about being helpful. [Laughs.] I don't think I ever heard anything that was such bull-- in my whole life!
Nemerson: No DED money for you....
Clark: But if you compare this with what other states do to make it easy for people to come...
Nemerson: But can I say something about that? You can go to northern Florida and get a secretary to work for $14,000 a year. Is that really the society that we want here? One of the things that makes us strong is that we do have a standard of living that people can have pride in. I was just in Mobile, Ala. They have a nine-percent sales tax and they have a high income tax. They have no public school system. Now, they can attract certain kinds of companies, but are they going to get the growth companies that are going to compete with Germany and France over the next 30 years? I don't think so.
I'm not convinced that the public really wants rapid growth. If you go to the towns where the growth would actually take place, there's a lot of resistance to it.
Rae: We began in the early 1940s, with the first public housing projects here, to artificially anchor people to the city as its economy declined. There is no good reason in the long run why people should not migrate toward jobs. It's easier for people to move to jobs than for us to make jobs move to people. There are probably 5,000 New Haven households, anchored here by housing and related social amenities provided by government, who might find jobs elsewhere faster than they could find them here.
'Elsewhere' meaning, Wallingford?
Rae: Meaning Jacksonville, or Phoenix.
Nemerson: The interesting thing is a that if you look at the graduating class of Yale - or certainly the graduating class of SOM [the Yale School of Management] - you'll find people who are going to Phoenix.
Rae: Absolutely. My own two kids, who graduated from SOM two years ago, are in California doing software.
Nemerson: And those are the kids who will create the companies that generate the jobs. The thing that goes to your point, John, is: Why isn't the next generation believing in the future of Connecticut? The biggest issue of regionalism here isn't even city vs. suburbs; I think it's generational. If the [resident of] suburbs become old and complacent and can't wait to retire - but their kids are all going to Phoenix - what happens to this state in 15 years?
Maybe people move to Phoenix due to the image of Connecticut. All of you travel extensively; what is the image people elsewhere have of Connecticut?
Morand: I would just put it another way and look at people who come in[to the area], whether it's high-level job searches or other kinds of things. And they confirm what I think is a fact: that our perception is significantly worse than our reality. In most other places, reality is worse than perception. Doing attitude-adjustment is an important thing. That won't solve our problems, but I don't think we can solve our problems without that.
Nemerson: If you grow up in Woodbridge, graduated from Amity [High School], graduated from Yale and then decide to move to Phoenix - that can't be about perception. There has to be some reality involved.
Lapides: I love living in New Haven; it's a great lifestyle. The issue is: How does everyone in New Haven like living in New Haven? It wouldn't necessarily be the same, because the opportunities are limited.
Morand: That would be true also in East St. Louis or Miami.
Lapides: We're talking about jobs for people, and opportunity. And the question is: What is the source of that opportunity and those jobs? Look at the [news]paper and tell me why Robby Len is no longer going to manufacture in New Haven and why 100 jobs are going to be lost [Editor's note: Robby Len Swimwear in June announced that it would cease all manufacturing operations at its State Street facility in New Haven, rendering some 100 workers jobless.]. Is that because of a perception of New Haven - or is that hard economics? And what happens to those people?
Doug's point is that some of those people actually need to move.
Hadley: If we're going to be excellent as a region - excellent in high-end manufacturing, excellent in biotech, excellent in the creative arts and excellent in academia - those are the four things we want to be absolutely excellent in terms of market niche. And what is it going to take to connect, all the way down, to [be superior to] any other region in the country that wants to be the same thing? That's what we haven't done, and that's why the manufacturers are screaming for employees [who] are trained in the basic skills. That's why the community-technical colleges don't have the really cutting-edge curriculum to make that happen. We talk about the arts, but it's all the way down to the kids in the elementary schools, that they have a future besides dying at [age] 13 on the streets. I think we can do this; but I don't think we're focused on what we want to be excellent in. I don't think this state is going to do that. They tried to do that, and I was part of that process, but they don't have a long-range vision up there to make that happen. But we do in this region.
Nemerson: What you're really describing is a small group of high value-added people who create things in a short time period. In 1986 we thought Science Park was going to be filled with software companies - it turns out it was going to be filled with biotech companies. But they're the same people, a generation later, who took different classes as undergraduates, different classes as graduate [students] and got into other things because the market has changed in this area. In 1804 the best graduates of the blacksmithing industry were going to work for Eli Whitney because that was the 'high-tech' industry of the time. Colt [Firearms] came out of Whitney; Pratt & Whitney came out of Whitney; all the inventions that created Winchester came out of Eli Whitney's shops. People came to New Haven because it was high-tech. What's happening in Portland (Ore.) is they decided that quality of life would be their competitive advantage - not an industry. They said, 'If we have [a high] quality of life, we can compete with San Francisco and Seattle. We'll be the alternative choice for the really talented people. Then they'll figure out what to do.' We could be that. That creates value - getting those people.
Lapides: But let's just focus on Robby Len. Tell me about the quality of life for the people who just lost their jobs.
Nemerson: But that's not the point, John. In 1955, East Street, Hamilton Street, Wooster Street were filled with little shops making corsets and dresses. We could cry over thousands of jobs lost - but it [no longer] makes sense to make dresses in a fourth-floor walk-up loft in Wooster Square. I loved Robby Len; but the fact that those jobs have gone to Malaysia, or wherever - you, of all people...
Lapides: The problem is that Connecticut as a state is not competitive.
Nemerson: We're competitive in aerospace. We're competitive in pharmaceuticals. We're competitive in software.
We're competitive mainly in marketplaces where large companies have almost a monopolistic hold.
Nemerson: But there are 130 new software companies that were created in greater Hartford over the last four years. Those are not large companies, or monopolistic.
Rae: But with any business in which the main factors of production are energy or labor, we do have a problem. Lots of jobs [with companies] that fit those descriptions are going to be migrating elsewhere.
Nemerson: They have been for 40 years.
Morand: And that's not simply a New Haven [condition].
Lapides: You're not alarmed by that? I am alarmed by that. We can't merely say that our cost structure doesn't matter, and if we get the right people who have the right kind of lifestyle, they'll bring jobs with them.
Nemerson: Are you saying that the government should subsidize electricity? How do we lower electricity costs?
Lapides: Nancy, you talked about targeting economic segments. And in a way, that's what Matt's doing. He's saying, 'There are these segments that are going to be competitive, and let's forget all the rest.'
Nemerson: I didn't say that at all.
Hadley: I didn't mean to forget [other industries]. I just think that people have to believe, and that there has to be some image, some excitement [about targeted industries]. You can't be excited about everything, or else you don't get results.
Lapides: I think there's a real risk in targeting industries. If you were going to mention one thing that Connecticut government has done wrong, it's trying to target industries. So while on the one hand we're trying to do this pie-in-the-sky steel mill [Williams Specialty Steel], with 350 high-paying jobs - we've just lost 100 [Robby Len] jobs for people who may not have alternative employment. The question is, why? Part of it is a cost issue. For instance: Our business is a manufacturing business in which we roll aluminum. We're energy-intensive. We need highly skilled labor. If you had said when I came back to New Haven in 1977 that this was going to be a growth business that would more than double its employment in the next 20 years, [state officials would have said], 'That's not one of the [businesses] we're picking. That's low-tech. That's energy-intensive.' But I employ people who consider it an enormous opportunity. The jobs are high-skilled; they make a fair amount of money; people have been able to buy homes, send their kids to schools and plan for the future. If you focus on the fundamentals, you'll get a lot of that. You don't have to focus on [individual] industries.
Nemerson: All Nancy said was 'advanced manufacturing.'
Lapides: What is that?
Hadley: You!
Lapides: Rolling aluminum?
Nemerson: Absolutely. You've existed with this very high energy cost, but you brought in computers, highly skilled labor - that's advanced manufacturing. You create a straw man, and you knock it down. You are what she's talking about.
Lapides: You don't bemoan the fact that we lose industries that probably didn't have to be lost?
Nemerson: Don't put words in my mouth. For four years we've been trying to do things with Robby Len. The reality is that the whole world moves away from people who sit there and sew things. Why did Starter - born in this town, making bags for dead people during the Korean War - move all their people to Florida?
Last January MAC [the Manufacturing Alliance of Connecticut] released a report saying that Connecticut was 47th in the nation in [its hospitability] to manufacturing. That got four column inches in the Hartford Courant. If a company opened in New Haven with four biotech jobs, it would be a big story.
Nemerson: I think you're confusing politics with reality here.
Lapides: Politics is reality.
Nemerson: Are you saying you think there's a political reason why electric rates are so high here?
Lapides: Yes. There are a lot of social costs loaded into our electrical rates. That has subsidized certain groups that were needy, but at the expense of industries that couldn't [as a result remain] competitive.
Nemerson: Because the South doesn't have to have set-asides for people who can't afford electricity in the wintertime.
Lapides: If you want to subsidize people, subsidize them. But don't load it into electrical rates that make [businesses] uncompetitive.
Rae: The political structure of Connecticut is archaic and cost-intensive. The cost of getting anything done around here is much higher than it is in many places in the country. I'm talking about the long-ingrained habits of self-seeking and venality which we're not, over this table, going to change. The inefficiency of state government...if you did a ranking of state governments by how well they get things done, Connecticut wouldn't stack up very well against lots of other states. It's worth spending some time working on those questions, as many people around the state are.
Clark: [John] said something that really resonated with me. You said we're spending all this time getting this pie-in-the-sky steel mill here, and in the meantime we lose jobs. There's a tendency here to chase the beautiful thing. We have theaters and museums here, and we chase the [now-Pilot Pen International] tennis [tourney]. Now we get the tennis stadium out there that gets people two weeks a year, and we have arts institutions that needed help, and the money goes in that direction [tennis] because 'It's going to be great, it's going to be wonderful.' This year we lost in this community two very important small arts organizations: Artspace and City Spirit Artists. How did that happen? What did we do wrong? By the same token we should say, 'What happened to Robby Len? Why did it happen? What could we have done differently?' Maybe that has nothing to do with economic development, but it has something to do with the way we operate.
Nemerson: It's just not factual to say that Robby Len just left, and nobody cared or noticed. We worked with them for four years - met with them, agonized with them.
Morand: We can curse the darkness and curse the weakness, but we need to address it. I don't think Nancy would object to our adding a fifth thing to her list: We need to have a decent cost of business - and government that works. But at the same time we have to have areas of strength to build from, and these include higher education, real strengths in transportation that are going to come with Amtrak and, I think we would all agree, we need a better airport both to maintain companies and if we want grow businesses around here.
Rae: I also think it would be a great help if we began to think of ourselves not as an isolated region which might as well be in Kansas. We are, in actual fact, part of the region of New York. If you look at the third regional plan for the City of New York, we are the easternmost suburb of New York. We should think of ourselves that way. Strategically, if I could pick one thing for us to focus on it would be 1946 railway schedules. Take the commuter rail - the cheap thing that goes once an hour. Get it to observe 1946 schedules, and we would have an economic bonanza.
Nemerson: Doug is absolutely correct: Our great competitive advantage is being part of the New York system. For the rest of the state, being on the periphery of the Boston-Providence system, it's a little more problematic.
Outside of this area, New Haven and Yale are virtually synonymous, and Yale itself is synonymous with excellence. And yet we have a public school system that's not exactly known for excellence. How do we get to excellence in [public] education?
Morand: Let's look at Stamford. Stamford is going to be the first city in our state to provide quality early-childhood programs for every kid and family who wants it.
Nemerson: That's our biggest issue.
Morand: If you look at entering kindergartners, the number who are not prepared at the kindergarten door is so high - in fact, it's higher than the number of kids who fail the Connecticut Mastery Tests. Thus you might say the schools are actually making some impact, however modest. We really have to look at [student preparedness] before the schoolhouse door.
Before we adjourn, what do each of you believe are the top priorities for our region, and how can they be achieved?
Clark: The South Central Regional Coordinating Alliance was discussing this, and we've talked about [how important is] regional identity, and how the ability to work as a region on many different things is the top priority.
Morand: First, to have our attitude catch up with our reality. Two, invest in job creation based on the amazing intellectual resources we have in the life sciences. Three: more renters downtown, and more home owners in the neighborhoods. And four, better schools. Five, transportation and infrastructure - namely, regional jet service to at least two major hubs.
Rae: I would focus on trains and planes and quality of life in the center of the city. And making New Haven a place where it is worth living, even if you don't have a job. I think it would be a huge turnaround here if there were 5,000 such households. It's not a huge number. It would just make a huge strategic difference in the place if they were the kind of households Matthew was talking about. I think that's doable.
Nemerson: Communities are competing with other communities. Individuals make decisions about where they want to grow, where they want their kids to grow. If we look at what communities we can compete with - ones that have higher costs and complicated social structures - then I would agree with what's been said here. We have to have excellent transportation. We have to hold on to every person who's willing to make the sacrifice of being well-educated, because that is your capital, your infrastructure for the future. So you have to be attractive to them. If they're attracted to the arts, you have arts. According to Money magazine, what people are attracted to is clean environment, low crime, good schools. In fact, the arts and sports are very low on people's priority lists - but that doesn't mean you don't have it, because that may be the small niche you need to be competitive. Frankly, for us to be competitive, probably the Farmington [Canal] bike trail is more important today than everything else - when you look at what people today really want, what they want is weekend recreation that's family-oriented - unfortunately, it's more important than the Ravens. So I would say right now that bike trails are as important as anything. When people go to [work for Microsoft], it's [because of] opportunity and lifestyle. We can do these things. But we have to think about the person who's graduating with an M.F.A. or a bachelor of science [degree] who's going to make a difference in the future. Just like Eli Whitney brought great people here who fueled this economy for 150 years. Schools are an absolute given. Our competitive advantage has to be fabulous schools from zero to [grade] 12 across the system. The colleges are there. We need to have excellent zero to 12 in every school system, including New Haven's - and West Haven's and East Haven's. That's our challenge. Finally, we have to strengthen Route 34 and our connection to the Valley. We have to own the Valley. We can't simply cede it to Fairfield County.
Hadley: We have to define what excellence is, and what we're focusing on. And then the systems have to be held accountable - governmental systems, non-profit systems, job-training systems - a focused effort so that the manufacturing plants have the employees they need. The issue of accountability in the non-profit and governmental sectors is to be able to deliver what's needed to whatever those market niches are that we feel are going to become reality. From that comes where do we, as the philanthropic community - the donors, the high-income people in this area - put dollars to work actually to get impact?
Lapides: The fundamental issue is to create stakeholders in our community - all segments of our community, as opposed to simply bringing high-asset individuals from New York to New Haven by fast rail. That's necessary, but not sufficient. The way to create stakeholders is to create jobs. And jobs need to be created without the guiding hand of government, lest we think that we can recreate the Soviet Union - the People's Republic of New Haven. We need stable and safe neighborhoods. We need quality of life, which is where arts, culture, sports are very important. In order to accomplish these goals, you need to do three things: One is to lower the cost and pervasiveness of government. Mandates need to be stripped. Towns have very little control over their own budgets. And while people talk about the town structure as being a high-cost alternative, I would point out that a small town just north of here, North Haven, has one of the lowest costs in the region. So the problem isn't the structure, but the [lack of] commitment to having low-cost government. Mandates complicate that - everything from workers-compensation mandates to heart-and-hypertension [benefits] for police and firefighters. The second thing I would do is to adopt GAAP [Generally Accepted Accounting Principles] while we still can, while things are good. If any business tried to do accounting the way the state does, no bank would bank us. The [third] thing I would do is to get government out of the risk-capital business. This idea of a steel mill is a classic example of if you offer somebody enough money, they will build it. And I'll offer right here publicly that if someone gives me $5 billion, I will build Disney World right here in New Haven. In terms of transportation and infrastructure, we need an effective airport, desperately, for Yale to be a center of educational conferences, for people to want to relocate here, for biotech people to want to come here - they have to have a way to get here. And fast rail needs to connect us to New York and Boston and Washington. Finally, [with regard to] education, we need school choice. It is clear that people have given up on the education system in Connecticut. But politically, people cannot speak about it: You don't hear Yale University taking a position on school choice. [Education] is the driver of economic competitive advantage, and there's no way to get around it.
Anything else?
Nemerson: I think we should look at 'super-regionalism.' We need to get into operational agreements between at least the western four or five counties in Massachusetts and Rhode Island and Connecticut. You obviously can't merge the states, because we don't want to give up four or six [U.S.] senators. But fundamentally, that's one state. And with the exception of lower Fairfield County, those economies are going to grow more and more interrelated. The only way, statistically, that you can get [greater] control over governmental costs is to increase the number of people who are being managed by the number of government employees. The reason we have such high relative costs of government is that we're so small.
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