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And Now for a
Return to Earth...
Conference celebrates present prosperity while urging caution
about future
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Business New Haven
6/1/1998
By: Michael C. Bingham
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Heaven on earth.”
That's how Fleet Bank economist Nicholas Perna chose to describe the state of Connecticut's economy at a May 21 Connecticut Business & Industry Association (CBIA)-sponsored conference on the subject in Meriden.
“Inflation and unemployment are at their lowest levels since the 1950s,” Perna said. In addition, “We have a pill that will grow hair; we have a pill that will do other things. It just doesn't get any better than this.”
Perna's remarks, as they often do, drew chuckles. Yet imbedded in the bonhomie of the event, at which two dozen economists, bankers, bureaucrats and business types traded statistics and anecdotes about the state's resurgent fortunes,
there was a sense of foreboding about darker clouds on the horizon.
Speaking of the financial services industry, which amid a fury of consolidations and mergers is generating record profits, Fairfield University economics professor Phillip Lane outlined five factors which developments which he said threatened to bring it back to earth:
n Action by the Federal Reserve to tighten credit, which Lane said may happen in the near future;
n The so-called Millennium Bug or Y2K problem, which threatens the operation of computers, especially mainframe systems, as the next century unfolds;
n The Asian monetary crisis, the impact of which has yet to be seriously felt on these shores, but which has serious long-term ramifications for the world economy;
n An overdue “correction” in equity markets, which Lane believes is overdue (based on actual value, he said, the Dow ought to be priced at about 8,200);
n And the ripple effects of the European monetary union on the U.S. economy.
Elsewhere, there was no dearth of recommendations on how Connecticut could continue to improve its economic fortunes. Speaking specifically of his industry, Daniel Adams, CEO of the Meriden-based Protein Sciences Corp. (which did an estimable but little-noted rush job in creating a vaccine for the Asian flu which first reared its head late last autumn), said, “Biotech needs a home in Connecticut. And that home is [New Haven's] Science Park.”
Adams explained why: “Biotech doesn't need grandiose; biotech needs low-cost and flexible. What they need to do is turn [Science Park] over to a real estate entrepreneur and kick anybody in the butt who gets in the way.”
The Meriden event drew about 100 business people to the Silver City's Ramada Plaza. What they heard was confirmation that Connecticut's rebound from the recessionary woes of the early 1990s is secure, but that guardians of the economy must be mindful of the potential land mines that could derail growth.
The biggest of those, in the minds of many speakers and panelists, was the looming dearth of skilled workers that has already dampened economic growth in states such as New Hampshire. According to one survey, 58 percent of Connecticut business owners said they had already begun to feel the effects of the skilled-worker shortage.
Noting that business confidence is at an all-time high, Jeffrey Blodgett, director of information resources for the Connecticut Economic Resource Center Inc. (CERC) said that confidence was based on the state's burgeoning competitive strengths: earnings and job quality; surging business competitiveness; the state's human and technological resources; and its unarguable strategic location (“We're within one day's drive of one-third of all U.S. economic activity and population,” he noted).
However, Blodgett also noted the competitive weaknesses which could suppress or even reverse the state's recent good fortune: the ever-growing disparity in income distribution; a dearth of entrepreneurial activity; declining infrastructure (specifically roads and bridges); the “college freshmen deficit” (Connecticut exports more college students than it imports); and eroding demographics (Connecticut is the sixth-oldest state in the nation, said Blodgett).
“We can't assume we've turned the corner, and we can't assume we've done the job,” said Blodgett, who concluded his remarks by displaying a sign that read, “No Complacency.”
People's Bank Vice President and economist Todd Martin and Anthem Blue Cross/Blue Shield of Connecticut President and COO Harry (Bud) Torello gazed into their crystal balls to divine the future for financial services in Connecticut and described similar visions: more of the same - and then some.
“The lines have become increasingly blurred” among the various financial-services sectors, said Martin, including commercial banks, insurance companies (Martin's own People's later this month will acquire the 105-year-old Hartford insurance firm R.C. Knox & Co.), money management and mutual fund firms.
But the trend of trends, Martin noted, was consolidation. Of the 14,500 U.S. banks extant in 1980, only about 9,000 remain - and that number continues to decline. Of 7,000 commercial U.S. banks still in operation, Martin presaged a diminution by half in the next decade.
Banking “consolidation is being driven by the deregulation of interstate banking and by international competition,” Martin said. And even in an arena of big banks getting bigger, Martin said, “There will still be room for smaller [financial services] companies that compete on the basis of advantages in innovation or technology” - his own institution being an example, he said.
Anthem's Torello spoke “from the perspective of a primary user of financial services” - and what a user Blue Cross/Blue Shield is, “redistributing” some $2 billion in Connecticut each year as the state's largest middleman between health-care providers and consumers.
In a landscape dominated by financial-services giants which seem to morph almost daily into ever-larger entities, Torello said “The Connecticut marketplace cannot provide sufficient scale to sustain a major player” - foretelling the arrival of the day, sooner rather than later, when virtually all major institutional decisions will be made in Boston, New York - or elsewhere.
Torello's own company, he said, “is already running out of choices for Connecticut-based banks that can handle the thousands of transactions we generate daily.” Eventually, he said, geogrpahy will become an irrelevant consideration in financial services. “You'll see companies that have a name, but not a face.”
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