November 21, 2002
Smarter investments needed for state’s future, panel says
Washington state may have been more lucky than smart in its recent economic history. But the current economic slump requires smarter investments if the state is to secure its economic future.
A panel last Friday that included economists, a journalist and a technology expert concluded that the state needs to make critical investments in key elements of its infrastructure, even in the face of the current economic slump — a recession that is the worst in three decades.
“An Uncertain Future: The Outlook for Washington’s Economy” was held in conjunction with the University’s annual Visiting Committee and Advisory Board Day. Panelists included Stephen Dunphy, business columnist for the Seattle Times; Dick Conway, an economist and principal of Dick Conway and Associates; Susannah Malarkey, executive director of the Technology Alliance; and Neil Bruce, professor and chair of the UW Department of Economics.
“The best economic decision that the region has made recently was to have Bill Gates born here, as well as Craig McCaw,” Dunphy said. The presence of these two visionaries, he said, helped to spur the shift in the region from a resource-based economy to knowledge-based.
Despite this diversification, Boeing remains a huge wild card in the regional economic picture because of the size of its employment base and its volatility, Conway said. Nearly all of the current economic slump can be attributed to the problems in aerospace, which have cost the region 49,000 jobs over the past three years, the largest decline since the Boeing Bust of the early 1970s.
While the worst of the decline may be over, the recovery is likely to be tepid, he said. Economic growth is forecast at just 0.3 percent next year and 1.8 percent in the following year, extremely low for the recovery phase of a business cycle. “The only solution to our economic problems will be time,” he said, as the national recovery pulls the state out of its slump.
The overall slump has been paralleled by a plunge in high technology startup investments, Malarkey noted. The Alliance of Angels, a Technology Alliance group that funds startups, pumped $13 million into these ventures in 1999 but only $5 million last year.
Bruce saw a possible silver lining in the state’s economic woes. The governor has announced his intention to “refocus” the state’s expenditures and to spend resources on the most important things that the state needs to be doing to promote the future welfare of its citizens. This could have a positive effect on the future economy, he noted, since currently Washington does not rank highly in spending on its infrastructure. The state ranks 30th in overall education spending, 32nd on K-12 expenditures and will soon rank 49th in transportation.
The panelists agreed that the best medicine for the state in the long term would be investments in education and transportation. “You need to protect those organizations and institutions that help you grow out of a recession,” Conway said.
“You never save your way out of a recession,” Dunphy said. “We need to fix those things that need fixing, to position ourselves for future growth.”
Malarkey noted that the state is split between those who are college educated and those who aren’t. Washington currently ranks 41st in providing bachelor’s degrees, which means that the benefits of job growth in the state’s knowledge economy are going to people who move here from out of state.
