Economies on Both Coasts Thriving--Study

WASHINGTON —  States in the industrial Midwest, seemingly on their last legs as the 1980s began, are now flexing their economic muscles, while Plains and Rocky Mountain states show little sign of recovering from the last recession, a private research group reported Thursday.

The study by the Corporation for Enterprise Development, a research and consulting organization, also said states on both coasts generally are in good economic health, and those in the South are improving but still have a long way to go.

Those states whose economies are healthy or improving have invented their own development policies in a “quiet revolution,” rather than wait for federal solutions to evolve, according to the study.

“The story is that while Washington continues to be stalemated over what we ought to do over foreign competition, the states have gone ahead and invented their own strategies,” said Doug Ross, corporation president.

The findings are included in the fourth annual “Development Report Card for the States,” financed by corporations, labor unions and private foundations. In it, the states are graded according to economic performance, business vitality, economic capacity and government policy.

The study said that for more than 40 years, states relied on “smokestack chasing,” or luring out-of-state businesses with incentives and subsidies, to build their economies.

By the late 1970s, that approach no longer worked as “dramatic changes in communication, transportation and technology” often made it impossible for U.S. businesses to meet overseas competition, the study said.

States then began creating home-grown strategies that focused mostly on new and existing businesses and “now encourage and support indigenous development--modernizing in-state businesses, easing their expansion and product development, educating their workers and facilitating start-ups,” Ross explained.

Here is a condensed view of the corporation’s assessment of various regional economies.

The industrial Midwest is still recovering from long decline, but improving satisfactorily.

The Northeast and West coasts are in good health economically, stable but with some troubling symptoms, according to the report.

The Northeast and Pacific states continue to be the nation’s strongest economically.

Of the 13 states with no more than one grade below B this year, nine are in these two regions--California, Connecticut, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont.

But Ross cautions that “despite their recent prosperity, these states show some troubling signs. The Northeast is struggling with labor shortages, the Pacific Northwest is wrestling with the decline of the timber industry. We already see economic slowdowns here--and significant defense cutbacks on the horizon could further shock their systems.”