Do Connecticut’s economic disadvantages preclude recovery?

The recent gubernatorial campaign focused attention on our state’s embarrassingly stagnant  economy and labor market over the past decade while the nation as a whole is enjoying major prosperity. Causal agents include some of the nation’s highest income and property taxes, repeated billion-dollar state budget deficits, recent state income and business tax hikes, among the nation’s highest salaries/benefits for its public unions, taxes on hospitals, inadequate transportation funding, inadequate public school funding and insufficient delivery of social services to the disadvantaged.

However, no attention was paid to the consequences of our major long-standing economic “deficiencies.” For example, Connecticut has almost a dozen cities, but none of them are large (as cities go) nor do they have modern high-tech computer industries.
Economic growth the world over takes place in modern cities. We have none.

Stamford is our only “city” that is functioning well by virtue of its close proximity to New York City. But Stamford lacks a modern high-tech computer industry. By and large Connecticut’s cities are home to our lower income residents, many of whom are at or below the poverty level with very limited access to good jobs, adequate housing or good public schools. Historically our premier war-focused industrial cities of Bridgeport, New Haven and Hartford, home to one in three residents, in the 1950’s failed to transform into modern cities.

To be sure there are some bright pockets, e.g. the mighty Yale complex in New Haven, the insurance complex in Hartford and our three surviving war industries – Sikorsky, Pratt & Whitney and Electric Boat. Yet together these employ less than 100,000 in a state with more than 3 million residents.

Not only does Connecticut lack cities with modern industries, it lacks colleges and universities focusing on the STEM field (science, technology, engineering and math).
Our high-tech computer firms habitually complain about lack of a well-qualified labor force here. And reportedly even our defense firms  largely recruit from out of state.

In a word, Connecticut is not well positioned to participate in the modern industrial economy. Historically that was not a problem for several centuries when Yankee ingenuity focused on small-scale manufacturing. Nor was it a problem when Connecticut was widely viewed as the “arsenal of democracy” during the war years.

So far not much attention has been paid towards even discussing how we might transform our severely depressed major cities into modern engines of growth and prosperity. Especially for our largest cities with major harbors such as Bridgeport and New Haven.

A second major “economic disadvantage” stems from our 169 towns and cities. For a population of just over 3 million. Just half a dozen of our “cities” have populations over 100,000. Spreading the population over 169 towns and cities means high costs of providing public services. Indeed, our state and municipal public unions together form one of our state’s primary industries. Most states use “counties” of several hundred thousand or more to provide local services. Our adherence to small towns and cities mans we are invariably a high cost provider of public services. Indeed, our municipal and state public unions are among the highest paid in the nation.

While creating a dozen or two counties would offer considerable savings in the provision of public services and reduce the acknowledged high cost of doing business in Connecticut, there’s not much (any) hope of adopting a county system here. But that doesn’t mean taking advantage of opportunities for regional services in fire, police, public works and some public school service provision.

It’s worthwhile asking why our neighboring New York and Massachusetts economies are vibrantly following our national economic recovery — the most impressive since the war.
Each neighboring state has major-sized cities with modern hi-tech industries, sizable numbers of world acclaimed colleges and universities specializing in the STEM subjects. And they employ the county system of governance. Each state also has among the nation’s highest income, business and property taxes as does Connecticut.
But they have large cities with modern industrial structure and ample numbers of well paid jobs to foster viable and successful economies. And a highly skilled labor force.

Unless Connecticut’s leaders focus on the major limitations to our well-being from not having modern large cities participating in the computer high-tech revolution Connecticut will likely remain an under performing State. Especially if we separate the 130,000 high income families of our Gold Coast adjacent to the formidable New York City economy.

Indeed, the “other Connecticut” outside the Gold Coast has far smaller incomes and opportunities more in line with average states across the nation.

While some have advocated more vigorously taxing the Gold Coast, such efforts will more likely accelerate the already substantial exodus from Connecticut. And it will not create a vibrant state with good jobs, good schools, opportunities or a bright future — nor a state with modern high-tech industries offering good jobs.

Now that the gubernatorial elections are behind us it’s appropriate to have some serious discussions on how to overcome our major economic disadvantages. Otherwise the stagnation so visible during the past decade will continue far into the future. Around the world modern cities are the real engines of growth. Witness China’s dramatic foray into the world’s second largest economy with dozens of major modern cities.

Finally, its worth noting that ultimately people vote with their “boots.” Connecticut has a much smaller population than Massachusetts. Yet it has many more homes for sale. Virtually ever major real estate market is our state is a buyer’s market. That ought to suggest some serious thinking about how to overcome our major economic disadvantages — lack of modern high-tech industry cities and high cost of providing public services.

Peter I. Berman of Norwalk held positions at Bank of America, various Wall Street firms and the Chamber of Gold Mines in South Africa. He’s a published author who has made numerous presentations before municipal and state governments, the U.S. Congress. Upon retirement he taught graduate finance at the University of New Haven for several decades.