Governors Look to New Industries in Bad Economy
It was a lot to take in on Monday morning, but faced with grim economic news from Charles Colgan, economist and professor of public policy at the University of Maine, two U.S. governors and a deputy premier from Canada still managed to remain optimistic.
Yes, the current recession is deeper and longer than originally anticipated, Colgan said Monday morning at The Council of State Governments Eastern Regional Conference’s 50th Annual Meeting. And yes, there are major implications that come along with it, he said.
“The Great Recession is even bigger than we thought it was going to be,” Colgan said. “You don’t grow out of economic events like this without going through some profound changes.”
The basic story: The financial crisis in fall 2008 led consumers to panic and in almost record time, consumers went from spending to savings, Colgan said. Malls were deserted and people stopped buying cars. In the next quarter, business investment plummeted—there was a more than 6 percent drop in U.S. gross domestic product.
That said, governors and their Canadian counterparts are looking to the new energy economy to fuel jobs and provide the innovation on which a future can be built.
“Carbon-based technologies have got to move forward or they’ve got to get out of the way,” said Deputy Premier Frank Corbett of Nova Scotia. “You have to control your energy resources or someone else will control your economy.”
Maine Gov. John Baldacci knows this especially well in his oil-dependent state, where 86 percent of energy is imported.
“We have an opportunity with offshore wind energy,” Baldacci said. Although the cost of wind energy is higher than traditional fuels such as oil, Baldacci said policymakers must look at the true cost of oil—that includes the cost to send troops to Iraq and Afghanistan to protect oil interests.
“There are other sectors that we need to think about away from some of the traditional industries where we can’t compete,” said Vermont Gov. Jim Douglas. Aside from new energy possibilities and renewable energy, Douglas said insurance companies hold potential in his home state, as well as the higher education and biotech sectors.
While Canada is slowly climbing out of the recession and enjoying a small recovery, the U.S. is not out of the woods yet, Colgan said. The danger now is deflation—a sustained decrease in the level of prices—what Colgan calls “a very strange and unusual beast.”
Periods of deflation are typically accompanied with meager—if any—growth in GDP, according to Colgan. In simpler terms, deflation could mean the economically grim days of 2010 could extend for the next decade, he said.