'Massachusetts Miracle' Makes Good Campaign Fodder

Posted: December 28, 1987

BOSTON — To America's aging industrial belt, to its struggling farm communities and depressed Southern oil states, presidential candidate Michael S. Dukakis has been carrying the amazing story of "the Massachusetts miracle" for nearly a year now. To no one's surprise, he has been enthusiastically received.

"Twelve years ago, they were calling us the new Appalachia," the governor tells his audiences. The state's double-digit unemployment rate was among the highest in the country. So were its taxes. Business and industry were in desperate decline. "There was no sense of hope," he says. "No sense of optimism."

That was then. This is now: "We have a 2.8 percent unemployment rate," Dukakis says to gasps and appreciative head-shaking. Nearly 300,000 new jobs have been added in the last three years alone, he adds. The message is far

from subtle. In fact, a Dukakis political ad puts it right out front: "What he did for Massachusetts, he can do for America."

But the reality is that back home, few economists agree on precisely what Dukakis did.

At best, they credit him with helping to create a positive business climate in Massachusetts, with being open to innovative policies and intent on spreading the new prosperity throughout the state.

At worst, they say he played only a bit part in a much larger drama, his actions more symbolic than catalytic.

"It was the Massachusetts miracle because it happened by itself," said David Lampe, assistant director of the Industrial Liaison Program at the Massachusetts Institute of Technology.

Moreover, Lampe and other economists question whether the elements of the turnaround can be transferred to other regions of the country. Key to the rebound, they say, was Massachusetts' unique mix of educational institutions, defense industries, high-tech entrepreneurs and venture capitalists. That cannot be quickly or easily replicated.

"What he's done is continue to be sympathetic to the needs of an expanded business sector," said James Howell, chief economist at the Bank of Boston. ''Other states have much to learn from Massachusetts but little to implement."

These are hardly the kind of kudos that advance a presidential campaign, especially one built largely on the image of its man as a major player.

Dukakis, who is in his third term as governor, announced his presidential candidacy with a call for "good jobs and economic opportunity and vibrant, sustained economic growth for every American." An early campaign brochure, which declared that "Mike Dukakis knows how to get results," focused largely on the state's economic success.

How much of that success resulted from state government actions is nearly impossible to discern, though.

Certainly, Massachusetts is considered a pioneer in development programs and public-private financing agencies that target small, growing companies and poorer communities. Under Dukakis, state money has helped to revitalize the once-dying industrial towns of Lowell and Taunton. The state has begun funding scientific "Centers of Excellence," an effort to encourage businesses and universities toward cooperative research in developing technologies. Five cities, all outside the Route 128 "Technology Highway" that rings Boston, have been identified as centers for such fields as plastics technology, solar energy and micro-electronics.

And in the old whaling city of New Bedford, Mayor John Bullard says Dukakis' involvement and state money were crucial to saving several hundred jobs at the 160-year-old Morse Cutting Tool Co. The state first lent the company $1.5 million through a program to aid old-line industries. Then this year, after Morse still went bankrupt, the state agreed to renegotiate the loan and push hard for Morse to be sold to a Scottish firm that would keep the jobs in New Bedford.

"Without state involvement and the attitude of the state, Morse would be out of business right now," Bullard said. "A signal was sent to every business in New Bedford that government cares."

Said Frank Keefe, the state secretary of administration and finance, "The governor is the first to say no single person deserves total credit . . . (but) to suggest that state government hasn't played a hefty role in bringing about the economic turnaround is ludicrous."

Increasingly, though, Dukakis' Democratic opponents have accused him of taking far too much responsibility for "the miracle." Supporting their criticism has been a rash of independent reports that, while generally complimentary of the governor, limit his role in the state's good fortunes.

"Progress in economic development must be tracked across decades, not years," noted one of the latest studies, put out by the Economic Policy Institute in Washington. "Many people credit Dukakis for Massachusetts' turnaround, because he was governor when it happened. The reality is more complex."

Indeed, David Osborne, the study's author, believes the boom would have occurred in the mid-1970s no matter who had been governor. The technological innovation that would power it had been building for more than two decades. At its genesis, neither Dukakis' economic programs nor the substantial tax cuts that came through public referendum in 1980 - which Dukakis adamantly opposed - were yet in place.

"If you phrase the question, 'Is Dukakis responsible for the economic boom?' it's sort of like asking is he responsible for the sun coming up in the morning," Osborne said recently. "It's a silly question.

"But if you ask, 'Has he done constructive things to assist the economy, to act as a catalyst in terms of bringing economic opportunity to areas that would be bypassed?' then the answer is yes," Osborne said.

At Harvard University's Kennedy School of Government, Ronald Ferguson and Helen Ladd came to similar conclusions in a study earlier this year. They lauded Dukakis for policy initiatives that encouraged development in some depressed cities and regions and that actively involved the private sector.

But Massachusetts' economy, they decided, likely would be much the same today, even without the many new state programs and agencies implemented under Dukakis.

"He did what he could, I think that's the thrust of it," Ferguson said in an interview. "And he learned a lot of things that could be useful to a president who wants to have a strong federal policy toward cities and states."

What other states can learn from Massachusetts, Ferguson said, is "to do the best with what capacity you have," rather than to try to clone Massachusetts' experience. Such an effort likely would be unsuccessful.

For starters, there is a well-established relationship between the state's private industry and its academic community, especially the powerhouse Massachusetts Institute of Technology. More than nearly any other factor, most economists say, MIT helped set the stage by attracting engineering's best and brightest, who in turn founded many of the technology and defense firms that today are a major part of the state's economy. Defense projects account for more than 7 percent of the state's economic output.

In addition, Massachusetts long has had nearly stagnant growth in its labor force, and on occasion, more people have left the labor market than entered it. That migration has made putting people to work much easier. Said Howell at Bank of Boston, "All we had to do was to employ those people standing around looking for jobs."

Still, Howell credits Dukakis with restoring order to the state's fiscal affairs, which were more than $500 million in debt when Dukakis first took office in 1975. "He played a very significant role in bringing modern managerial policies to state government."

Despite the growth in the high-tech, financial and service sectors, not everyone has benefited equally. The burgeoning number of jobs in those areas has masked significant losses within manufacturing. And some people fear continued declines could tarnish Dukakis.

According to the federal Bureau of Labor Statistics, employment in the state's manufacturing industry has fallen by more than 5 percent, or nearly 34,000 jobs since 1982. During the same period, manufacturing jobs nationally were increasing.

"Manufacturing really did not participate in the economic miracle in the last three years," said K. Heinz Muehlmann, chief economist for Associated Industries of Massachusetts.

Last month, an additional 3,700 high-paying jobs at General Motors' plant in Framingham were put into jeopardy when the carmaker announced it was laying off 3,700 workers because of poor sales.

For Dukakis, the plant carries special significance. Several years ago, he played a key role in keeping it open, taking 37 acres of land by eminent domain to allow GM to build a new paint plant.

"Saving General Motors," his campaign literature trumpets. "When GM considered shutting down its Massachusetts plant, Mike Dukakis didn't go to Washington. He went to work."

"Sure he claims more than is his credit," said Robert Friedman, president of the Corporation for Enterprise Development in Washington, which last spring awarded Massachusetts top marks for economic development.

"But it's not fair for people to dismiss him as a factor. . . . Clearly there's a government there that is consciously struggling to do what it can."

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