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Economic Salvation?

Outsiders see pluses but our chamber of commerce sees only doom

The economies of Buffalo-Niagara and other Upstate New York metro areas were doing reasonably well, at least until the Wall Street crisis of 2008, according to numbers released recently by the Bureau of Economic Analysis in Washington. Buffalo-Niagara is a low-cost place in which to do business, according to the international accounting and consulting firm KPMG Peat Martwick’s under-reported recent study on which American metros compare well with Canadian metros for business-friendliness. According to KPMG, Buffalo is comparable to Oklahoma City in the low-cost arena. And 10 years after Erie County, the culturals, preservationists, foundations, and philanthropists created a fitful but effective cultural tourism campaign, Buffalo, particularly the urban landscape itself, has been garnering increasingly and consistently positive press because of the historic fabric of our built environment, including our parks. Arts organizations and active citizens, like the people who put on the Garden Walk and Doors Open Buffalo-Niagara, add to the positive.

A typical comment: “In an age of cultural tourism, an age in which people are eager to find ways to explore places that are different from other places, places that do not look like the banal Anywhere is Nowhere is Everywhere of the American Interstate, Buffalo has a kind of power, the power of the authentic place.”

And now comes some very good policy news out of Albany. This week, Governor Paterson signed a very smart Sam Hoyt bill into law, the Public Infrastructure Priority Act (A8011/S5560B). “This groundbreaking bill,” according to a smart-growth group called Empire State Future, “instructs state agencies, authorities, and public corporations to align their infrastructure spending with smart growth criteria.” Hoyt sponsored it in the Assembly. Three downstate state senators co-sponsored. Only two state senators and two assemblymembers opposed it.

One would think that these are good facts for the Buffalo Niagara Partnership to tout, because chambers of commerce are touts, like the bow-tie-wearing clowns of old who would loudly proclaim the virtues of this circus or that strip joint just around the corner. Touts sell.

Our bow-tie business touts, sadly, take a different tack: They routinely tell the world that it sucks here. Just this week, the Partnership bashed the very Albany politicians who bravely enacted this new infrastructure bill, which will stop the destructive 50-year-long trend toward over-building suburban roads and sewers and other public works, thus slowing if not halting altogether the economically destructive trend of sprawl in a zero-population-growth environment.

And news consumers can be forgiven for thinking that the earth crashed into the sun when John Simpson decided to call it quits as president of SUNY’s university center in Amherst and depart for his home on the West Coast, chiding Albany for not giving him all he asked for—including higher tuition, billions of dollars for construction, and a management toolbox with which to tinker with faculty work rules and compensation.

It’s weird to hear local leaders and then to read statistics from the Bureau of Economic Analysis (BEA), which reports on the net positive growth, even after adjusting for inflation, of the gross domestic product of the metro regions of Upstate New York. Say it again: There was positive growth. In the Buffalo-Niagara metro, despite the fact of shrinking population in the region, there was nonetheless a net increase in measured economic activity from 2000 to 2008, a positive change from $32.93 billion to $36.96 billion. The fact that the rest of the country grew faster, and grew in population, is a given; the total share of America’s gross domestic product that came about in the Buffalo metro shrunk a bit. We knew that.

But despite a truly terrible China-centered national trade policy, and despite a truly terrible Washington bias in favor of financial speculators who bash down American wages, incremental positive economic growth is a reality, even here.

There are lots of interesting data that tell the story about which sectors of our region’s economy are important, growing, struggling. There’s just no question about the positive impact of downstate money flowing into support for SUNY; a recent study of the economic impact of SUNY on Western New York was part of the case UB President John Simpson made for getting more money out of Albany. If it hadn’t been for the collapse of Wall Street in 2008, and the subsequent collapse of New York State revenues to support mandated programs, SUNY might be getting more rather than less state support today. The BEA numbers clearly indicate just how large and important the downstate-funded SUNY investment is in this region.

But local public money matters, too. There was a measurable if small uptick in both the hospitality and the culture “industries” here between 2000 and 2008. The category “performing arts, museums and related activities” grew more than “amusement, gambling and recreation.” Add it all up and you still have a relatively small slice of the regional economic pie, at under six percent of the total regional product, but almost $1.8 billion in total economic activity is nothing to sneeze at. Anyone who disputes the idea of public investment in cultural spending should be directed to check the BEA numbers, which demonstrate that public investment in the arts stimulates solid, measurable, positive economic activity in this region.

What’s not so clear is whether the infrastructure investments that get made in this region are as uniformly positive. In a previous column, we totted up all the various road projects in the area, stopped counting at about $2 billion if you include the proposed $700 million Peace Bridge plaza plan, and observed that most of the road projects are about maintenance but that the few that are new won’t do much for longer-term regional economic sustainability because the proposed new inputs are either going to enable sprawl or, in the case of the Peace Bridge plaza, are utterly unproven as anything but construction-period economic stimulus. Construction employment around here is mainly about housing, which is in massive oversupply, or about roads. Meanwhile, hanging over the region’s head are mandates from both the federal and state environmental authorities to do something on the quick-step about preserving one of our few global comparative advantages—our access to clean, fresh water. The problem with our water is that it is dirty because our 100+-year-old sewers overflow and discharge raw sewage into Lake Erie at least 50 days per year. The Brookings Institution reported last year that cleaning up the Great Lakes will cost $23 billion, but that the positive return on that investment could be quadruple that.

The question remains, though: If neutral outside observers praise our cultural, architectural, and landscape fabric, and also praise our cost-effectiveness, and note that there is positive economic growth even as our population shrinks, and that there could be more if we clean up our water, then why is the messaging from our business community so relentlessly negative?

The answer, simply, is that there are two economies here. There is real economy of the producer, the consumer, the merchant, and the much-maligned public sector; the latter, all told, constitutes about one-fifth of the workforce and the payroll. That’s the economy that seems to work positively.

And then there is the economy of those in the business world here who live by the big public project—the bankers and their various support personnel, the engineering and construction firms, and about 3,000 workers (out of a regional workforce of over 550,000) whose leading voices tell this community that massive, disruptive change is needed, or else, as the Partnership’s bow-tied leader recently said, we should all move to Florida, which is the home of America’s most enormous object lesson in what happens when you turn the economy over to real-estate developers and bankers.

The mentality of positive, incremental, organic change is an endorsement of small-“d” democratic, participatory economics, where the public role is to support common infrastructure and not to pick blockbuster mega-projects designed to rescue an allegedly failing community.

The mentality of abrupt, massive, directed inputs of public funds for “salvation” projects is quite different. Its premise is that the idiosyncratic and the small and the incremental are all foolish, insufficient and irrelevant, and that only by self-interested elites directing massive projects can the region hope to grow.

The numbers say otherwise, because the numbers speak about positive increments of change despite bad national economic policies. So do outsiders.

The community is beginning anew a debate about what to do with all the public funds that were destined for Bass Pro, the latest “salvation” project.

As our regional population continues to slide, and as our claim on Downstate New York’s money grows ever less tenable, the small-“d” mentality needs to get organized quickly before the loud, negative voices that gave us a demolished War Memorial Auditorium, zillions in subsidies for our oversupply of hotel rooms, dirty Great Lakes water, and overbuilt suburban roads get to the next governor and invites him to maintain the status quo.

Thanks to the smart-infrastructure legislation just signed by the outgoing governor, we may have a shot at redirecting public expenditures so that they’re more effective. Thanks to the many gardening-obsessed homeowners and the patient, enduring and sometimes litigious preservationists, the out-of-market reputation of our community is improving. And thanks to those elements of the academic community that win national competitive grants and outside recognition for their work, the SUNY system will continue to be a regional economic positive, notwithstanding a slower rollout of the university’s inevitable expansion.

It is quite strange, though, that the local chamber of commerce insists that Bass Pro, casinos, convention centers, and unmitigated suburban sprawl are preferable to everything that objective outsiders see as positive.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

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