The ‘fix’ is on- Political rhetoric about reviving resource industries ignores the realities of Montana’s economy

Natural Resource Strategy for Montana Economic Development

Before they can elect a new governor next November, Montanans are going to need to evaluate the various candidates’ proposals for “fixing” the Montana economy. It remains to be seen just what those proposals might be, but there’s one perennial favorite that’s already making the rounds. This is the notion, popular across the political spectrum but particularly popular with Republican Pat Davison, that the key to Montana’s prosperity is natural resource development. And natural resources will be developed, so this story goes, when Montana breaks the stranglehold of “extremist” environmental groups, who have come from outside the state to pursue a “special interest” agenda.

by: Richard Barrett and Thomas Michael Power –
Economics Department –
University of Montana

Don’t believe it. There are three big flaws in the argument. First of all, like it or not, it just isn’t the case any more that our economic prosperity depends on natural resources. Consider these facts. Between 1990 and 2000, both inflation adjusted labor earnings and the number of jobs in Montana grew by 2.5% per year; the total output of the state’s economy grew by 2.9% per year. This growth occurred in spite of the fact that the state’s natural resource industries were themselves contracting, rather than growing. Over the decade, jobs in natural resources industries – agriculture, mining, petroleum and natural gas, lumber and wood products and primary metals – fell at .21% per year and earnings fell by 3.2% per year; the output of natural resource industries rose, but at .27% per year, about one tenth of the rate at which the state’s economy as a whole was growing. By 2000, only about one out of twelve jobs in Montana was in a natural resource industry.

Of course the fact that Montanans found jobs in other industries while losing them in natural resources may not tell the whole story. That’s because the natural resource jobs we lost paid well, while many of the jobs we gained in trade, services and the like paid badly. But while it’s tempting to conclude that this shift from good to bad jobs was responsible for declining pay in Montana, that conclusion is not warranted. With only a couple of interruptions, inflation-adjusted pay in Montana fell steadily for much of the past quarter century; from $28,162 in 1978, pay per job fell by $5,051 to $23,111 in 1996 (both numbers are in 2000 dollars). During that period we lost almost 6,500 natural resource jobs (excluding agriculture, which is not a high earnings industry) while gaining more than 140,000 jobs elsewhere in the economy. Had natural resource industries kept their 1978 share of employment over this period, we would, instead, have gained 8,200 natural resource jobs. But surprisingly, even if that had happened, average earnings per job would have fallen by $4,574, almost as much as they did anyway. The reason for this is that, quite aside from any shift in jobs from highly to poorly paid industries, within particular industries (including natural resources) pay was falling.

None of the foregoing is meant to suggest that for particular communities and areas, natural resources are not important. They certainly are. Nor is it to say that there is something wrong with natural resource industries. The point rather is that when we consider the state’s economy as a whole, and when we examine its recent history, we have to recognize that natural resources are no longer the engine driving its growth, and their presence in the labor market is not big enough to have much impact on pay levels for the typical Montana worker.

Even if natural resources don’t play the role they once did, Montanans might still want to take a long, hard look at their environmental policies if they’re convinced that those policies are stifling natural resource development. But the evidence suggests that it was not environmental policies, but national and international market forces that were the real cause of the problem. During the 1990s, natural resource industries throughout the nation experienced the same kind of declines that they did in Montana. Buffeted as they were by a variety of market forces, employment in these industries fell, and their output grew much more slowly than the rest of the nation’s economy. It was the fate of Montana’s natural resource industries that they had to fight to hold on to their share of a shrinking national natural resource pie, and there’s nothing to suggest that they were held back in that fight by the state’s environmental policies. On the contrary, at least in terms of jobs, Montana’s share of the national natural resource pie grew over the decade, albeit only slightly.

Consider finally the claim that environmental groups are pursuing the “special” interests of their members. Most Montanans have at some point questioned friends and neighbors about why they stay in Montana when they could earn so much more elsewhere. And the answer is always the same: most people (not some, but most) say they stay in Montana because it’s such a good place to live. They like to fish, or ski, or hunt, or hike, or enjoy the scenery and the tranquility of their communities; they like to live in the “last best place.” In other words, the natural and social environments are very important to them – so important that they are willing to make a considerable economic sacrifice to enjoy them. And when a group of citizens works to protect and enhance environmental quality – through a land trust, or a watershed group, or a wildlife federation, or a wilderness society, or an advocacy organization – they are working for the public interest, on behalf of the great majority of their fellow citizens. It follows that politicians who denigrate these efforts do not understand the public interest, are not in a position to protect it, and certainly do not deserve your vote.