Taking a look back for an economic fix in Mass.

In 1991, newly elected Republican Governor William F. Weld turned to Harvard Business School professor Michael Porter for help. Back then the state faced both a budget crisis and an economic crisis and Weld wanted to know what Massachusetts had to do to get back on its feet. An expert in the field of competitive advantage, Porter produced a report called, not surprisingly, ”The Competitive Advantage of Massachusetts.”

By Charles Stein, Boston Globe Columnist

Eleven years have passed and a new Republican governor-elect, Mitt Romney, has called on Porter again. The Harvard professor has been tapped to run Romney’s transition team on jobs and the economy at another difficult time in the state’s history. Massachusetts is confronting a new fiscal crisis; the economy is ailing too, although it is nowhere near as sick as it was a decade ago. Still the parallels were close enough to make me curious – curious enough to take a look at Porter’s original report. I wanted to see what advice he offered and whether it would be relevant to today’s troubles.

Porter had three basic messages for Massachusetts: Fix your budget mess (he never said how); improve the business climate; and beyond that, don’t look to government to solve your economic problems. ”Government cannot create competitive industries,” wrote Porter. Fortunately for Massachusetts, Porter concluded, it was blessed with a talented and educated work force and a core of strong industries: technology, health care, finance, and knowledge services, a blend of universities and consulting firms. Those four, wrote Porter, ”would be the envy of most nations. All are expected to be among the fastest-growing sectors of the national and world economy.”

Porter’s fundamentally optimistic view of the future was right on target. The state fixed its budget mess with a combination of tax hikes and slower growth in spending. The business climate got better too, through business tax cuts and the reform of the workers’ compensation system. And just as Porter predicted, when the economy came back, Massachusetts was there with the goods and services the world wanted to buy – everything from mutual funds to telecom equipment.

So here’s the question. Is it still appropriate to be optimistic about Massachusetts’ future? Most economists say yes, for the same reasons Porter gave. ”We have a highly educated work force and we are flexible,” said Alan Clayton Matthews, a professor at the University of Massachusetts at Boston. This flexibility has been especially evident in technology. In the 1960s technology here meant defense and the space program. In the 1970s and 1980s it meant minicomputers. In the 1990s it was telecom and the Internet. The transitions were messy. In the gaps people lost jobs and companies disappeared. But eventually local firms found a way to hitch their wagon to the next rising star and Matthews is confident they will again.

Like Porter, most economists also think Massachusetts has been dealt a good hand. The same four industries he identified still have good future prospects. Think about it: If you were going to swap them for other industries, what would you choose? Farming? Oil and gas? Making cars? The truth is most states and countries would kill to have the mix of businesses Massachusetts has.

The problem is we need to get through this valley to the hills beyond. That may not be so easy. Balancing the state budget without tax hikes may require steep and damaging budget cuts, including cuts in education. While technology and the stock market will undoubtedly come back, it could be a while. Big booms are typically followed by big busts and the boom of the 1990s was a humongous one. Health care will grow, but paying for it may impose a burden that slows the growth of other industries.

”We should not mistake the downturn for something deeper,” wrote Porter in his 1991 report. The same holds true today. I wish I could say I knew when the downturn will end, but I don’t. Even Michael Porter can’t tell us that.

Charles Stein is a Globe columnist. He can be reached at [email protected].

© Copyright 2002 Globe Newspaper Company.

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