The reaction in Massachusetts to the demise of Curt Schilling’s 38 Studios has stretched the gamut from a grim sigh to some barely concealed glee. After all, it was less than two years ago that the soap opera began after Rhode Island successfully lured Schilling away from the commonwealth with a $75 million loan guarantee.
In the history of taking a pass on a risky investment of public dollars, this may have been Massachusetts’s finest hour. But there is no cause for celebration anywhere in the wake of 400 New England jobs lost and a bill to be paid by the good people of Rhode Island.
The debacle surrounding the video-game company speaks to a larger and deeper issue: the very significant risks – to fragile economies and scarce taxpayer dollars – when companies are allowed to pit New England states against each other in the battle for their business. This is an all-too-familiar story and a clear example of what happens when New England states fail to work together to create economic development and a better quality of life for the region. When companies know they can manipulate competing states, it can be taxpayers, our economy and our region that ultimately strike out.
It doesn’t have to be this way.
Municipalities, along with state and federal governments, have a valuable and important role to play when it comes to generating economic development and creating incentives for additional growth. There are countless examples of states wisely and effectively targeting investments and tax credits consistent with an overall economic-development strategy. While our elected leaders should exhibit caution and take a long, critical look at potential return on investment when using taxpayer money, that doesn’t mean investment should stop. There are always risks when it comes to investing in new companies and industries, but this risk can be mitigated when regions work cooperatively together.
New England has an even greater advantage in this area, as it is one of the most desirable places in the world to live and do business. When it comes to having a highly educated workforce, an innovative, technologically advanced economy and high standard of living, our region is near or at the top of any list. New England’s size and transportation infrastructure place key industry and population centers within workable distances of one another.
We need to leverage these opportunities through better communication and coordination. And we need to develop a few simple, common guidelines and streamlined polices when it comes to the key issues that drive economic growth: taxes, workforce education and development, environmental standards and transportation. Without some consistency and consideration of how these issues impact the region as a whole, we cannot effectively market ourselves to take advantage of new business opportunities. And worse, we could accelerate a “race to the bottom” that encourages the public sector to take undue risk.
The Northeastern governors are holding their annual meeting at the end of July, and 38 Studios is a valuable case study. The region’s governors ought to reassess ways to work together to enhance economic development and job creation. The conference itself is an acknowledgment that our commonalities outweigh our differences, and New England states ought to be fostering an environment that is less susceptible to potential bidding wars associated with companies that might not pan out.
And there are positive examples of collaboration already underway. Notably the Hartford-Springfield Economic Partnership has developed the “Knowledge Corridor” to leverage shared assets such as Interstate Route 91 and Bradley Airport along with the academic and industry strengths in both metro regions. There are undoubtedly similar partnerships waiting to blossom, such as those between the technology and precision manufacturing companies of the Merrimack Valley in Massachusetts and southern New Hampshire, and the insurance and financial-services industries in Connecticut, Massachusetts and Rhode Island.
While competition between our states will always exist, as a region we are a much more powerful entity capable of attracting and retaining promising industries. When we seize on the opportunity to utilize our collective strengths, we are better positioned to take advantage of opportunities and compete with anyone else in the world.
The example of 38 Studios is a painful lesson for Rhode Island, from which the state will no doubt recover. But it’s something our entire region should learn from.
John Hailer is president and chief executive of Natixis Global Asset Management, focusing on the Americas and Asia, and chairman of the New England Council, a business advocacy group.
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