KRWG

New Mexico citizens are poorly served and being left behind

May 11, 2018

Commentary: People often confuse economic growth, either measured by employment or GDP, with economic development. They are very different concepts and failure to distinguish these concepts leads to bad policy.

Economic development is an involved process that affects all aspects of life. It is the adoption of new techniques for economic production; and in so doing, transforming social and political relations.

Take the transition for traditional agriculture of the middle ages to early industrial production in northern Europe. The pre-industrial agricultural societies were rural, feudal and militaristic. This was replaced by early industrial societies that are urban, less traditional, and mercantilist. Responsibility for education moved from the household to the school house. Political power devolved from hereditary nobility to a self-made capitalist class. All aspects of society changed.

Of course, accompanying the industrial revolutions was economic growth; indeed, the motivation for industrialization was wealth creation. Achieving this higher income involved a full restructuring of society. The consequence has been a sustained, ongoing improvement in human welfare.

Economic growth does not require economic development. Take, for example, the so-called resource curse, which is that oil exporting countries often experience GDP growth but not economic development. The consequence are wealth societies characterized by a feudal hierarchy. Too often the political system of these countries evolves into kleptocratic despots. Saudi Arabia, Nigeria, and Equatorial Guinea all come to mind in this regard.

New Mexico has too often adopted policies that promote economic growth, but not economic development. Rather that adopt policies that promote a 21st century workforce, we have engaged in economic growth-by-theft in that we seek to lure business from other states by offering tax breaks and subsidies, thereby, gaining at the expense of our neighbors. While this might create jobs short term, it does nothing for economic development long term.

New Mexico’s film credit program is the classic example in this regard. Large subsidies to attract production companies that blow into the state then blow out, creating no long-term jobs. Of course, people feel good because they get to see New Mexico scenery on “Better Call Saul”, or “Longmire” but this is not economic development.

There is plenty of political blame to go around for both parties. Bill Richardson was a frequent practitioner of growth-by-theft, but at least he was competent at it. Our current Governor also practices growth-by-theft, but much less skillfully.

We are in transition to a new type of economy—one characterized by robotic production and AI. Coming up with policies that promote true economic development are critical. If we don’t develop a workforce prepared for this, we will be left behind. Worse our children will be left behind.

Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He teaches in NMSU’s Doctor of Economic Development program. The opinions expressed may not be shared by the regents and administration of NMSU. Chris can be reached at chrerick@nmsu.edu.