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New Mexico needs to diversify economy

ALBUQUERQUE, N.M. — New Mexico’s economy came by its reliance on federal spending honestly, but we continue to pay a high price for our dependence.

New Mexico still has the fifth-largest federal payroll of all the states and the District of Columbia, and 4 percent of all employed New Mexicans work for the federal government, according to the University of New Mexico Bureau of Business and Economic Research.

The Journal’s Richard Metcalf will report in Monday’s Business Outlook that job growth in the state remains glacial in part because federal employment has been declining 3 to 4 percent annually for the past three or four years. Cuts in federal programs not only mean cuts in direct federal employment. Canceled projects mean contractors that service the federal government also have to shed jobs.

This dependence didn’t occur by magic, and it’s not evidence of our laziness or ineptitude. It is a manifestation of New Mexico’s competitive advantage when it comes to serving the nation’s defense industry. That advantage no longer means much, because Uncle Sam is no longer buying much. If we are to escape our economic doldrums, we have to come up with new competitive advantages for new customers, something our fellow New Mexicans in the southeast have become pretty good at doing.

The huge federal presence here began with the Manhattan Project during World War II. Robert Oppenheimer needed a very secret, remote, secure place to build an atomic bomb. He was an avid horseman and had ridden and camped in the Jemez Mountains. It was obvious to him the place to build the bomb was Los Alamos, especially because New Mexicans were always pretty good at minding their own business.

Once the war was over, the Cold War began. The demand for nuclear weapons and research was insatiable. Money poured into New Mexico’s national laboratories. Any economic development expert knows that success breeds success, and such was the case here: A collection of federal installations begets more federal installations. Before long, our deserts were bristling with rockets, radar, aircraft and anonymous buildings where who-knows-what was going on.

It helped that our congressional delegation, including Sens. Dennis Chavez, Clinton Anderson, Pete Domenici and Jeff Bingaman, was committed to New Mexico’s Cold War mission and senior enough to secure the funds the mission required.

New Mexico offered infrastructure, vast tracts of land, security and remoteness. Over time, we developed a labor force with the skills necessary to run the bureaucracies those federal installations require.

The feds don’t demand the weaponry they once did now that the Cold War is over. New generations of politicians are much more concerned about controlling spending than their predecessors were.

Lea and Eddy counties in the southeastern part of the state never landed the big military bases or research laboratories. Instead, they relied on commodities to sustain their economies, especially oil, natural gas and potash. Their competitive advantage was simply that nature chose to put resources there.

Making a living from commodities takes a strong stomach. Let the Saudis decide to pump some extra oil, and you have a drop in the price per barrel and some out-of-work roughnecks in Hobbs. Let the Canadian dollar decline to the right level, and the United States starts buying its potash from Canada.

To break the boom-bust cycle, Lea and Eddy have diversified their economies, as Kevin Robinson-Avila reported in last week’s Business Outlook. Instead of relying on the commodities business, they are now in the energy business. By offering a competitive advantage, they have attracted companies that serve the nuclear and alternative energy industries – among them nuclear fuel processor URENCO USA, biofuels maker Joule Unlimited and wind energy producer Anderson Wind Farm.

There is abundant land, few natural disasters hit the area, the workforce has decades of experience dealing with energy and with hazardous materials, the community supports the nuclear industry, the infrastructure to move trucks carrying hazardous cargo is in place, state and local regulators are familiar with the needs and practices of the energy sector, and the local schools, including the community college, have created programs to train the workforce the energy industries need.

Fortunately, economic development experts understand the need for competitive advantage. A panel of three experts last week told NAIOP that Albuquerque needs to build high-end office space, improve air transit and train a better workforce if it hopes to compete for what ever will replace federal spending. City government, business leaders and educators, recognizing the end of federal profligacy, are building infrastructure, including the Downtown innovation district, designed to appeal to the young, the creative and the entrepreneurial. Many business and community leaders have made education reform their No. 1 priority.

Our goal can be nothing less than the transformation of our economy, because the alternative is permanent poverty. It sounds daunting, but communities do it all the time. Boston was once the shoe manufacturing capital of the world. Silicon Valley was mostly orchards not that long ago. Before the Research Triangle was formed, the foundation of North Carolina’s economy was tobacco.

UpFront is a daily front-page news and opinion column. Journal writer Winthrop Quigley can be reached at wquigley@abqjournal.com.

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