Global Matters: Maine's economic answer isn't in the rear-view mirror

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As the global economy slowly recovers from financial meltdowns of the past several years, it’s becoming clear that certain conditions, once thought to be temporary, have become the new normal, and certain trends will continue, giving rise to a new economic landscape.

Gasoline prices have settled in at the $3-per-gallon mark nationally – much higher in many places – and are expected to approach an average of $3.75 per gallon as demand rises this summer. Crude oil prices are forecast to exceed $100 per barrel this spring and reach $110 per barrel this summer.

China and India continue their remarkable transformations into modern economies, producing and consuming more goods, developing more talent and demanding many of the raw and refined materials, including petroleum products, which are necessary to power burgeoning and more prosperous populations.

Corporate profits are up, as are major stock indices. Mergers and acquisitions are on the rise as financial institutions stabilize, credit becomes available and businesses prepare once again to assume risk. Rapid growth in the BRIC countries – Brazil, Russia, India and China – is creating both opportunities for investors and challenges for those in industrialized, slow-growth nations.

The brave new world we see – or should be seeing – is one in which refined fuel and other products derived from costly energy resources are only going to become more expensive. Global competition for these products and resources will push prices higher. Investors will place their bets where they perceive opportunities for growth and profits to be strongest, i.e., where populations are growing and buying, which in turn will feed more consumption and still greater pressure on petroleum products and fuel prices.

All of which brings us back to Maine – and when I say “back,” I mean back.

During the recent gubernatorial campaign, candidate Paul LePage expressed his desire for agriculture, forestry and fishing once again to become key drivers of the Maine economy. Given the state of affairs I’ve described above, I hope his election has afforded him the opportunity to reconsider Maine’s best path for growth.

No one denies agriculture’s importance. Maine continues to be a major producer of potatoes, broccoli and now, tomatoes, and our niche, organic farming sector continues to grow. But it’s hard to see how the ag sector is going to pave the way to prosperity.

We are distant from large markets, and the fuel needed to transport products is getting more expensive. Much of what we grow is available elsewhere, closer to and less expensive for consumers.

As for the forestry and paper industries, 15 years ago the paper industry employed 14,000 Mainers. Today, the number is roughly half of that.

Fishing? Fuel costs, limitations on catch, quotas and so on suggest that few of our young people will be needed as deckhands. Nor is seafood processing in growth mode.

Bottom line: with commodities available globally, with markets growing most rapidly abroad, with shipping costs dependent upon fuel costs, it’s hard to see how our natural resource industries can form the basis for a sound, future-focused economy.

So what can work here? Take a look to the south.

Boston has developed a concept and is now marketing an area of downtown called the Innovation District. It is intended to attract clusters of synergistic companies and entrepreneurs who want to work, create and live in an urban, collaborative environment. The idea is to capitalize on the city’s knowledge-driven industries and quality of life, and create an “ecosystem” in which ideas, intellectual property, companies and industries are germinated and launched.

Already space is being leased, companies are moving in, entrepreneurs are exchanging ideas and infrastructure is growing to meet tech-driven needs.

Where is the Innovation District? At Fort Point, an area with industrial facilities, retail locations, restaurants, offices, even a brewery.

The Innovation District concept has Portland written all over it, but there’s no reason why creative clusters couldn’t be developed in other parts of our state, as well. Warehouse and mill space is ideal for open, collaborative ventures. University resources connected to innovation sites and corporate seed support for new ventures could form the foundation for new economic ecosystems.

Clearly we’ll need vision and energy to flesh out these ideas. We’ll need to study what is working – and not working – in Boston and in other places where innovation districts have been launched.

Progress, however, depends upon understanding and adapting to changed conditions. We can’t build a future by reliving the past.

Gov. LePage is now finalizing his Cabinet appointments. I hope his commissioners advise him that relying on Maine’s natural resource economy is a lot like driving in the express lane while looking in the rear-view mirror.

You need to be aware of the past, but you have to keep your eyes on the road ahead.

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Perry B. Newman is a South Portland resident and president of Atlantica Group, an international business consulting firm based in Portland, with clients in North America, Israel and Europe. He is also chairman of the Maine District Export Council.