Do Good C.E.O.’s Make Good Presidents?
With only a few weeks remaining until the election, it’s still not clear how Mitt Romney would manage our jobs crisis. There aren’t many lessons from his term as the governor of Massachusetts — the economy was comparatively healthy back then, and the unemployment rate was fairly low. His current economic platform lays out broad principles (Principle No. 1: Don’t be Barack Obama) but is light on specifics. All that’s certain is that Romney has promised to use decades of business savvy to create jobs, which raises the question: how do you apply business strategy to a jobs crisis? No business views hiring as an objective. When a crisis hits, the response of many executives is to let workers go.
When I put this question to business analysts, several pointed me in the direction of Louisiana, which has applied a number of Romney’s principles. Its governor, Bobby Jindal, is a former McKinsey & Company consultant who has focused on making his state more attractive to businesses. Since taking office in 2008, Jindal helped cut antiquated taxes (like those on certain factory machines) and streamlined regulatory burdens (like lengthy permit processes). He and Stephen Moret, his secretary of economic development (and another former McKinsey guy), have also used state tax incentives in creative ways. A few years ago there were virtually no video-game designers in Louisiana; today, digital media is on pace to make up 5 percent of the state’s economy. In 2011, according to Southern Business Development magazine, Louisiana attracted more new business-development projects per capita than any other state in the South. Its unemployment tracks below the national average, too. Romney would presumably be encouraged by the comparison.
I was surprised, though, when Moret volunteered that some of what his state has done during the crisis cannot be applied on the national level. State government can persuade companies to move to Louisiana and prevent the ones already there from moving out. But that doesn’t have an impact on the overall national employment picture. After all, Louisiana can enlarge its slice of the pie, but it can’t make the pie bigger. “At the state level,” Moret said, these policies are “perfectly appropriate.”
Jindal has received praise from free-market advocates. Some economists, however, argue that Louisiana’s robust economic growth suggests the opposite point. After Hurricane Katrina in 2005, Louisiana received a ministimulus in the form of billions in federal dollars and insurance payouts that went into recovery projects. It’s a quirk of economic measurement that rebuilding a destroyed city can look the same as healthy economic growth. And while Moret argues that Katrina spending mostly dried up before Jindal took office, many economists contend that the benefits of any stimulus last longer than the initial spending.
Regardless of whether this growth was achieved by a federal infusion or conservative policies (or a combination of both), it is not necessarily clear that it has even worked on a statewide level. Many of Jindal and Moret’s highest profile projects focus on specialized industries, like pharmaceuticals, renewable energy and digital media, which offer a disproportionate number of jobs to already in-demand workers in gentrified urban areas. The median wage for a software developer is more than $90,000 a year, and new jobs are expected to grow at more than double the national average and nearly four times the state’s average income. Moret was eager to point out one recent success story — a new G.E. software office in New Orleans. The facility, however, will largely employ computer engineers, software developers and other information-technology professionals. It’s unlikely to have much of an impact on the city’s poorer residents.
Moret contends that growth, no matter where it starts in the economy, will eventually effect everyone. “If we’re able to grow faster,” he said, “you can have a surplus of tax revenue, without raising tax rates, that you can invest in education.” But when I pressed him on how job growth among programmers in Baton Rouge or engineers in the Garden District would enhance the lives of the chronically unemployed in the Lower Ninth Ward, Moret said, “We’re not there yet.” The state has successfully recruited some manufacturing and call-center businesses that employ high-school graduates, he said. These jobs, however, are unlikely to reach Louisiana’s truly poor. “We haven’t done well enough to see the reduction in poverty we’re looking for,” he said.