Ivan Manev gets many things right in his recent column about the business climate in Maine, “Prosperity starts with business” (BDN, Feb. 12). I agree that multiple factors, including duplicative, unnecessary and costly regulations, high taxes and energy costs, make Maine an unattractive place for new business.
However, his article misses the mark in two places. He writes off all of Maine’s natural resource industries, which includes our forest products industry, as “in decline due to cost competition from overseas.” The facts do not bear this out.
Maine produces more sawn lumber now than at any time in its history, recent or past, and about as much pulp and paper as during the peak of the 1980s. Indeed, Verso and SAPPI recently have invested nearly $100 million in their Maine operations. These are not the actions of an industry in decline.
How is this possible? After all, the decline of the forest products industry is accepted as received wisdom in most circles. The answer, of course, is that productivity gains from the initial tree harvest to the loading of the final product for shipment have reduced the need for labor. Output per hour of labor has increased dramatically during the past few decades, and in some cases by an order of magnitude.
The problem is that Maine has done absolutely nothing to replace jobs lost to increased productivity. No new industry of scale has come to Maine in at least a decade, and in general, existing facilities invest capital in cost reduction, not process expansion.
The second error by omission in Manev’s article is the high cost of electricity in Maine. It is mentioned, but not included in the list of solutions. We will not see any new business of scale in Maine until we reduce our uncompetitive electric rates, which are nearly three times higher than the national average and nearly five times higher than neighboring Quebec.
In fact, every energy initiative in Maine over the past decade has increased electric costs. Subsidies for expensive renewable energy, participation in the Regional Greenhouse Gas Initiative, removal of low-cost hydro facilities and the closure of Maine Yankee and subsequent dependence on natural gas have taken us from a moderately competitive state to one with among the highest energy costs in the contiguous 48 states.
Without a credible and timely plan to reduce electric rates, Maine will continue to suffer economically. We need to import cheaper power from our Canadian neighbors, and we need to focus on low-cost local solutions, including hydropower and coal.
In addition, we need business to enter the state or expand at scale. Manev argues that Maine can do a much better job at connecting entrepreneurs and small businesses with “development centers, incubators, universities, the state’s venture capital fund and local economic development agencies.” As a former board member of the Maine Technology Institute — an independent, legislatively authorized entity that provides funding and resources for emerging technology businesses — I would argue that Maine already does this fairly well.
However, the situation is so severe in rural parts of the state that only large entities that are able to create hundreds of jobs will make a difference, and these entities need an attractive business climate and reasonable energy costs. As important as new small businesses are, and they are a critical component of economic growth, we cannot solve our problem by relying on new ventures that employ five to 10 employees.
My forestland management business takes me to many places in the nation, and I’ve been struck by the rate of expansion of manufacturing in states like Texas. Places like that, with a business friendly climate, often add several new jobs for every one lost to increased productivity. This is the classic formula for economic growth and increased standards of living, a formula that Maine seems to have forgotten.
Pete Vigue of Cianbro, has referred to Maine’s forest products industry as the “low-hanging fruit” for economic expansion. While I welcome and look forward to the entry of new industries in Maine, we will not become a high-tech or biotechnology powerhouse in a few short years. We need to invest and grow our vital natural resource-based industries as well, as they are the only hope in the near term.
Peter Triandafillou is the vice president of woodlands for Huber Resources Corp.