In his June 18 Bangor Daily News article, “A Focus on Industries of the Past,” Christopher Burns admonishes Gov. Paul LePage for focusing on industries based on natural resources, including Maine’s forest products industry. Instead, Burns and the experts he quotes appear convinced we should focus on new industries, including “innovators, entrepreneurs, small startups all across the state in all sectors.”
I heartily agree with the idea of focusing on all sectors of the economy, including new businesses, both small and large. Attacking traditional industries or making it an either/or decision, however, is shortsighted and counterproductive.
There is no doubt that global and national changes have had an impact on the forest-products industry. Demand for many grades of paper is down, and global competition is stiff. But a 2016 assessment from the University of Maine indicates the estimated annual economic impact of Maine’s forest products industry is worth about $8.5 billion, about the same as a 2011 assessment. It’s still one of the largest industries in the state.
This is a massive part of Maine’s economy and drives the lion’s share of the rural economy. It is also true that employment in the pulp and paper sector has declined. With the relentless drive toward efficiency, it is normal, if very painful, to use less labor to produce the same amount of product, and for smaller, less efficient mills to close.
I am sure that all of my colleagues laughed at the notion of natural resources being a source of “easy riches.” No one who has visited a modern pulp and paper mill, sawmill, or other facility that turns wood into value-added products would dream of calling any of it “easy.” It takes prodigious amounts of effort, technology, energy and capital to make any of it happen.
Therein lies our real problem and the reason why we don’t have more startup companies. Burns’ article misses the fact that Maine does not attract adequate investment capital, not only for new business arrivals or startups, but also for existing businesses. Compared to the rest of the U.S., Maine has a terrible track record at attracting capital. We rank 48th in Forbes magazine’s list of business friendly states. For comparison, Massachusetts and New York rank 18th and 29th, respectively. We are ranked 41st for the cost of doing business and 45th for regulatory climate. The Tax Foundation ranks us 34th for overall taxation and 45th for corporate taxes.
Investment capital is the lifeblood of business. Without it, existing businesses wither and new ones never get started. Yet, for decades, Maine policymakers either made excuses or ignored our terrible rankings for this critical business driver.
An economy with a virtuous cycle of business investment will grow fast enough to spread tax burdens and attract new businesses. A high-cost, unfriendly business climate that does not attract capital is doomed to a cycle of business loss. That raises the necessary cost of government on remaining businesses and individuals, which accelerates business loss. Look around our state; in which cycle do we find ourselves? It is painfully obvious that we are treading water at best, and in a downward cycle at worst.
In spite of this, we see investment at many Maine mills. Given our economic climate, it is a minor miracle that Maine has new tissue machines at the Woodland mill in Baileyville and that J.D. Irving Ltd. opened a new sawmill in Ashland in 2015. Imagine what we could do if our state were more business friendly. It will, however, take many years and painful decisions to make Maine economically competitive with the rest of the nation.
More capital investment is the only way we will grow both mature and new businesses. Fighting over a shrinking pie of our own creation by attacking the natural resources sector only distracts us from the real problem and will only spread the economic gap between Maine and the rest of the nation.
Peter Triandafillou is vice president of woodlands at Huber Resources Corp.