Breaking Down Richard Tisei’s 6-Point Jobs Plan for the 6th District

Richard Tisei, the Republican nominee for Congress in the 6^th District of Massachusetts, recently unveiled a six-point jobs plan to spur economic development in Northeast Mass. While politicians always like to exaggerate their potential influence over local economies, Tisei’s plan is disappointing for its lack of creativity and its failure to take into account some of the greatest assets of Essex County and its surrounding communities.

That’s not to say that every element of Tisei’s plan is without merit. His emphasis on the need to better link economic development with workforce development is long overdue and greater flexibility for local economic development agencies to direct workforce dollars will better enable regions to create human capital that is responsive to industry need.

Unfortunately, that’s where Tisei’s good ideas end and the parade of protectionism and tax giveaways begins. From ginning up reasons to maintain defense spending that ballooned to over $700 billion in 2011 (more than the next 11 highest spending nations, combined—see chart) and targeting tax breaks at specific industries rather than at investment writ large, to the traditional GOP talking points of slashing corporate taxes (despite the fact that many corporations pay next to nothing in income tax) and environmental/financial regulations designed to maintain stability in the markets, Tisei’s plan does little to lay the groundwork for private sector growth.

A true jobs agenda for the 6^th District takes advantage of Northeast Massachusetts’ historic strengths while also being aware of the trends of the 21^st century global economy.

It means (1) building on the success of the Route 128 job corridor by providing federal support for the creation of sustainable, walkable communities that attract creative class workers.

It means (2) laying the foundation for growth (and spurring construction jobs in the process) by investing heavily in improved infrastructure—both modern energy grids and public transit, such as the long-proposed Blue Line extension to Central Square, Lynn.

It means (3) supporting mixed-use projects along the waterfront, like those ongoing in Haverhill, Gloucester, and communities throughout Essex County, which promise to create an “active” street life by leveraging our “working waterfront” and recognizing the importance of tourism to Essex County’s economy.

It means (4) making work pay by boosting the income of the 6^th District’s poor and working class residents through an expansion of the Earned Income Tax Credit.

It means (5) looking ahead to the industries of tomorrow, especially renewable energy, rather than subsidizing the slow death of industries that have fled the U.S. as globalization has taken root. Instead, Paul Ryan’s (R-WI) budget—which stands as a midterm priority list for the GOP—slashes civilian research and development by $92 billion from the current baseline over the next decade.

Cities and towns throughout Northeast Mass. have historically relied on clean energy. For over 150 years, Lawrence has embraced hydroelectric power—from the Great Stone Dam in 1848 to the launch of a hydroelectric plant powering 7000 homes a year, in 1981. In Beverly, Salem, and Marblehead, windmills were grinding corn and bark as early as the 17^th and 18^th centuries.

With an immense coastline, a regulatory environment supportive of renewables, and countless students committed to investing their futures in the field, the 6^th District is the perfect laboratory for the transformative energy technology of tomorrow. Our institutions of higher learning—from Gordon College in Wenham and Endicott College in Beverly to Salem State University in Salem, Northshore CC campuses throughout the region, and Merrimack College in North Andover—must be nodes of innovation.

Lastly, (6) with home prices increasingly out-of-reach in many towns in the District and long-term trend lines for Millennials showing a shifting preference for renting/apartment living, the federal government must reassess current tax breaks that disproportionately benefit the wealthy (such as the mortgage interest deduction) and boost tax credits for investment in smaller, more environmentally-efficient homes that permit greater density near transit hubs in places like Salem and Newburyport.

That’s a true 6-point plan for economic growth in the 6^th District—one that puts private sector innovation at the core, not through tax giveaways and weakened regulation, but by boosting the human and physical infrastructure needed for long-term, sustainable development that can support middle class jobs.

What it Means to be #1: Happiness and Social Policy

“Gross National Happiness is more important than Gross Domestic Product.”

-- His Majesty Jigme Singye Wangchuck of Bhutan

Last week, Nicholas Kristof of the Times noted that between 1975 and 2006, “99 percent of the French population actually enjoyed more gains in that period than 99 percent of the American population.” In other words, if you exclude the top 1 percent, the average French citizen did better than the average American.

Nevertheless, on one of the more common metrics used to determine the prosperity and halth of a nation—the Gross Domestic Product (GDP)—the U.S. actually came out on top during the same period, as the American economy significantly outperformed the French.

So who’s “#1”? Before you start chanting, “U-S-A! U-S-A!” (too late?), let’s take a closer look at just what we’re trying to measure.

In recent years, researchers have prodded cities and states to step away from the traditional measures of prosperity and embrace tools to measure overall “happiness”. In December 2013, the National Academy of Sciences issued a report calling on governments to ask citizens a series of questions related to their happiness and to use the results to shape social policy priorities and prescriptions.

This type of survey—which began in the small nation of Bhutan in the early 1970s—has spread to other nations, like the U.K., France, and Canada, all the way down to the local level, as in Somerville, Massachusetts.

Indeed, several U.S. cities are now experimenting with happiness or wellbeing measures. Santa Monica, California, which defines “wellbeing” as, “[p]ersonal satisfaction with life, influenced by social connections, economic stability, personal safety, physical surroundings, fulfilling employment, civic engagement, and health,” recently won a Bloomberg Philanthropies award for its efforts to measure wellbeing and respond accordingly.

In New York, Megan Golden (NYU) and Liana Downey (Liana Downey & Associates) wrote that the de Blasio Administration should pilot a happiness survey to determine “whether some groups are struggling more than others, where problems are concentrated, and what conditions affect New Yorkers’ happiness the most.” This pilot would borrow from the Centers for Disease Control and Prevention, which already surveys Americans every four years about health and life satisfaction, as well as “Measure of America”, a project of the Social Science Research Council.

Of course, measuring happiness is easier said than done. As with any broad survey, getting a representative sample is a challenge, particularly in a City like New York, where many are often wary to respond to formal government surveys (see: New York’s experience with the 2010 Census). Furthermore, since most people filling out the survey have different definitions of happiness, questions that seek to gauge the subjective mindset of any population may be inherently suspect.

An even more fundamental question exists, however. And that is whether happiness, however defined, should be the goal of social policy in the first place. As David Brooks wrote this week, “Happiness wants you to think about maximizing your benefits. Difficulty and suffering sends you on a different course.”

No, Brooks is not advocating for a political system that promotes difficulty and suffering. But he’s also cautioning against viewing certain types of suffering as in need of eradication. To put it in concrete terms, suffering that flows from hunger, disease, violence, or neglect carries no short or long term benefit (much to the contrary), whereas the pangs that come with failure, the loss of a loved one, or can make us fuller people—changed souls, rather than shattered ones.

Ultimately, since that the unique number of paths to happiness is roughly as numerous as the number of people alive, the Framers probably got this one right—namely, that the government’s role is to ensure the foundational elements necessary for the pursuit of happiness (food, shelter, health care, employment), leaving to the individual citizen to decide how to chart his own course toward that seemingly universal goal.

The "Magic Semicircle": The Future of the Route 128 Corridor

“Route 128 is more than a highway…It is, as the blue signs posted for many years, ‘America’s Technology Region.’”

--Alan Earls, Route 128 and the Birth of the Age of High Tech, 2002

This week, the Martin Institute for Prosperity published a new report, “Start-up City: The Urban Shift in Venture Capital and High Technology.” Written by University of Toronto/NYU Professor Richard Florida (author of The Rise of the Creative Class), the report finds that while “[s]uburban high tech is not going away…the newest and most innovative developments in the industry are likely to emerge from urban and urban-like locations.”

While the 128 corridor remains, in Florida’s words, a “classic suburban nerdistan,” the highway once known as “the road to nowhere” has lost share of VC funding in recent years to Cambridge and Boston.  Indeed, while the “978” remains the 15^th largest recipient of VC funding—with 42 deals worth nearly $350 million in 2012—there is room to grow VC funding on the 128 belt—particularly in Essex County, as shown in the map below.

Source: "Start-up City" Report, Martin Institute, p.25

How then can Massachusetts poiicymakers ensure that the “Massachusetts Miracle” of the 1970s, which witnessed the establishment of Route 128 as one of the nation’s leading tech hubs does not fade into the Massachusetts mirage? [for a terrific primer on Route 128’s history, check out “Silicon Valley and Route 128: The Camelots of Economic Development,” in the May 2013 issue of the Journal of Applied Research in Economic Development].

We can start to answer that question by defining what cities and towns in Essex County cannot do: become dense metropolises like New York City. The infrastructure of the North Shore won’t allow it and the proud history of the Essex County National Heritage Area precludes communities from tectonic shifts in development priorities.

To state the obvious, Northeast Massachusetts can’t compete with New York and San Francisco on the playing field of the “global city.” Instead, our region must leverage its unique assets to drive growth in a way that shows fidelity to history and takes advantage of new modes of suburban living that emphasize mixed-use, sustainable neighborhoods.

We already have models of what these walkable suburban centers can look like. Salem and Lynn earn relatively high scores from WalkScore, but when you drill deeper into the mapping, it is clear that the downtowns of these ancient cities are extremely walkable. Not coincidentally, these downtowns are located near train stations that can whisk residents to Boston in about a half hour.

In recent years, development throughout NE Mass has focused on walkable neighborhoods and live-work environments. As stated in the 2009 Bridge Street Revitalization Plan prepared for Salem, “The Bridge Street Neck neighborhood should be an active mixed-use neighborhood, incorporating lively commercial and residential areas. The neighborhood should have a safe and enjoyable pedestrian environment that connects its different amenities and serves its residents and businesses.” The City of Beverly has also promoted its walkable downtown in its effort to woo business to the home of the Panthers.

Governor Deval Patrick must have been listening. Three years later, he announced a plan called the “Compact Neighborhoods Policy” which calls for the construction of multi-family homes, rental apartments, and starter homes near jobs, transit, and city and town centers. Providing incentives to cities and towns to engage in such “smart growth” is one of the keys to ensuring the continued vitality of the suburban ring, not just the entrepreneurial engines of Boston and Cambridge.

In addition to embracing smart growth and walkable, mixed-use neighborhoods, Essex County also needs to do more to capitalize on the creativity of our college students. Gordon College in Wenham, Endicott College in Beverly, Salem State University in Salem, Northshore CC campuses throughout the region, Merrimack College in North Andover—each of these institutions of higher learning should be nodes for innovation on the North Shore.

Public-private partnerships that position incubators and affordable housing near campuses (linked to downtowns with free/low-cost bus/van transportation) can help to ensure that graduates not only see Essex County as a great place to learn, but also as a prime location to start a business and raise a family. Salem State’s Enterprise Center is a terrific start, but more can be done to harness this enduring asset. In particular, universities should actively partner with existing private sector incubators with proven results, from Newburyport’s CleanTech Center to Beverly’s North Shore InnoVentures.

This last element leads me to my final ingredient for the success of the Route 128 corridor—preserving the natural treasures and community assets that make Essex County such a sought-after place to live. This means protecting our beaches, from Salisbury and Crane to Good Harbor and Preston, as well as taking advantage of our history to drive tourism.

But it also means continuing to invest in our schools, many of which consistently rank among the best in Massachusetts. Salem Academy Charter School ranks 5^th in the State and 139^th in the nation, serving a diverse student body where 2 in 5 students are economically disadvantaged. And last year, Masconomet Regional High School ranked in the top 15 in statewide testing on math and science.

Route 128 may no longer be known as “America’s Technology Region,” but on the North Shore, it remains a critical job corridor in the modern innovation economy—one that can and should be exploited to transform the ancient industrial cities and shipbuilding ports of Essex County into engines of creative class growth.

Workforce Training: A Public AND Private Duty

“Your workforce is your most valuable asset. The knowledge and skills they have represent the fuel that drives the engine of business.”

-- Harvey Mackay, 2010

As previously discussed in this space, the Harbor power plant in Salem, Mass. is transitioning from coal to natural gas. As a result, most of the plant’s 105 workers will be laid off at the end of May.

Last week, the Boston Globe discussed the next steps for many of these workers, including how both public and private actors have roles to play in workforce training and redevelopment.

On the government side, the Worker Adjustment and Retraining Notification Act is designed to give families “transition time” to find other employment or seek additional training to make them more competitive on the job market. Furthermore, the Workforce Training Act of 1998 established “One-Stop” career centers for displaced workers to seek out new opportunities and resources (one such center is located right in Salem, with others in surrounding communities).

There is a clear need for improvement in government-sponsored workforce development training. All too often workforce development dollars are poorly coordinated and only tangentially linked to long-term economic trends in particular communities.

As former Speaker of the New York City Council Christine Quinn noted last year, NYC’s system is a “disjoined mess” where workforce development is viewed as little more than an afterthought. “First we create the jobs, then we make sure New Yorkers have the skills to do the jobs. That’s looking at it backwards.”

Indeed, as the Center for an Urban Future reported, while 56 percent of all new job openings in 2012 in NYC required a post-secondary degree, only 42 percent of adult residents possessed one. This state of affairs has led many, including the Partnership for New York City, to call for an overhaul of workforce development in NYC.

As a result, taxpayers are right to question whether the billions of dollars in workforce training dollars are truly being spent efficiently. We’ll dive into this issue more and seek out solutions in future posts.

Today, however, I want to look at how private industry has a duty to play a role in workforce development as well—not only by growing opportunity within their own company, but in helping those workers displaced by the creative destruction inherent to market economies.

Salem Power Plant: Site of "Creative Destruction" and Renewal?
Photo by flickr user "massmatt" (Creative Commons license)

In Salem, the company taking control of the plant, Footprint Power, has “made $500,000 available to help workers train for new jobs…Some workers already have started to retrain as truck drivers, fuel burner technicians, or in the heating, ventilation, and air conditioning field.”

Footprint is setting a great example for other companies who want to do more than just issue pink slips and wash their hands of the real world effects of corporate change on the lives of everyday Americans. But more can and should be done to integrate public and private efforts at workforce training and redevelopment.

In the Bay State, the Workforce Training Fund is designed to provide training and technical assistance grants to small and medium sized businesses. The Fund is 100 percent funded by Massachusetts employers and overseen by the quasi-public Commonwealth Corporation. Money is distributed through a competitive grant process that prioritizes projects that will create jobs, improve productivity, and increase the competitiveness of the Commonwealth’s workforce.

In FY 2013, the Fund distributed over $12 million in grants to 147 applicants in cities and towns throughout Massachusetts. North Shore companies that benefitted include Danvers-based XTechnology Global (specialized computer training for 16 workers), Lynn-based Traditional Breads (managerial and safety training for 50 workers), and Newburyport’s Crystal Engineering (technical training and certification for 25 workers).

By ensuring that employers can exercise direct control over projects, the Workforce Training Fund encourages a much tighter “fit” between workforce spending and the needs of the business community. However, as with many workforce development tools, the Fund still needs additional procedures/follow-up to determine the efficacy of its spending using measurable metrics.

Building a labor force that can successfully compete in a global economy requires an all-hands-on-deck approach and a commitment, from both public and private sectors, to carefully define the skills gap and make targeted investments to improve workforce readiness.

Industries will rise and fall. Companies will come and go. Jobs will be created and destroyed. But the bills families must pay are ever-present, and providing the opportunity for people to pull themselves up in times of struggle is one of the core promises of America.

The New Gateway to the Middle Class: Tech and the Role of Gov’t

“Education then, beyond all other devices of human origin, is a great equalizer of the conditions of men—the balance wheel of the social machinery.”

--Horace Mann, Secretary of Massachusetts State Board of Education, 1848

Last week, BetaBoston published a piece titled, “Tech, the great equalizer, still struggles to make it to Dudley Square,” about still-nascent efforts to bring the opportunity of the Boston tech ecosystem to neighborhoods in need of economic development, such as Roxbury and Dorchester.

Incubators like DreamFactory and Smarter in the City are essential to ensuring that entrepreneurship—the 21^st century ladder to the middle class—is available to all. However, I believe that the very title of the piece is indicative of a misunderstanding of how government can and should help the tech economy to thrive in all neighborhoods. The great equalizer is not tech. Instead, as Horace Mann noted 165 years ago, it is education.

The clustering effects seen today in New York City’s “Silicon Alley” or the Massachusetts Avenue corridor from Harvard to Kendell Square in Cambridge are the result of proximity to talent—the straw that turns the drink of any industry, particularly one that demands such high-skilled labor.

As important as education is to this puzzle, it is not the only reason why “clusters” have formed in Boston, New York, and elsewhere. Rather, as described in Start-up City, a report I wrote for then-Manhattan Borough President Scott Stringer, creating a tech ecosystem that can power growth for all requires significant public investment in infrastructure, a streamlining of government “red tape,” and measures to ensure that young people can afford to live and work affordably.

When we apply these key ingredients to Roxbury, it becomes clear that we cannot simply divert the tech economy to Dudley Square. Instead, we need to take steps to draw the industry to the neighborhood. Many of these steps are already taking place. Indeed, like many urban neighborhoods across the country, Dudley has experienced substantial change in recent decades, thanks in part to a plunge in crime and innovative programs like Boston Main Streets, which has helped remake neighborhoods into mixed-use, 24-hour communities.

But more must be done. As Ed Glaesar noted in a recent piece on Dudley, private sector investment is essential to the community’s success, which means that Boston must reduce barriers to opening new businesses, including one-stop permitting with guaranteed decision times.

In addition, while Dudley is one of the busiest bus depots in the entire City, the “Silver Line” service that is termed “Bus Rapid Transit” pales in comparison to grade-separated systems in other parts of the world, like Bogota, Columbia or Cleveland, Ohio. The Silver Line doesn’t even qualify as “basic” BRT, let alone warrant a bronze, silver, or gold ranking from the Institute for Transportation and Development Policy.

Thus, 65 years after the Massachusetts Legislature authorized $19,000,000 to build a subway under Washington Street to Dudley Square, the neighborhood continues to be at the margins of the MBTA’s transit network, despite being at the geographic center of the Hub.

As MassDOT found in its 2012 report on transit needs in the neighborhood, the relocation of the Orange Line in 1988 created, “A city with several high-frequency rail lines radiating out from downtown in multiple directions, but with the largest gap between lines coinciding with the location of the city’s highest concentration of minority, low-income, and transit-dependent residents.”

The answer is not to throw out the Silver Line, but to remake it as true BRT, with off-board payment, and a dedicated right-of-way, taking lessons from other cities and transforming the Washington Street corridor in the process.

In college, I taught civics to 8^th graders at Dearborn Middle School in Roxbury, a historic campus that is now in the process of becoming a grade 6-12 STEM-focused institution. In many respects, I had little in common with most of my students. I grew up white and privileged, in a rural town with a two-parent family. Most of my students were black and working class, whose homes were often headed by single parents in multi-story apartment buildings.

But what we lacked in common was more than made up for by their excitement to learn—about how their city/government functioned, about what college was like, about the limitlessness of their own futures.

It is our responsibility to ensure that opportunity is available for these students and all our youth. But it won’t happen overnight and it won’t happen by taking a piecemeal approach to economic development. Instead, government should stick to what it does best—preventing crime, building infrastructure—from transportation to broadband—and making the State a partner, not an obstacle, to business growth.

An Eternal Asset: Making the Most of Essex County’s Waterfront

“She knew they were her woods by the smell of pines and the quality of the air, a scrubbed, cool, clean sensation that she associated with the Merrimack River. She could hear the river, distantly, a gentle, soothing rush of sound that was really in no way like static.”

--Joe Hill, NOS4A2 (2013)

As the story goes, in 1004, Thorewald the Norseman, a seafaring fellow meandered down the New England coast in search of the perfect dwelling place. Upon laying his eyes on Cape Ann (or, as others assert, Nahant), Thorewald declared, “It is beautiful; and here I would like to fix my dwelling.”

Whether he was steering his vessel around the jagged cliffs of Rockport, the brilliance of Dolliber Cove, or the tiny peninsula of Nahant, the truth is that Thorewald couldn’t go wrong. Indeed, with nearly 500 miles of coastline, not to mention flowing rivers from the Merrimack to the Ipswich, Essex County is a beautiful a place to fix a dwelling as it was a millennia ago.

It goes without saying that much has transpired since Thorewald’s voyage. In particular, how we engage with our coastline has undergone a series of shifts—from the pre-industrial economy of the colonial era, to the industrial economy of the 19^th century and now, as we forge ahead in the 21^st, a hybrid of commercial and recreational uses.

Twenty years ago, in a profile of Cape Ann for the New York Times, Suzanne Berne wrote that “[w]hile Gloucester maintains a fishing industry and a palpable grittiness, Rockport has cleated its future to galleries and craft shops.”

The tension between a “working waterfront” and the importance of tourism to Essex County’s economy is an important element in how policymakers and communities approach reshaping waterfronts as part of an integrated economic development strategy.

The future of Essex County’s rivers and shores is one of mixed-uses, fighting to protect fisheries and ports, while simultaneously welcoming people to engage with the water in new ways. This model is on display today in Haverhill, where a plan forged through a public-private partnership is in place to reconnect residents with the Merrimack River by literally tearing down a block of buildings that close off the waterfront and rebuilding downtown with office and retail space, apartments, restaurants, a boardwalk, and—most importantly, perhaps—a new satellite campus for UMass-Lowell.

While Haverhill appears ready to pull shovels in the ground this fall, Lynn’s Master Waterfront Plan is now six years old and progress has been frustratingly slow on the 305-acre site which sits a mere 10 miles north of Boston. 2014 may be the year things speed up, though, as ferry service from Lynn to Boston may finally arrive (thanks in no small part to the efforts of State Senator Thomas McGee). Nothing is more important to jumpstart the private-sector investment that is essential to the plan’s success than the creation of transit links like the ferry and the extension of the Blue Line to Central Square.

Despite delays in getting its master plan off the ground, Lynn’s embrace of mixed-use plans along the waterfront, just like that of Haverhill, Gloucester, and communities throughout Essex County, promises to create an “active” street life that promotes business development and reconnects our communities to their historic roots.

Innovative waterfront development must also exploit modern technology and antiquated infrastructure to draw people to the water and teach both tourists and natives alike about the County’s history.

In Gloucester, Mayor Carolyn Kirk has embraced technology as a way to support both critical economic drivers. In 2012, Mayor Kirk launched the Gloucester Harborwalk, 1.2-mile stroll full of stories about Gloucester’s past and present history and fully integrated into a mobile app.

Similarly, the 4.3-mile Danvers Rail Trail (a grassroots project that has transformed an old, unused rail line into an active recreational space) has used technology to link recreational and commercial opportunities, even creating a hide and seek type game with gift cards from local businesses hidden along the trail that require visitors to download a mobile app (as a sidenote, another unused rail spur stretches from Downtown Salem to Peabody and Danvers, allowing for a potential extension of the Danvers Trail to Cedar Pond and the Crane and Waters Rivers).

Other efforts, like the 1.3-mile Amesbury (or Powwow) Riverwalk (part of the Coastal Trails Network linking Amesbury, Salisbury, Newbury, and Newburyport—see map), hold similar promise.

As one of only 49 National Heritage Areas, Essex County’s many historic assets will continue to play a key role in our economic future. However, more eternal and more vital than any colonial home or ancient artifact is our waterfront. It is essential that our cities and towns work together to make the most of its potential for generations to come.

Comcast, General Electric, and The Role of Government in America

“The winners…will be those who…insist on being number one or number two in every business they are in. Don’t play with businesses that can’t win. Businesses that are number three, number five in their market—Christ couldn’t fix those businesses. They’re going to lose anyway.”

-- John “Jack” Welch, CEO, General Electric

Last week, Comcast announced its intention to buy Time Warner Cable in a $45.2 billion deal that will unite the nation’s two largest cable providers. According to the New York Times, the resulting company will operate in 43 of the 50 largest metropolitan markets, and will serve nearly 30 percent of paid television subscribers and about one-third of all broadband Internet subscribers.

Outcry about the anticompetitive effects of the merger has been strong—not only from consumer groups, but from politicians on both sides of the aisle—an unsurprising result given that Americans pay more for worse service than most countries in the developed world.

A 2011 study by Pando Networks found that U.S. Internet speed was 26th in the world and a 2012 study by the New America Foundation found that Tokyo residents enjoy speeds that are eight times faster than New York’s for a lower price. And Hong Kong residents enjoy speeds that are 20 times faster, for the equivalent price.

Many cities—from Lafayette, Louisiana to Chattanooga, Tennessee—have have launched municipal fiber networks in an effort to thwart the monopolistic behavior of the telecommunications industry. 

As Susan Crawford, visiting professor at Harvard Law School [my alma mater] and author of “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age,” wrote in the Boston Globe this week:

The way to do this is to install a new wholesale fiber network controlled by the city…Cities do not have to be in the business of competing with private providers, but their control of the basic infrastructure is essential to make sure that competition emerges.

We’ll talk more about the nation’s connectivity problems in another post, but today, I want to use the struggle to find a solution for sluggish Internet to examine how we should outline the scope of government in the 21^st century.

For guidance, let’s go back 30 years to one of the seminal philosophies in American corporate history: Jack Welch’s effort to streamline General Electric into a capitalist juggernaut.

Welch—a native of Peabody, Mass. who grew up in Salem and later graduated from the University of Massachusetts—famously scribbled his philosophy on a napkin during an interview with Forbes Magazine in 1984 (see picture, left).

The picture shows GE’s three “core” businesses, from Welch’s perspective, as well as other non-core businesses that were either number one or number two in their respective fields. For businesses that failed to fall into one of those two buckets, the solution was brutal and short, "Anything outside the circles we will fix, close, or sell," Welch said.

This philosophy was anything but charitable. In his first five years as CEO (1981-1986), Welch slashed 130,000 jobs – 1 of every 4 workers at GE. However, those who remained were the beneficiaries of a more directed, stable, profitable company, which grew shareholder (and worker) value.

Welch’s leadership of one of America’s flagship companies provides meaningful guidance on how we should go about determining the size and scope of government in America, his misguided statements about the growing chasm between executive and worker pay notwithstanding.

Government, unlike private business, does not always have a legion of natural competitors (national defense, for instance). However, government does compete with the private sector in a variety of ways (public universities and the Postal Service just to name a few). I believe that defining the role of government starts by examining what you want government to do and placing it into one of the four boxes of the two by two matrix below:

 

          I.     Things government does well that private industry also does well

        II.     Things government does well that private industry does poorly

      III.     Things government does poorly that private industry does well

      IV.     Things government does poorly that private industry also does poorly

Like Welch’s three circles, we should examine everything that government does through this matrix to determine where to “fix,” where to “close,” and where to “double down.”

Let’s start with the easy stuff in boxes II and III.

We should be doubling down on government investment in functions falling into box II, not only because government excels, but also because there is no logical alternative. Many of these functions are so-called “natural monopolies” such as water and national defense (though there is admittedly some question as to whether government does well in these categories—more on that later).

We should completely eliminate functions in box III, where government is a woeful failure and private industry does fairly well. Venture capital (“picking winners and losers”) is perhaps the most obvious example of this, though others surely exist.

Now things get tricky. What do we do with box I? I believe that we should neither buy or sell, but “hold” our investments in these areas and take advantage of the private sector mechanism where feasible. For instance, few government investments are as beneficial as higher education and research and development. However, private universities (here’s looking at you, MIT) are incredibly successful at putting these dollars to work. Thus, government should continue to provide public higher education (particularly to provide low-cost alternatives to students of lesser means), while also pumping billions of dollars into R&D at America’s private colleges and universities.

Lastly, we come upon the bane of our existence: box IV. The first question to ask is whether the function need occur at all. Assuming that the answer is yes—and that someone has to do it—government has no choice but to fill the gap. However, given government’s terrible track record, legislators must be even more willing than usual to (a) experiment with innovative approaches to service delivery and (b) exercise unusually probing oversight.

A good example of this is the operation of commuter railroads. In Massachusetts, both the government (MBTA) and private enterprise (MBCR) have proven ineffective at keeping the trains on time and on budget. Thus even though optimism abounds that a new private carrier, Keolis, will succeed where others have failed, legislators should be on the lookout for waste, fraud, and failure.

In the end, like Welch’s circles, the matrix I’ve outlined won’t hold all functions demanded of government or the private sector. However, it is an effort to get at one of the first principles of American democracy: how to determine the shape and scope of our government.