America's Northeast: on the economic rebound

Sunbelt states beware: America's Northeast sees itself as muscling up for an economic comeback.

That's the message from extensive interviews over the past six months in the 11 ''Northeast Corridor'' states - a region which, as recently as 1975, seemed little more than an economic brontosaurus slowly blundering toward extinction.

The region still faces serious challenges. Figures from the 1980 census continue to show a leveling-off of population in the region encompassing the Boston-Washington corridor (New England, New York, New Jersey, Pennsylvania, Delaware, and Maryland), while Sunbelt states have grown rapidly in both population and income.

And the recently announced closings of Bethlehem Steel plants in New York and Pennsylvania, with the loss of nearly 10,000 jobs, comes as a reminder that the western edges of these states share problems with north-central ''smokestack'' states.

But economists familiar with America's regional differences note that the Northeast is still the most concentrated market in the nation - packing more than one-fifth of America's population into 5 percent of its land mass. In addition:

* The region's 49 million inhabitants (22 percent of the US population) produce more than their share (25 percent) of America's wealth. By contrast, the 27 states of the Census Bureau's South and West regions (excluding Maryland and Delaware) have 50.2 percent of the population, but produce less than their share (only 48.2 percent) of the nation's wealth.

* The Northeast's total personal income ($645 billion) makes it the fifth largest economic unit in the world - roughly the size of France or West Germany and twice the size of California.

* With assets of $1.7 trillion, banks in corridor states account for 37 percent of the nation's bank assets. Of the $5.9 billion in venture capital available nationwide in 1981 (according to figures from the National Venture Capital Association), nearly 50 percent was concentrated in the region.

* Unemployment in the Northeast's 26 million-member work force is lower than the national average. And while the region is more heavily unionized (27 percent) than the nation as a whole (20 percent), there are fewer days lost due to work stoppages here.

* Of the 3.6 million manufacturing workers in corridor states, one out of every seven is employed in a high-technology occupation, according to figures from the First National Bank of Boston.

Evidence for this resurgence also includes an increasing number of businesses locating or expanding within the Northeast. From 1979 to 1981, Pennsylvania was fourth in the nation in attracting new investments - trailing only Texas, Louisiana, and Florida. And Massachusetts, which in 1981 broke its previous annual record for plant expansions, chalked up another record in the first six months of 1982 - despite the deepening recession.

The reasons for the resurgence are partly historical. ''We are where it started - our roots go very deep,'' muses Delaware Gov. Pierre S. du Pont IV (R) in his spacious Wilmington office.

Across town, the head of a Delaware-based holding company recently established by a major New York bank explains the importance of those roots. ''I frankly think the region provides some realistic stability,'' he says. He contrasts the Northeast's ''aura of sophistication'' with what he calls the ''boom and bust'' mentality of the Sunbelt.

The causes for this renewed vigor extend into the present as well. ''We are the creative, the artistic, the financial, and the cultural center of the country,'' asserts Peter C. Goldmark Jr., executive director of the Port Authority of New York and New Jersey.

Developer James W. Rouse, the mastermind of center-city renewal projects such as Boston's Faneuil Hall Marketplace and Baltimore's Harborplace, agrees. ''The really troubled cities in the United States are the fast-growth cities,'' he says, adding that ''the old cities are facing up to their problems.'' Finding the terms ''frost belt'' and ''Sunbelt'' inadequate to describe the differences between Northeast and Southwest, he proposes some provocative alternatives: ''Full-culture vs. half-culture,'' he says, or ''full-life vs. half-life.''

And the resurgence gives every indication of continuing into the future. In a major turnabout of political attitudes (explored later in this series), the Northeast is rapidly shedding its high-tax, antibusiness image. ''If we're going to build a strong economy for the future,'' insists Massachusetts Gov.-elect Michael S. Dukakis, ''the level of state and local taxation has to be competitive with that of other industrial states.'' Coming from Mr. Dukakis, the statement is especially significant: During his previous term as governor (1975- 79), he acquired a strongly antibusiness reputation.

Why does the region continue to attract job-creating investment? Observers cite the following:

Skilled labor. After decades of work in industries of all varieties, the large labor pool here respects hard work. Pennsylvania Secretary of Commerce Geoffrey Stengel Jr. notes that companies in West Germany (a country known for diligence) have invested heavily in his state - making everything from Volkswagens to Adidas sportswear. Why? ''They love the work ethic here,'' he says. Similar responses come from employers throughout the region: Wages may be higher, they agree, but absenteeism, turnover, and work stoppages are low, and the quality of workmanship is generally very good.

Market concentration. Corridor states are close, by air and sea, to European Community countries - a market of some 271 million people. More important, however, are home markets: manufacturers centrally located in the corridor can reach more than half of all US and Canadian manufacturing firms and retail sales outlets within 24 hours by truck. As transportation costs increase, and as foreign trade remains volatile due to exchange-rate fluctuations, ''the ability to market close to home (becomes) increasingly important,'' says Hugh O'Neill, deputy secretary to outgoing New York Gov. Hugh L. Carey. It is an ability, he adds, which highly export-oriented countries like Germany and Japan cannot fall back on.

Education. The 11-state region sends 2.8 million students annually through 875 colleges and universities - a concentration of higher education unmatched elsewhere in the nation. Many students end up in the high-tech and professional-service businesses that have been instrumental in turning around the region's economy since the mid-1970s. The success of Massachusetts' famous Route 128 (now billed as ''America's Technology Highway'') is credited to the proximity of Massachusetts Institute of Technology, Harvard University, and the host of other world-class colleges in the Boston area. And New Jersey, with only 3.3 percent of the country's population, has laboratories doing some 9 percent of America's research and development work.

Infrastructure. The region's roads, bridges, and water systems, while admittedly needing repair, are at least in place. Many fast-growth cities have yet to develop adequate systems - and the price of doing so, which includes assembling the necessary lands in a climate of stiff government regulation, increases every year.

Energy efficiency. Fuel costs are still high in the corridor: The average household energy expenditure in 1980 was $1,268 in the Northeast, compared with percent of the population, the region uses only 20 percent of America's gasoline and 18 percent of its electricity.

Quality of life. New England, with its special ethos, is not alone among corridor states in its rich mix of education, culture, and rural tradition. Pennsylvania still has the largest deer population in the country; New York is peppered with lakes; and all the region states except Vermont have access to the seacoast. And most of the corridor's residences are within easy driving distance of some of America's foremost cultural attractions: Washington's Kennedy Center for the Performing Arts, Philadelphia's world-class Symphony Orchestra, New York's Metropolitan Opera Company, Boston's Museum of Fine Arts, and others.

Summarizing the region's attractions, James O. Roberson, Maryland's secretary of economic and community development, lists the three top ones as ''geography, geography, geography!'' That, he says, is why the Northeast can survive the challenge of the Sunbelt.

Next: Probusiness attitudes sweep through the Northeast

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