No one denies that Maine’s economy faces major challenges. Much of Maine’s post World War II prosperity has been based on paper, forest products and fisheries. Their role will continue, but these industries can hardly be significant engines of economic growth. As the Brookings Institution suggests in its much publicized study of the Maine economy: “Few growth sectors will involve low skill mill jobs.”

Brookings argues that Maine’s economic future depends on preserving and promoting its “brand,” the distinctive quality of life in Maine. The state must also increase social investment in education, research and development, and the funding of industry-led partnerships for work force development, marketing and network building. These initiatives are to be funded, at least in part, by savings in government deliveries of services as well as more proactive attention to the economic burdens of suburban sprawl.

Conservatives have a familiar explanation for Maine’s economic troubles: high taxes and an overly intrusive government. Let the market work and those good-paying mill jobs could be replaced by high-tech and service-sector jobs that would bring the state new prosperity. Brookings, like many observers, fully concedes, and provides considerable elaboration for the claim that Maine is not getting an adequate return on its tax dollars, but it resists the siren song of low taxes as the primary key to economic growth. And for good reason.

Low taxes and small government were not the key elements in the high-tech explosion that conservatives celebrate. Computers and the Internet, the very technologies that might make telecommuting and information technology investments in Maine communities viable, were themselves the product of major government R&D expenditures over a generation. Economic Policy Institute economist Jared Bernstein points out that “investments by governments to private firms are not only useful but also can be critically important to our welfare. New industries often need seed capital that is not forthcoming from financial markets, especially when large infrastructure needs mean steep start-up costs: Think of the Internet, which began as a Department of Defense project. Because firms can’t recoup all the benefits of their R&D investments, they tend to underinvest. If government took a pure hands-off approach, there would be less money put into medicine, technology, aviation and most other cutting-edge fields.”

Brookings identifies organic farming and specialty foods, cold water aquaculture, marine research, and biotechnology as some areas where state-level research could become a major instrument of private sector growth.

The market for products in all of these areas is likely to expand; it will be difficult for any one producer to monopolize the market; and growing energy and transportation costs are likely to create strong and loyal local demand. Finally, preservation of a high quality environment can even be enhanced by proper development of these industries.

Nonetheless, government subsidies, even for the most worthy ends, are not without their risks. We can match the success of the Internet with the massive cost overruns so endemic to other military contracts or to the obscenity of the U.S. Department of Agriculture’s virtually permanent subsidy to ecologically destructive agribusiness. In addition, as much as investment in these areas, Maine needs major upgrading of its transportation and energy infrastructure to reduce dependence on fossil fuels.

Grants, loans, and subsidies along the lines Brookings advocates are also more likely to succeed if they are of limited duration and subject to oversight by constituencies independent of the industries. The role of oversight leads to one other issue Brookings insufficiently addresses. Brookings hopes new jobs in the advanced fields it recommends will be high skill and high paying. It views broader access to postsecondary education as key to this outcome. Mill jobs often paid well because organized labor protected the rights of workers and demanded that the high productivity of the work force be rewarded accordingly.

The correlation between skill level and compensation actually is becoming weaker as more of the work force becomes educated. Many new jobs are in sectors currently unprotected by unions. Nor is it a given that all corporate recipients of government support will necessarily value the education and input of their workers. When government agencies award grants, work force relations should be a major criterion.

The Maine brand includes social as well as aesthetic and ecological components. Maine, like most U.S. communities, has always had substantial gaps between rich and poor. But in the post World War II period, government, unions and even many private initiatives prevented gaps from becoming chasms.

Unfortunately, in the last 15 years, the gap between low-, middle-, and high-income earners has widened considerably. The Maine brand doesn’t and shouldn’t include gated communities, abject poverty and a shrinking middle class. If prosperity in Maine is to be fully shared, public policy must find ways to protect the interests of workers even as it extends appropriate assistance to business.

John Buell is a political economist who lives in Southwest Harbor. Readers may contact him at jbuell@acadia.net.