The Little State That Could

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Not all of the analysis, however, has teen directed at the state's existing industries. According to Magaziner, volunteers and staff consultants on loan from his 50-employee firm have done a complete inventory of what is happening within research laboratories throughout the state. They have looked at more than 200 research projects at each of the state's universities and medical centers in hopes of identifying activities that may be commercially viable and, in turn, capable of generating well-paying jobs. Although some of the most promising projects, he notes, are in such broad industrial categories as defense, materials, and marine electronics, the idea would be to select a handful of narrow market segments within these categories where the odds seem favorable for becoming national or international leaders. "We'd be looking to compete in highly focused niches within those areas," says Magaziner. "We'd be trying to do things that would enhance their capabilities and speed the process of commercialization."

The specific actions the Rhode Island commission would be proposing were not yet announced at press time, but the goal, says Magaziner, will be to create an integrated series of incentives and mechanisms aimed at targeted problem areas and opportunities identified in the study. Most of the funds required for new programs would depend on private investment, he notes, but it is likely that a significant commitment of public money will also be required.

The scope of these actions is expected to vary all over the lot. To improve the competitive abilities of energy-intensive textile and metalworking companies, for example, the commission's answer might be fuel-bill subsidies. The boat-building industry, on the other hand, might benefit most from exemptions from some state sales taxes -- a different sort of incentive entirely. By contrast, the panel may recommend research grants along with other incentives to spur private investment in selected new ventures and to stimulate new product development within existing companies. "It's a mistake to do things across the board," says Magaziner, who criticizes the Reagan Administration's economic policies for being too vague. If you're looking for the most highly leveraged way to help, you have to design things differently for each activity."

The success of Rhode Island's effort will, of course, depend first on whether or not business and labor groups are able to rally behind the recommendations. Chairman Murray says the dozen or so recommendations coming out of the year-long study will be presented as an integrated package -- in essence, an economic development "compact" -- which must be accepted in its entirety by the different constituencies. In exchange for commitments by private industry to invest in long-term growth and employment, for example, labor may be expected to bend on such sensitive issues as strike benefits and workers' compensation. To persuade interest groups of the need to bite the bullet and fulfill their necessary roles, Murray and Magaziner have been seizing opportunities to speak at union and business-group meetings throughout the state, sometimes three or four times a week. "There's going to be a certain amount of choking all around," predicts Murray. "But if we're going to move forward into the next decade with half a chance of outperforming the rest of the country, we're going to have to take some bold steps. If we have negatives, we have to address them."

The real impact of whatever actions may be taken by Rhode Island won't be apparent for some time. But as increasing national attention is focused on the need for a more clearly defined U.S. industrial policy -- particularly during the 1984 Presidential campaign -- the trail-blazing efforts of the nation's smallest state could make it an early showcase. Magaziner, for his part, is optimistic that within a year or two after the new programs are adopted it will be possible to link the higher level of investment in Rhode Island to a growing number of of new jobs in the state relative to other states. In particular, he believes they will be jobs in which the value-added per employee is high, allowing for higher wages. But such ambitions, as Magaziner is the first to admit, may never be fulfilled unless Rhode Islanders, such as John Boehnert, are prepared to devote as much time and effort to implementing and maintaining the new mechanisms as they have been to doing the research. "This absolutely has to be an ongoing effort," agrees Norton L. Berman, the state's new economic development director. "If it's treated as just another report, I'll guarantee you that the exercise will fail."

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