Pulling Rank
Trying to move up in the Forbes business rankings is an understandable end goal. But we need to make sure the means don’t exact too high a price.
According to Forbes magazine, Maine is the worst place to do business in the United States. The absolute worst! The Capitalist Tool, as Forbes likes to call itself, ranked us 50th overall in its 2010 state-by-state comparison, giving us abysmal marks for business costs, labor availability, regulatory environment, and growth prospects.
It’s a good thing Guam, American Samoa, Puerto Rico, and the U.S. Virgin Islands weren’t included or we’d surely have finished 54th.
I know, I know. These rankings are highly subjective and they can be shaped in any number of different ways. Much depends upon the relative weight that is afforded a particular category or criteria used in the rankings.
But just like those rankings that drive university presidents mad, people read this stuff and many times they believe it. What’s more, as these rankings get repeated, the message gets reinforced and becomes an accepted part of the narrative until it is simply considered true.
Politicians then feel they have to make major changes in order to improve the business environment. Voters become convinced they’re living in a wretched place. Everyone walks around moping and wondering how the other half lives, and so we begin to muse: What would it be like to live in a place that’s actually ranked best in the country for new investment? Maine is aging so quickly. Wouldn’t it be exciting to live in one of the places considered best in the country for young professionals?
Then we begin to gripe. If our energy costs weren’t so high, we’d be awash in new business. If our regulatory burden wasn’t so terrible, we’d be growing like crazy. If we would permit employers to keep more of their revenues and stop paying so much to the state, everything—everything—would improve.
Sorry to interrupt the rant, but it’s time for a reality check. There are rankings and there are rankings. While Forbes’ rankings may lend support to those who want to effect wholesale changes on our tax and regulatory infrastructure, other rankings suggest that Maine is one hell of a place to live and a fine place to do business. Ernst and Young recently completed a major study for the Council on State Taxation—a trade group that represents multistate corporations—and concluded that Maine offered the best tax environment in the entire country for companies interested in setting up corporate headquarters. And, interestingly enough, it was Forbes itself that recognized Portland in 2011 as one of the best cities in the country for young professionals.
Look, no one’s going to deny it’s expensive to live and work in Maine, but the bottom line is that these rankings are distractions. To the extent that negative rankings become part of the narrative, they’re harmful. To the extent they’re positive, they need to be taken with a grain of salt.
We have to deal with rankings, but policy makers shouldn’t make any rash decisions or fashion entire legislative agendas based on them.
Case in point: There’s a move afoot to reduce or eliminate Maine’s requirement that by 2017 some 40% of our energy be produced from renewable sources. The argument goes that renewables are too expensive and therefore keep the costs of doing business too high; by reducing or eliminating the 40% target, presumably we’ll lower the costs of energy and stimulate investment.
That might be good news for some, but it probably wouldn’t be good news for the thousands of Maine people building access roads, producing composite materials, trucking materials to job sites, erecting windmills, attracting research funding to our universities, designing floating wind platforms, deploying test sites, installing tidal power generators, and so on. Above all, eliminating the renewables target would immediately end the flow of billions currently being invested in renewable power projects in the state. How is that good?
In the abstract, an agenda that lessens the regulatory burden and lowers the costs of doing business is a positive. Businesses and their owners can keep more of the money they earn and will then be free to invest in the Maine economy, or not, as they choose.
Lowering the costs of doing business might also enable us to move up a few notches in the Forbes rankings.
But sometimes the cure is worse than the disease. Every medical student is admonished, first, do no harm. Cutting renewable targets might allow us to inch up in the Forbes table next year, but at what price?
Do we really want to stake the future of Maine on something as fleeting as a feature article in a business magazine?
Perry B. Newman is president of Atlantica Group LLC, an international business consulting firm based in Portland.
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