The 1980s in Utah were not for the faint of heart. Much like the economy today is transitioning to a hyper-global, mega-digital world, the economy of the 1980s was transitioning from a goods-producing economy to a service-producing economy. The conversion caused serious economic pain and required deft policymaking during and after the decade. Today’s decision makers would do well to learn from the past and follow a similar course of action. Here is a brief summary of the challenges, counsel and critical policy decisions that we can learn from the past.
Utah faces significant challenges today, but the 1980s caused plenty of havoc as well. The decade began with a severe national recession. Double-digit inflation, high unemployment and high interest rates threatened economic life in the country and the Beehive State. The Federal Reserve tightened monetary policy and the prime rate climbed from about 7% in 1977 to an unheard of 19% in 1981. The Utah unemployment rate more than doubled from 5% in 1980 to nearly 11% by the end of 1982. Stagflation became an everyday term for business leaders and the entire country was hurting.
Later in the decade energy prices plummeted and dramatically impacted Utah’s economy. Oil prices, after peaking at $34/barrel in 1981, fell to $13/barrel in 1986. Coal prices peaked in 1982 and then dropped steadily for the rest of the decade. Copper prices suffered as well.
The drama of low commodity prices played out in the labor market. Utah’s two largest private-sector employers shut their doors. In 1985 Kennecott Copper Corporation closed its doors for one year. More than 4,000 people were put on the rolls of the unemployed.
Geneva Steel Works faced a similar fate. Initially stopping production as part of a labor dispute, the parent company – USX Corporation – decided not to reopen the plant. Approximately 1,500 people lost their jobs until the plant reopened about a year later.
The economic hardship resulted in more people leaving the state than moving into the state for seven consecutive years. That’s right, net out-migration became the norm, a feat that has not been repeated, even for a single year, ever since.
Mike Christensen, a PhD. historian with a penchant for economic analysis and the state planning coordinator at the time, chronicled the transition from a goods-producing to a service-producing economy in the 1991 Economic Report to the Governor. Based on input from the state’s Economic Coordinating Council he offered sage public policy advice that remains applicable today (excerpts from the 1991 Economic Report to the Governor.):
ROLE OF GOVERNMENT – “State government should focus on doing those things that government is designed to do and do them well. If government does its part effectively, individuals and businesses will efficiently product and exchange goods and services to create their own jobs and increase their wealth.”
EDUCATION – “Investing in and developing an excellent education system is the single most important area of government involvement.”
INFRASTUCTURE – “Roads, bridges and water systems need to work properly and effectively.”
SOUND REGULATORY ENVIRONMENT – “The state has a responsibility to protect its citizens from harm, fraud and abuse…Too often regulatory agencies become captives of those they regulate. The result is they tend to limit competition and harm entrepreneurship rather than encourage it.”
ENVIRONMENT – “If Utah wants to continue to be an attractive place for new business, it must protect its environment where it is still clean and clean up its environment where it is not. The Governor’s Clean Air Committee which has made recommendations to the state is an excellent start.”
A SOUND FISCAL SYSTEM – “A state’s fiscal house must be in good order.”
Critical policy decisions
I was a young state economist when Mike Christensen shared this advice and I had a front row seat for the gubernatorial and legislative stewardship that preceded it and followed it. My list of decisions that continue to benefit Utah today include the following:
I-15 Salt Lake County and other highway improvements – We built a modern transportation system. Today, commerce flows freely through our state and we have those who made the sacrifices – including a gas tax increase – to thank. I-15 Core in Utah County will pay similar dividends.
TRAX and Commuter Rail – We have visionaries from the past to thank for plotting out, securing right-of-ways, doing the environmental work, and gaining public support for our best-of-its class transit system in the country. Utah’s rail system wasn’t an accident, it was willed by great leadership in this state.
Investment in education – Many will remember Gov. Bangerter risked re-election by proposing and passing a tax increase for education to pay for surging enrollments. In a service economy, investment in education pays off and the fruits of this investment so many years ago show up today in Utah’s workforce.
Creation of a Budget Reserve Account – As a member of the Legislature, Olene Walker was instrumental in creating Utah’s rainy day fund in 1986. Keep in mind, the state took this bold fiscal step during one of the toughest decades in modern times. It would have been easy to focus on the concerns of the day and leave the future to someone else. The Utah Legislature did the right thing.
Pursuing and hosting the Olympic Winter Games – The Olympics were great in 2002 and are even better a decade later. Make no mistake about it…the seed of reputation for many of the companies that have chosen to locate in Utah ten years after the games was planted in 2002.
Investment in the information age – Gov. Leavitt made certain that Utah transitioned to the information age with speed and depth. We were the first state to accept digital signatures, we aggressively pursued broadband infrastructure and a wide area network for state government, and we led most states in our adoption of online services.
Welfare reform – We may think of this as a federal issue, but Utah was actively involved in changing the philosophy of our welfare system. Gov. Leavitt played a primary player in these negotiations and created the Dept. of Workforce Services during this timeframe. Utah can influence leadership in Washington, D.C., something to remember as we consider immigration reform and the impending fiscal cliff in today’s state-federal relations.
I’m fond of the saying that the future is not a gift, but an achievement. A tough decade, great advice, and superb leadership from governors and legislators provide a great road map for today.