Maine's Place in the Global Economy

Cooperatives are great for communities and they have a tremendously important role to play in Maine in particular: helping the state face challenging economic times. The traditional sources of well-paying jobs in Maine, resource extraction and manufacturing, largely continue their long decline in terms of employment and economic influence. Largely due to technological change (machines replacing workers) and outsourcing to low-wage locations, the lost jobs are unlikely to return. As noted at the beginning of this report, some in the state place hope in attracting large, high-tech manufacturing firms and corporate customer service centers from outside of Maine as a way of replacing jobs lost in traditional industries. “Attraction” strategies produce limited results, involve significant losses of local and state tax revenues (since they use tax breaks to attract outside firms), and leave Mainers vulnerable to the decisions made in distant boardrooms and in other competing localities. Furthermore, this type of manufacturing is very capital intensive relative to the number of jobs created. And such “economic hunting” does very little to build up local entrepreneurial capacity that could produce “home-grown” jobs. In the end, chasing high-tech manufacturing leaves Mainers in the same precarious state that we currently face in the realm of general manufacturing: forever looking over our shoulders, wondering if a job will be lost to technology or cheap foreign labor. Many of today’s high-tech, large-scale manufacturing jobs in the United States will likely be lost in the near future as countries such as China continue the inexorable process of technological catch-up. This is not the game Maine should be playing.

Innovation Business Clusters

What is a better economic game to play? The most prosperous regions in the United States today are hubs to “innovation industries” such as computing, internet-related activities, entertainment, and pharmaceuticals. These industries and the firms that comprise them, however, are not evenly distributed across the economic landscape. Rather, they tend to locate in business clusters: concentrations of associated businesses that lower the cost of finding both talented labor and supporting businesses in areas such as banking, law, and advertising. For example, Silicon Valley, a classic business cluster, provides a hotbed of entrepreneurial talent for large, high-tech corporations as well as thousands of startups; the density of high-tech firms attracts talented job-seekers, and the talented job-seekers attract more high-tech firms, all of which lowers labor costs for firms and the costs of finding a job for workers. This economic activity provides fertile ground for support industries and firms that are familiar with high tech, where the presence of the support firms makes it easier for the core high-tech firms to do business in the region. All of this enhanced, clustered economic activity and increased income, in turn, creates fertile ground for broader and more diverse economic prosperity in the region–restaurants, personal services, housing, recreation, and so forth.
So can Maine get in on innovation industry clusters, becoming the next Silicon Valley? Unfortunately, this entire process of core firms, workers, and supporting firms being attracted to clusters means that established clusters have an enviable advantage over non-cluster regions, and that those non-cluster regions will struggle to catch up, or may never catch up. In general, both firms and workers would much rather locate in an established cluster than face the higher costs and lower benefits of being outside a cluster. Maine has, by some definitions, small clusters in various activities (e.g., local agriculture and food), but the reality is that we will have a very challenging time putting a serious dent into the lead clusters in the innovation industries, which comprise the United States’ most dynamic engine of economic growth and well-paying jobs.

The rise of cluster-based innovation industries as the drivers of economic prosperity in the United States could thus be seen as an insurmountable economic (and demographic) obstacle for Maine. Fortunately we can emphatically claim this trend does not spell doom for Maine. While Maine is unlikely to achieve a dominant position in innovation industries themselves, we can certainly sell to innovation industries, so to speak. Of course, this is something we already do: millions of visitors come to the state each year as summer residents or tourists, spending billions of dollars, drawn essentially to things that are unique to Maine (the scenery) or in limited supply elsewhere (comfortable summer weather, small-town charm, beautiful rural settings). Many of the biggest spenders among these visitors are undoubtedly working in innovation industries, so that their success is also our success. It is estimated that only one in ten Americans works in innovation industries, and history tells us that the provisioners to the newly affluent (think merchants who sold supplies to gold rush miners) can do as well or sometimes better than those involved in the latest economic trend. And as long as Mainers maintain stewardship over our natural and community resources, the economic activity of “selling to innovation” will never be lost to machines or outsourcing; in fact, many would argue that these particular resources are likely to become even more valuable in the future, in a world that continues frenetically to urbanize and accelerate the pace of life, making “the way life should be” an ever more precious asset.

Cooperatively Owned Tourism

Maine faces some serious reckoning in regard to selling things to people from away. It seems that we’ve always been okay with selling paper, shirts, shoes or cod or lobster to the larger world, but recommending that we hook our economic wagon to activities such as tourism has always been done reluctantly at best. Selling things to people from away in this realm is not exactly viewed as the path to steady, high-paying jobs and economic prosperity. We think this can and should change. That’s because some people do very well in businesses that serve tourists or seasonal residents: they are the retail merchants, the design-and-build firms, the high-end chefs, and the creative consultants. Most significantly, they are the business owners. It may be that not everyone who spends time flipping burgers dreamed of having that role, but what if the cook is also one of the owners of the business? Not only are wages and career growth likely to be better for this worker-owner, they are also much more likely to have a greater sense of pride in themselves and their work, have a greater sense of investment in the local community, and be much more likely to become a long-term resident. If Maine is to have broad-based economic prosperity in the future, we need more owners in our “sell to innovation” industries, tourist and seasonal or otherwise.

Individual tourism businesses could come together in business cooperatives that would allow these hotels, restaurants and tour operators to maintain their uniqueness and individuality, while consolidating much needed back-office services, purchasing and marketing. Best Western Hotels & Resorts is a cooperative of hotel owners who democratically elect the board of directors of the company, which provides a suite of services to each individual owner. Maine could have its own cooperatively-owned tourism brand that builds upon our global reputation of being “ way life should be.”

Black Star Co-op Brewery, Austin, Texas. Co-op ownership structures could be a good fit for many in Maine’s growing brewing industry. Photo courtesy of Black Star Co-op.

Maine Craft Manufacturing

Beyond tourism, there is another way in which Maine can “sell to innovation,” and the economic possibilities and benefits of this approach are also greatly enhanced by promoting broad-based business ownership via cooperatives. As noted above, traditional manufacturing faces continuing decline in Maine, and seeking out high-tech manufacturing can be like chasing a mirage. But this does not mean manufacturing is dead in Maine!  On the contrary, we see a bright future for “craft manufacturing” in Maine: smaller-scale manufacturing making unique products that are marketable based on Maine’s cachet and reputation for quality. Just as smart retailers don’t compete directly with big-box stores, craft manufacturing doesn’t seek to compete on the basis of cheap labor and lots of machinery–it relies on highly skilled workers producing fairly unique, small-run manufactured products that can’t effectively be made in (or marketed from) places like China. An example of craft manufacturing in which Maine already excels and for which we are known nationally is microbrewing: Maine is one of the top five states in microbreweries per capita and production, exports and brewpubs are all trending strongly up.

Whether in the realm of food and beverage production, artisanal manufacturing such as furniture and woodworking, or specialty production of precision parts for larger manufacturing processes, craft manufacturing involves relatively labor-intensive activities that sell based on reputation and skill and that can’t easily be done elsewhere. Employee ownership and craft manufacturing are very much mutually supportive. Craft manufacturing businesses are relatively small and highly dependent on skilled, motivated workers who usually lend their expertise and voices to shaping production processes. Such workers are likely to be attracted to the opportunity to have an ownership stake in the company for which they work.

Becoming a Cooperative Business Cluster

The idea of attracting highly skilled workers to Maine via the opportunity to have an ownership stake in their firm suggests one more way in which broad-based ownership lends itself to Maine’s current economic situation. We have outlined above the economic advantages, to firms and workers, of being in a business cluster: a locale that has a vibrant density of core firms in a particular line of business, supporting firms that are familiar with the core activity, and workers with the knowledge and skill needed for the cluster to develop successfully. We’ve described how it’s hard for a “new” region to compete with established business clusters. The ways clusters grow are complex and we necessarily simplify to a degree in this report, but what is clear is that established clusters have an enviable head start. All of this suggests that it would be very advantageous to be the first cluster of a given economic activity. While clusters are most often based in the context of various production processes and products such as the internet, entertainment, or pharmaceuticals, business clusters can also be based on business type.

Just as the presence of workers, lawyers, bankers, and advertisers who “know” high tech gives innovation startups a huge advantage in Silicon Valley, a place with workers, lawyers, bankers, and advertisers who are familiar with employee-owned businesses and other types of cooperatives would create a tremendous advantage in creating these businesses and attracting people who want to form or be a part of them. We believe that cooperative and employee ownership itself can be an engine of broad economic prosperity, in the same way that resource extraction and manufacturing were in Maine’s past, and we propose that Maine become a cooperative business cluster and can be a national leader in this economic realm. We believe that ownership can transform Maine’s traditional tourist industries, making them better paying and more attractive in other ways, and attract the sorts of entrepreneurs and workers who are drawn, for example, to craft manufacturing and food production.