Geoscience Reference
In-Depth Information
base is evolving in the direction of software development, medical research,
producer services, and tourism.
Richardson (
1985
) in a survey of input-output and economic base multipliers
wrote that “the literature would need to be much more convincing than it has been
hitherto for a disinterested observer to resist the conclusion that economic base
models should be buried, and without prospects of resurrection.”
The Washington data strongly suggest that the economic base theory is not
wrong, as Richardson seems to imply. But the theory as expressed by North and
Tiebout is incomplete. All it ever purported to do was to explain how a regional
economy, in particular its nonbasic industries (principally, trade, services, and local
government), would react to a change in its exporting industries. In this regard, the
economic base theory is a conditional theory of growth. Except for the notion of
comparative advantage, it does not attempt to explain why a change in exports
occurs. As North recognized, that is left to location and related theories.
Richardson's harsh criticism notwithstanding, the economic base theory is still a
good way of looking at regional growth:
If you plunk an aircraft industry down on an empty plain, will someone build a grocery
store? Probably. If you plunk a grocery store down on an empty plain, will someone build
an aircraft industry or any other industry? Not likely.
It should also be said that, as a practical matter, the economic base concept is
alive and well. All regional input-output models and most regional econometric
models (e.g., Glickman
1977
) are based on it. The concept and models continue to
be useful because they provide good, though not total, predictive power.
8.4
Employment Change
One reason why the economic base theory has been dismissed as an inadequate
explanation of regional growth is the empirical observation that most, if not all,
employment growth occurs in nonbasic industries (e.g., trade, services, and local
government). Less than 3 % of the more than 2.0 million jobs created in
Washington since 1970 have been in manufacturing. As a share of total employ-
ment in the private sector, manufacturing fell from 19.8 % in 1970 to 8.7 % in 2010
(Table
8.3
).
Does this mean that manufacturing, which is responsible for one-half of the
state's exports, is losing its importance as a source of growth? Should economic
development agencies abandon programs to retain and attract manufacturing
enterprises? While one might be inclined to write off manufacturing as a fading
sector, there are good reasons to resist the temptation. The first is the myth of
de-industrialization. Noting the loss of manufacturing jobs nationally, some
observers have lamented the decline of the United States as an industrial power.
But today, using just one-fifth more workers, Washington manufacturers produce
three times as much output as they did 40 years ago.
