State, businesses lack common plan

October 30, 1994|By John E. Woodruff | John E. Woodruff,Sun Staff Writer

After the inauguration parties end on Jan. 18, the next governor will discover how hard it will be to give Maryland the coordination and reputation needed to revive an economy that has been battered in the last six years and badly lags behind the nation in economic recovery.

That formidable reality emerges from 47 interviews over three months with executives both in and outside Maryland, economists, state officials, economic development authorities and others.

Maryland has many elements working in its favor -- an excellent location, an educated work force and a superb transport system.

And the port of Baltimore, transformed by the Schaefer administration, stands out as a central asset, permitting companies to move merchandise into and out of the East Coast with ease, and pumping vitality into every element of Maryland's economic landscape.

Gov. William Donald Schaefer is widely credited with upgrading the state's highway system, reinvigorating Baltimore-Washington International Airport and elevating a once-anemic state development agency to a central role.

But the interviews reveal problems so deep that they undercut the state's ability to exploit its assets.

Among the most serious:

* Governor Schaefer, though known as an enthusiastic business booster, is widely regarded as intolerant of open discussion on issues he considers "negative," blocking public debate of critical problems and fostering mistrust between the administration and core elements of the business community.

* Division and infighting within Maryland's business community prevent a unified voice and complicate relations between the state government and the top business leadership.

* All attempts in recent years to establish a comprehensive, joint government-business strategy for economic development have failed.

* Business leaders inside and outside the state perceive Maryland's taxes as being among the highest in the country.

* The state compounded its tax reputation in 1992 by imposing a series of nuisance levies and an income surtax to make up for revenues lost to the recession.

* A perception is widespread within and outside the state that Maryland's regulatory bureaucracy is often heavy-handed and a drag on economic growth.

The problems are only deepened by the strains in communication between government and business leaders.

And in some of the interviews, the tensions at the top of the state's power structure broke the surface spontaneously.

In a broad discussion of the state's economy, Governor Schaefer immediately raised his voice at the first mention of criticism from the state's most powerful banker, H. Furlong Baldwin, president of Mercantile Bankshares Corp.

"Baldy is a damaging and very negative person. He talks about cutting taxes and rides around in a stretch limousine. He talks the state down all the time," Governor Schaefer said.

In a separate interview two weeks earlier, Mr. Baldwin vented his own feelings about Governor Schaefer.

'Hello, Baldy'

"When the governor calls me, I know what's on his mind as soon as he says my name. If it's 'H. Furlong Baldwin,' I know he's about to chew me out. If it's 'Hello, Baldy,' I know he needs something from me," he said.

While the bluntness of their remarks speaks to the personalities of two of Maryland's most influential and strong-willed men, it also illustrates a broader gulf between the state's government and key segments of the business community.

This division couldn't come at a worse time and has aggravated a troubled economic climate.

The national economy's restructuring -- especially the shift away from manufacturing -- has clobbered Maryland's once-powerful industrial core, and the sudden contraction of defense industries is compounding that challenge into one of the most serious threats to the state's economy.

As recently as 1989, Reagan-era defense contracts pumped billions of dollars a year into Maryland. Even as erosion accelerated in Maryland's traditional manufacturing base -- clothing, chemicals, steel and building supplies -- the defense buildup more than made up the losses.

The state averaged 3.5 percent annual job growth from 1983 through 1989, adding as many as 87,000 jobs in 1984 and 86,000 in 1987, the two peak years of the Maryland defense boom.

Shrinking defense

But since then, the end of the Cold War has brought radically shrinking defense budgets, which have been an economic calamity for Maryland, the country's fifth most defense-dependent state.

Waves of defense cutbacks have meant that the recession hit Maryland harder and longer than the rest of the country. Even today, the state lags behind the rest of the United States in the economic recovery.

Since 1990, Maryland has suffered a net loss of 61,000 jobs, and its job growth was a minuscule 0.68 percent for the latest 12 months, ranking 46th among the 50 states.

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