WINTER 1997 Montanan - Volume 14, Number 2 One of a series of seven fabric art pieces depicting abstract Montana scenes by Vickie Meguire of Great Falls. The pieces hang in the Gallagher Business Building. The Economics of Change Is Montana's economy becoming a high-tech service economy, or is it more of the same? by Kim Anderson The images are the stuff of political ads or nightmares: The family ranch being sold off to developers who will turn the rolling vista into a "planned community" of ranch houses on cul de sacs with names like Meadowlark Way and Sweetgrass Lane. Three generations of loggers reduced to waiting in line at the local job service while the family gets by on food stamps. The once prosperous mining town now left with deserted streets and empty storefronts. The perception is that Montana's economy is changing. According to popular wisdom, Montana's traditional industries-agriculture, wood products, mining-are disappearing and with them, a way of life: the certainty that if a man and woman were willing to pour their sweat into the land, the land would take care of them. Some may welcome a new, high-tech service economy, but others question how it will affect the traditional image of Montanans as self-reliant, tough and independent. While these anxieties are based, in some part, on changes in Montana's industry and employment, the effects on income and lifestyle are not so clear, economists say. The Evolving Frontier "We're going through the normal economic evolution that the rest of the country has experienced," says Thomas M. Power, chair of The University of Montana's Department of Economics. "This is the last frontier, but other sections of the country have gone through this evolution and continue to. New England, the Midwest, the Southeast-all these regions started out by being almost exclusively dependent on natural resources. As those economies matured, they moved into a manufacturing stage and then into a service economy." "There's not much doubt about it," agrees UM economics Professor Richard Barrett. "In terms of what Montanans do, there's a shift that mirrors the economy nationwide away from manufacturing and heavy industry and toward a growth in services." But Paul E. Polzin, director of UM's Bureau of Business and Economic Research, does not see the changes in the state as more unusual or more dramatic than at other times in the state's history. "If you're looking at how Montanans are employed, yes, most of us now work in service industries and that trend will continue," Polzin says. "But the three big industries in Montana in 1929-agriculture, wood products and mining-are the same top three industries today. We may have added nonresidential travel, but essentially, the big picture has remained the same. Service industries do not drive Montana's economy, and that will not change." Polzin is referring to the difference in employment figures for the state and gross state product figures, which measure net production. In 1992, approximately 56.4 percent of Montanans were employed in personal and business services, which made up 46.5 percent of the gross state product. But projections for 2010 indicate that only 60.4 percent of Montanans will be employed in personal and business services, which will make up 47.5 percent of the GSP. The biggest changes in the state economy, Polzin points out, are not shifts between industries but developments within industries. "Mechanization and technology have been in a large way responsible for the loss of jobs, not the fact that the particular industry has become less prominent in the economy. The information revolution has affected the state's economy because it's changed how the major industries operate." While Power and others have said that extractive industries are declining, Power doesn't believe the region's traditional industries are collapsing. In his new book, Lost Landscapes and Failed Economies (see review, pg. 22), he questions whether an entire economy should rely on a major industry and its exports. "It's not that timber or mining is in decline," Power says. "It's that it's not going anywhere." Power also argues that the typical stereotype of the service-industry job that involves flipping burgers is misleading because the category covers a broad range of professions, including medical and personal services, retail and wholesale trade, government, finance, transportation, communications and public utilities. "Most of the people you and I know, middle-class people, are in the service industries and have been for a long time-your kids' teachers, the accountant next door, the new bakery down the block. That shouldn't be so frightening," he says. Perceptions vs. Reality According to Power, the specter of Montanans losing high-paying mining jobs to stand behind a counter and ask, "Do you want fries with that?" is not a true image of how the economy is changing. What Power refers to as "the sociology of knowledge" may play a role here: despite economists' cautious optimism about the state's economy, the public perception may be very different. Polzin points out that despite the ongoing outcry about the loss of natural resource jobs in the state, "in fact we've had stability since the early 1990s. The declines that people voice concerns about are behind us." Why, then, is there still so much emotional debate about job loss in these industries? "The more I speak with different groups, the more impressed I am with how little of what we consider 'knowledge' is factually, scientifically based and how much is based simply on belief," Power says. "All of the new economic growth in this region has come from small business. But they're not organized. The old, traditional industries, on the other hand, are very well organized. The mining and timber industries are highly funded and highly organized, and very vested in getting their story out." There is also the perception that certain areas of Montana are in danger of Aspenization from a new breed of upper middle-class professionals who are moving into the state with their Jeep Cherokees and cellular phones. They're building huge, energy consuming homes, driving up the cost of living, and sending a portion of their substantial disposable income to the Sierra Club, thereby killing off more timber and mining development. "Sure, it will happen," says Polzin. "I'll let someone else decide whether that's a good or bad thing. But while the changes in areas like Whitefish or Belgrade are certainly felt on a local level, it remains a very small phenomenon." And while the signs of new money entering the state are hard to miss in scenic magnets like Whitefish, Bigfork and Red Lodge, and in urban centers like Missoula and Bozeman, Power cautions against leaping to conclusions. "First of all, there is nothing on the scale of Aspen or Jackson Hole in Montana," he says. "The vast majority of new growth that Montana has seen has nothing to do with one industry development of that kind [recreation or tourism]. "The problem in those areas is the same as the problem in mining towns or timber towns," Power explains. "An Aspen or a Butte gets in trouble because it becomes too specialized. Simply switching from timber to tourism is not a recipe for success. What you want for economic health is to be a nothing town, a town that relies on a large variety of large and small business." Environmental Economics In his book, Power describes what he calls an environmental view of the economy. People locate in certain sites because of the social and environmental amenities. The increase in population results in a lower-cost supply of labor, which attracts business and investment, which in turn raises the number of people the community can support. The resulting economy is more broad-based and healthier than one that relies heavily on one industry or commodity. "There are clearly places in the West that are developing in response to environmental quality," Barrett agrees. "I think it's a way of developing pockets in the Montana economy, and pockets are probably all one can talk about in such a sparsely settled and developed landscape. "But I'm also concerned about how well we can survive that kind of development. Parts of Montana are attractive right now because they are the 'right package.' But the usual prediction is that as more and more people move in to take advantage of the package, the quality of the package declines," Barrett says. "Yes, Montana can enjoy some degree of development based on environmental quality, but there is also danger and disruption involved in that development." Power doesn't believe the environmental economy has to result in its own version of the Rust Belt. Instead, he believes there is a middle ground, where individuals opt for quality over quantity and thus consume fewer resources. In settings where the economic value of aesthetics is important, he encourages communities to strive for a mix of traditional industry, small business and service jobs. Polzin, whose bureau predicts steady but slow growth for the state through 2010, takes comfort in the sameness of change. "Economists are always saying the economy's changing," he says. "What doesn't change are the changes." Kim Anderson is a writer in Missoula.