What can Colorado do at the government level to help the state rebuild an economy that has now been stagnant for more than a decade?
First, recognize the limits, and understand what NOT to do.
Colorado has limits on its ability to directly affect the job market, and this has to be clearly defined. Although government sponsored utility and infrastructure construction can result in short term direct employment befits, the long term capability to generate growth through infrastructure alone is limited. Almost certainly the government should not attempt to boost employment through expansion of the government. Partisan drum-beating aside, bureaucratic growth does not truly represent an increase in productivity, and expansions of the state government should be carried out for need, and not for maintaining employment.
Next, plan around what the government can do in practical terms. Recognize that net growth can only arise from per capita increases in productivity, or increases in population, or both. Many ephemeral descriptions of the economy exist, but if legislators and economic development offices lose sight of the sources of net growth, they will fail to work toward effective job creating solutions.
Firmly understand that the state is not a qualified investor in new technology and startups; the lesson all around the world is that direct investment by the government sector in new technology does not work. CTEK is the latest example locally, but there are many other cases, and all of them point to keeping governments out of direct investment.
Limit tax breaks for new businesses, such as film industry subsidies or aid to new aircraft firms (both have been suggested in Colorado recently). Many of the subsidy programs have proven over time to be bad business, working as investor and tax avoidance schemes but not resulting in measureable tax revenue or job benefits to the states that have used them.
Finally, stop believing the EDO prevailing wisdom on the unexamined value of their efforts. Many of the personnel in EDO (economic development office) positions in Colorado have never worked in the private sector, and have no idea of the effort or strategies required to build business. They often default into developing business support for political objectives and will fail to separate business value from partisan expediency.
So what is to be done?
First and foremost is to take an approach that treats bilateral efforts as one of the key objectives of a state level economic development program. Anything worth doing is worth doing with support from both parties, and usefully moves the discussion from partisan politics to pragmatic effectiveness. Within this proposed pact is the need to establish planning horizons that reach beyond election cycles.
Second is to understand that the most that the government can do in most cases is to provide a favorable climate for development and growth. The private sector then needs to step up and do the rest of the job, and the government will need to live with the pace and scale of the private sector efforts.
Third is that the government can possibly accelerate its efforts by aiding other institutions such as universities, some non-profits, and developing relationships with other governmental organizations that are outside of the direct sphere of influence for the private sector.
One Specific Remedy- Enabling Access to the Capital Market
The state of Colorado has one crucial area where legislation and the state government can make a difference, and that would be enabling legislation that would encourage development of a new small cap stock exchange along the lines of the TMX. Small cap stocks hit the skids in Colorado in the wake of the Blinder Robinson scandal of the 1980s, and a promising source of capital for new and small companies disappeared from the Rocky Mountain West.
Building a mature and well regulated market takes time, experienced managers and a dedicated effort on the part of the legislature and Colorado's leading financial institutions. Potential abuses would need to be headed off with experienced and reliable non-partisan regulators, and the regulatory authority would need to be able to give their seal of approval ( or not) in a way that leads investors to count on investments in a regulated equities market based in Colorado.
Recognize that the equity markets are now largely electronic, and that many equity markets are developed now as franchise operation of larger markets. Make the market unique, and able to offer investors and specific types of businesses special features that aid investors in gaining access to good new investment opportunities, and give new business easier and more efficient access to the capital they need.
This one suggestion for a bi-partisan focus on economic assistance to small business does not engage the government in picking winners and loser, but instead provides for an enabling tool to help businesses help themselves – and the state.
