The Southwest Economy in the 1990s: A Different Decade: Proceedings of the 1989 Conference on the Southwest Economy Sponsored by the Federal Reserve Bank of Dallas PDF
Preview The Southwest Economy in the 1990s: A Different Decade: Proceedings of the 1989 Conference on the Southwest Economy Sponsored by the Federal Reserve Bank of Dallas
The Southwest Economy in the 1990s: A Different Decade The Southwest Economy in the 1990s: A Different Decade Proceedings of the 1989 Conference on the Southwest Economy Sponsored by the Federal Reserve Bank of Dallas edited by Gerald P. O'Oriscoll, ]r. Stcphcn P .A. Brown The Federal Reserve Bank of Oallas ., ..... Springer Science+Business Media, LLC Library of Congress Cataloging-in-Publication Data Conferenc:e on ,he SOUrh. ..., Economy (1989 : DaD .., TeL) The SOU'h ....' economy in rhe 1990s : a differen, decade : proceedings of the 1989 Confere",", on the South. ...t Economy / sponaored bJ rhe Federal Reserve Banlt of Dau.. ; edited bJ Geniei P. O"DriIlCOII,]r., Srephen PA. Brown. p. an. Includes bibJiosraphical refere",",". ISBN 978-1-4613-6807-6 ISBN 978-1-4615-4040-3 (eBook) DOI 10.10071978-1-4615-4040-3 1. Economic forecutins-Sourhwesrern States-Con_ _. 2. SOU'hwestern Statea-Economic amdirions--Consresses. 3. Sourhwestern StareI-Economic pnIicy-Con,resses. L O'Driscoll, Geniei P. U. Brown, Srephen P. A (Srephen Paul AdoIph) 1948- IU. Federal Reserve Baok of DaUaa. IV. Tirle. HCI07.AI65C66 1989 330.976'OOn2-dc20 90-5349 Copyrigh' © 1991 by Sprinser Science+Busin.ss Media New York OrisinaJly pIlblished by Kluwer Academic Publishers, New York in 1991 Sofll:owr reprint ofthe hardcover Ist edition 1991 prirlllt/ .11 1IliI/-jiw p""... AU righrs reserved. No parc of ehis publication may be repro duced, srored in a reuieva! syscem, or uansmitted in any form or by any mean., mechanica!, phococopying, recordin" or orher wise, wiehouc ehe prior wrirren perntission of ehe publisher, Springer Scicnce+Busincss Media, LLC. Contents Introduction Overoiew-The 1990s:ADifferentDecade xi AbouttheContributors............................................................................ xv General Meetings-The 1990s: ADifferent Decade WelcomeAddress-The1990s:A DifferentDecade 3 Robert H. Boykin TheFutureoftheSouthwestEconomy: ChallengesandOpportunities 5 Admiral Bobby R. Inman ResearchandPublicSeroicein Comprehensive Universities 13 William H. Cunningham From Outlookto Opportunity:Making the 1990sWork 19 John B. McCoy Session One-Meetingthe Challenges in Education IntroductoryRemarks-MeetingtheChallengesinEducation 29 William H. Wallace TheCaseforEducationalChoice 31 John E. Chubb v vi Contents Schools inthe 1990s: The OpportunitiesandRisks Facing TexasandOtherStates 39 Eric A. Hanushek AmericanEducationAfterANation at Risk .45 Milton Goldberg Meeting theChallengesinEducation 51 Paul F. Roth SessionTwo-The Challenges ofthe International Marketplace The Canada-U.S. Free TradeAgreement: ANewReality, A New Challenge 57 Carl E. Rufelds TheMexicanEconomy 65 William C. Gruben The ChallengesoftheInternationalMarketplace: TheFarEast 75 Lawrence B. Krause Session Three-eritical Issues TheRoleofFinancialInstitutions inEconomicDevelopment 81 Jerry1.Jordan TechnologicalInnovation in theSouthwest 93 Keren Ware TheEnvironmentandEconomicGrowth intheSouthwest 99 John A. Baden Energyin theFutureoftheSouthwest 121 Stephen P.A. Brown Contents vii Session Four-The SouthwestEconomy: The NextYearand the Next Decade Arizona'sEconomic Outlook 127 Lee R. McPheters Louisiana inthe 1990s:A DifferentDecade 139 Loren C. Scott TheNewMexicoEconomy 147 M. Brian McDonald TheOklahomaEconomy: TheNext YearandtheNextDecade 163 Larkin Warner RegionalEconomicCyclesandthe TexasEconomy 181 BartonA. Smith The views expressedare those of theauthorsanddonotnecessarily reflectthepositionsoftheFederal Reserve Bank of Dallas or the Federal Reserve System. Preface T he 1980sbeganduringagreatupswingintheSouthwesteconomy, but what lay ahead was a decade of plummeting oil prices, deflated real estatevaluesandunprecedentedbankfailures.ThethemeoftheFederal ReserveBankofDallas'secondannualconferenceontheSouthwesteconomy, "The 1990s:ADifferentDecade," reflectedourbeliefthatthe beginningofthe new decade would mark a turn toward economic strength in the Southwest. The conference, heldOct. 26-27, 1989, at Loews Anatole Hotel in Dallas, Texas, broughttogethermore than 250interestedindividualsandspeakersfor anexchangeofinformationandideas.Topicsrangedfromthecurrentcondition ofthe Southwest economy to the factors shaping the future. TheinfluencesontheSouthwesteconomyarediversebutinterrelated. For example,the Southwestfaces acomplexdilemma in reforming itseducational system. As conference speakers illustrated many times, education reform and the qualityofourschoolsare closelylinkedto the region's, ifnotthe nation's, ability to compete in future world markets. These proceedings follow the basic organizational pattern ofthe confer ence. Keynote and luncheon addresses appear in the first section, General Meetings-The 1990s:ADifferentDecade,whichincludesspeechesbyBobby R. Inman, admiral, UnitedStatesNavy(retired), andprivateinvestor; RobertH. Boykin, president and chiefexecutive officer ofthe Federal Reserve Bank of Dallas;WilliamH.Cunningham;presidentoftheUniversityofTexas,Austin;and John B. McCoy, chairman and chiefexecutive officer ofBanc One Corp. Session One, Meeting the Challenges in Education, provides insight from five experts,whosurveythecurrentstateofeducation, pastattemptsatreform andpossiblesolutionsforproblemsintheeducationalsystemsoftheSouthwest. SpeakersinSessionTwo,TheChallengesoftheInternationalMarketplace, examine U.S. trade relations with two neighboring countries, Canada and Mexico, and emerging markets in the Far East. ix x Preface InSessionThree,CriticalIssues,speakersprovidenewinsightonfourtopics that have influenced and will continue to influence the region's economic health: finance, energy, technological innovation and the environment. Session Four, The Southwest Economy: The Next Year and the Next Decade, presentsastate-by-stateforecastfortheSouthwest,includingArizona, Louisiana, New Mexico, Oklahoma and Texas. Thisconferencewouldnothavebeenpossiblewithouttheeffortsofmany people.WewishtothankLeaAnderson,TaraBarrett,SusanAugustBrown,Britt David, Kim Ernst, Harvey Rosenblum, Paula Tucker, Sammie Vaught and the speakers, who helped make the conference a success. Wealsowouldliketothankoureditorialstaff,RhondaHarris,DianaPalmer and Virginia Rogers, who helped make this volume possible. Gerald P. O'Driscoll,Jr. Stephen P.A. Brown Overoiew-The 1990s: A Different Decade Sally Bell I nasimplisticsense, itisobviousthatthe 1990swillbeadifferentdecade. Time,afterall,flows smoothlyfromDec. 31,1989,toJan. 1,1990,withthe gentletickofaclock. Butfew wouldquestionthatthe 1990strulywill be differentfromthe1980sinveryfundamentalways-somegood,somebad, but most still up for grabs based on the collective decisions we make now. TheSouthwestentersthenewdecadeuncertainaftermanyheadyyearsin whichbusinessleadersseeminglycouldnotmakeawrongdecision.Nationally, educationisinashambles.Thenationcannolongersmuglyrelyonuncontested dominance economicallyor politically. We wonderwhether we can compete with the Pacific Rim nations, and we shake our heads in simple astonishment as Eastern Europe moves to rejoin the Western world. Many worry that the environmentsustainingusmayhavebeensoabusedthatitwillturnrenegade in which case, our otherworries will not matter. Butthe comingdecade holdsunparalleledopportunitiesaswell, ifweare thoughtfulenoughtodiscernthemand boldenoughtoseizethem. The 1990s, afterall, aretheearlydawnofthesecondmillennium.TheSouthwestisslowly recovering, sprouting the seeds of new industries that hold the potential for transforming our economy even as traditional bedrock industries erode. BusinessisrealiZingthatitssocietalrolegoesbeyondmakingmoney;ifitwants to lead the way to a prosperous decade, business must be in the forefront of decisions made now in education, environmental policy and a restructured economy. The problemsofthe 1990sareapparent. Itis up toustoshapetheir solutions to our liking. Such was the theme ofthe Second Annual Conference on the Southwest Economy, Oct. 26-27, 1989, sponsoredbythe FederalReserve BankofDallas. Expertsoneducation,internationaltrade,finance,theenvironment,energyand xi xii Ove17Ji~The 1990s:ADifferentDecade individual state economies addressed a capacity audience ofbusiness leaders at Dallas' Loews Anatole Hotel. Robert H. Boykin, president and chiefexecutive officerofthe Dallas Fed, wasted no time in presenting the Southwest's challenge. Most ofthe region is slowlyrecoveringfromthedebacleofrecentyears,hesaid,anditiswell-situated for growth in the 1990s if it repositions itself now to capitalize on the opportunities ahead. Although the region's problemsseemdiverse, theyall are related, Boykin said. The region must revamp the educational system to produce a well educatedworkforceifitistohaveanychanceofcompetinginternationally.Yet success in a global economy undergirds the economic strength ofeach state, which ultimately forms the base to pay for educational reforms. The region's launch into new arenas cannot be made without bold moves from a banking industry now timid after the buffeting ofrecent years. In his conference kickoffaddress, BobbyR. Inman struck the same notes ingreaterdetail, urgingSouthwestleaderstoexploresolutionstotheproblems "before, rather than after, these problems overwhelm us." Inman, a private investor, is a former director of the National Security Agency and founding chairman ofAustin's Microelectronics and ComputerTechnology Corp. Inman said the region mustdevelop all segments ofits economysimulta neouslyifithopestoachieverisinglivingstandardsfortoday'schildren. Facing the necessity of dealing with a unified marketplace in the future, the region cannotdepend onitsoldstandbyresources ofcotton, cattleandenergyfor its prosperity,hesaid. Norcanitrelyontheburgeoningserviceindustriestoboost the quality oflife because service jobs typically paysignificantlyless than the manufacturing jobs they replace. Ensuingsessionsproducedsimilarpoints.The nationcannotremaincom petitive unless its educational system can produce skilled workers to match those ofother nations, said speakers in a session on educational challenges. Speakerswho addressed critical issues for the Southwestsaid the region may find prosperity again in the 1990s if it summons the courage to make basic changesintheeconomy. In theashesoftoday's bankruptfinancial institutions liesthe possibilityofa reinvigorated industrywith the knowledge and insight torecognizetheinnovationsthatwillcreatetomorrow'sjobs,saidKerenWare, directoroftheTexasDepartmentofCommerce'sOfficeofAdvancedTechnol ogy.Indeed,the1990scanbecomethe"mostprosperousdecadeofthecentury" if the basic challenges are met successfully, saidJerry L. Jordan, senior vice presidentand chiefeconomist for First Interstate Bancorp ofLos Angeles. PoliticaluncertaintiesintheSovietUnion,EasternEuropeandChinamake a solid and diverse economy at home more important as we enter the new
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