New Mexico Economy in 2050

Lee Reynis, Jim Peach, Fred Harris, Fred Harris

• Editore: University of New Mexico Press
• Anno: 2015
• ISBN:
  9780826356154
• Argomento: History
• Categoria: North American History

In New Mexico Economy in 2050, an E-short edition from New Mexico 2050, two of the state's foremost economists, Lee Reynis of the University of New Mexico and Jim Peach of New Mexico State University, provide an overview of New Mexico's economy. Reynis and Peach present the dimensions and effects of income inequality in the region and how it can be ameliorated. This selection also includes two short guest essays, one by Henry Rael on tradition- and culture-based economic development, and the other by Chuck Wellborn on fostering and nurturing homegrown industry.

New Mexico Economy in 2050

Lee Reynis and Jim Peach

New Mexicans deserve better. New Mexico can do better.

This is a state with abundant natural resources, including oil, natural gas, coal, copper, uranium, and potash. New Mexico has been a major contributor to technological change, especially since World War II. Two of the most important inventions of the twentieth century, the atomic bomb and the personal computer, originated in New Mexico. The state is home to two national laboratories (Los Alamos and Sandia), three major research universities, and hundreds of private firms involved in high-technology activities. New Mexico exports a variety of products and services to the rest of the nation and around the world. The people of New Mexico are hardworking, energetic, and innovative. Individually and in combination, these economic development assets should be indicators of an extraordinary economic development success story.

The New Mexico economy has grown considerably since the end of World War II. Except during the 1960s, New Mexico’s population and employment growth rates have been higher than the comparable national figures. Yet New Mexico has not realized its full economic potential. In 2012 New Mexico ranked forty-third among the fifty states in terms of per capita income.1 New Mexico’s per capita income in 2012 ($35,079) was 82 percent of the national average. Around fifty years ago (1962), New Mexico’s per capita income ranked thirty-ninth among the fifty states and was also 82 percent of the national average. For the last five decades New Mexico’s per capita income has ranged from 75 to 82 percent of the national average.

New Mexico has also been slow to recover from the severe national recession that began in December 2007. While New Mexico was not as severely affected as many other states, as of December 2013 the state had 38,700 fewer jobs than it had in December 2007 and had experienced no growth in employment since the official end of the Great Recession in June 2009. Unless New Mexico employment growth accelerates, it may be 2017 or 2018 before New Mexico has as many jobs as it did in December 2007—that is, it may experience a decade with no job growth. It will have been lost in the dust by its fast-trotting neighbors and virtually every other state in the country.

New Mexico’s economy lacks one or more leading sectors that can bring dollars into the state and generate growth in other sectors. The state depends heavily on federal government expenditures and primary commodity exports, such as energy, minerals, and agriculture. The national political environment suggests that the state can no longer depend on federal government expenditures as an engine of economic growth. A history of repeated cycles of boom and bust should make us cautious about hitching the state’s future to oil or other commodities. Rather, we should use the revenues generated wisely and invest in the future but not plan on a continued bonanza. New Mexico, like other states, has a rapidly growing health- and educational- services sector, but this sector can be an engine of growth only so long as it brings in resources from outside.

New Mexico’s economy can perform better than it has. New Mexico must prepare itself to compete for jobs and income in a twenty-first-century economy—an economy that is increasingly dominated by technological change and international trade. A prosperous New Mexico economy—one that provides the opportunity for jobs and adequate income for all New Mexicans—requires, among other things, substantial investment in its physical and human resources, the development of a leading sector or sectors, major changes in state and local policies, significant efforts to reduce income inequality and regional disparities, and a systematic and comprehensive long-term economic development strategy.

New Mexico can create the conditions needed for long-term economic growth and development. Other states and nations have done so. If New Mexico is to become an economic success story, the required investments and other actions will be the result of deliberate (public and private sector) policy decisions within the state. We must do it ourselves while recognizing the limitations of state and local efforts. Individual states do not conduct fiscal and monetary policy. Individual states do not control the demand (or prices) of their export commodities. But individual states, including New Mexico, can have a profound influence on economic development policies that matter.

Now we want to address: (1) the current state of the New Mexico economy, including the history and structure of major industries; (2) obstacles to economic development, including inequality, poverty, and rural-urban disparities; and (3) policies to promote a healthy New Mexico economy in 2050.

The Structure of the New Mexico Economy: An Overview

The industrial structure of the New Mexico economy and the national economy differ greatly. As measured by employment in 2012, New Mexico depends more heavily on public sector employment (23.2 percent) than does the nation (16.0 percent).2 The mining sector accounts for 3.1 percent of total New Mexico employment but only 0.6 percent of employment at the national level. Conversely, manufacturing employment in New Mexico accounts for 3.8 percent of total employment, while the comparable figure for the nation is 9.0 percent. Differences in industrial structure help explain differences in growth rates between the state and the nation as well as state and national differences in income per person. If New Mexico had the same industrial structure as the nation, the state’s growth rate would be very similar to the national growth rate. An analysis of selected major industries in New Mexico follows.

Agriculture

The historical importance of the agricultural sector is illustrated by the trend in farm earnings as a percentage of total New Mexico earnings from 1929 to the present (figure 1). In 1929 farm earnings accounted for almost one-third of total New Mexico earnings, including compensation and self-employment income. Farm earnings were sometimes as high as 20–25 percent of state earnings in the 1930s and 1940s, but in the early 1950s they plummeted to between 5 and 10 percent. Since the mid-1960s, however, farm earnings have been consistently below 5 percent of state earnings on an annual basis, and since the 1980s they have rarely averaged above 2.5 percent.

Figure 1. New Mexico farm earnings as a percentage of total earnings, 1929–2012

Source: U.S. Bureau of Economic Analysis

This is the case despite the emergence of the dairy industry in the late 1980s. New Mexico made a deliberate attempt to develop an industrial cluster that would support an emerging dairy- and cheese- product industry as well as produce a market for New Mexico alfalfa. The growth of the dairy industry explains about 80 percent of the growth in alfalfa production.

A 2005 report from New Mexico State University noted that New Mexico “has been one of the fastest growing dairy states.”3 According to the most recent data from the Dairy Producers of New Mexico, the state has “approximately 150 dairies and the largest average herd size (2088) in the nation.”4 In 2014 the state was ranked ninth in the nation for milk production and fifth for cheese.

There is no question that the dairy industry has brought economic benefits to the state. The question is at what cost. Tight regulation might minimize the threats of groundwater contamination.5 Unfortunately, production of milk and cheese based on alfalfa takes an enormous amount of water. In its milk and cheese exports, New Mexico is effectively exporting water.

Energy and Minerals

New Mexico is a state rich in natural resources, including timber, agricultural resources, oil, natural gas, coal, uranium, copper, and potash. In 2011 New Mexico ranked sixth in the nation in the production of crude oil, produced 5.3 percent of the nation’s natural gas, and ranked fourth in installed photovoltaic capacity.6 In 2012 New Mexico ranked first in the nation in potash, perlite, and zeolite production and third in copper production.7 The extraction and use of these resources provides important economic benefits, including employment, income, and tax revenues for New Mexicans.

The New Mexico oil and gas industry is one of the most important sectors of the state economy. In 2013 the value of oil and gas production in the state exceeded $15 billion; directly and indirectly, the oil and gas industry accounted for more than 30 percent of state revenue, and it directly employed more than 18,...