Despite Massachusetts’ Strong Economy, Business Risks Remain. Towns Like Groton Could Help.
Professor Scot Latham
by Russell Harris
The stock market’s recent volatility has business leaders and economists split on whether a recession is imminent in 2019. But UMass Lowell Professor of Management Scott Latham believes Massachusetts is more recession-proof than the rest of the nation and many parts of the world.
“There are tailwinds and headwinds on the economy now that contribute to arguments on both sides of whether 2019 will bring a recession,” said Prof. Latham, an authority on business strategy, growth and turnarounds. While he pegs the odds of a global recession next year at 50-50, he believes there’s only a 25 percent chance of a national economic slowdown. And, in Massachusetts, the likelihood of a recession is far less than that, he says.
He said that the state is resistant to recession because the economy is diversified, noting that state leaders learned tough lessons from previous economic downturns and have successfully diversified the business base. In the late 1980s, the state’s economy was dependent on the minicomputer industry: DEC, Apollo, Wang, Prime and others. In those days, he says, Massachusetts had a “one-trick-pony” economy. So when the minicomputer businesses tanked, Lowell collapsed along with parts of the regional economy in towns like Groton. He said, “Lowell really suffered through the 1990s and the 00s and there was an enormous amount of effort to make sure that doesn’t happen again.”
But there are other atypical risks to the Massachusetts and the Lowell regional economies that need to be confronted in order to keep the economy strong and growing. In this view towns like Groton have a part to play in confronting these atypical risks and to keep the eastern-Massachusetts economy growing.
Although Massachusetts is at a lower danger for recession because of the diversity of the pharmaceutical, bio and high-tech industries centered here, he said, “I think we’re at a crossroads. It’s a curious crossroads because business leaders, executives and entrepreneurs say the biggest issue that they’re struggling with is housing and transportation.
“We’ve done a great job of diversifying the local economy, but if we don’t address housing, mass transit and traffic, we’re going to hit a wall and those three things will prevent the Massachusetts economy from growing. Unless we fix mass transit, we can’t build enough housing to fuel the growth that we see in the Boston area.” He said inadequate mass transit in Massachusetts has been a festering problem for years and needs to be fixed.
Prof. Latham referenced a Wall Street Journal article titled “Boston Doesn’t Have Enough Housing. Can It Get the Suburbs to Help?” He agrees with that housing development in metro Boston is struggling to keep pace with demand and points to the article’s conclusion that this problem is playing out in many “hi-tech” urban areas, especially in the Northeast: the urban area is booming, but since apartment buildings are a tough sell in surrounding areas, growth opportunities are being choked off.
Ex-Urban Towns Like Groton
Prof. Latham points out that the WSJ article references the town of Ashland near Framingham. He said Ashland and Groton are similar, both being “very beautiful communities that retain that small town New England feel.” He said many suburban and ex-urban towns like Ashland and Groton could alleviate some of the challenge Boston has with housing, especially if there were better mass transit.
But in the absence of a good mass transit system, he sees another solution developing that also requires towns like Ashland and Groton to help. He said secondary cities, cities like Lowell, Fall River, Worcester, Springfield and Holyoke are becoming regional engines for economic growth in their own right. In the short term, he said, these “secondary cities” are a possible stop-gap solution to the housing and transportation problem.
Lowell As Economic Engine
He explained, “I think you’re going to continue to see Lowell emerge as a regional economic engine for employment and business. Instead of trekking into Boston as congestion increases, as commutes get longer and as mass transit lags, people will be able to find good jobs near these ‘secondary cities.’” He added that Lowell is becoming more of a regional economic engine and “we’re getting the type of educated professional that does not want a two-hour commute in and out of Boston each way, every day.”
Not many years ago, UMass Lowell students came almost exclusively from the surrounding region. But, Prof. Latham says, “Now we’re getting international students, students coming back for their grad degrees and Ph.D.s. UMass Lowell is a university that is not only educating local students, but it’s creating economic growth.”
He explained, “UMass Lowell is doing some great things around business incubators. On campus there are four different incubators. These business incubators have two models. We have companies like Raytheon that rely on our researchers to help develop new technology that will spawn new businesses and spawn new employment. Second, we have small entrepreneurs that are co-working in shared lab space. Some of them will hit, some of them will fail, but it’s not that one big bet that we made on Wang 30 years ago. You know it’s more of a balance that you know we have the Kronos [a business based in Lowell] of the world.”
“It’s really the larger companies that maintain the stability in an economy, companies like Kronos in Lowell. There are a lot of big companies in this area. But there are smaller ones that are going to hit. They’ll be the companies that you and I are talking about 10 years from now that are employing 100, 200, 500 people.
Prof. Latham said UMass Lowell Chancellor Maloney “has done an incredible job.” He added, “She started those incubators. She kept telling them ‘yes, yes yes’ - so Chancellor Maloney has done a wonderful job.”
Now a management professor in UMass Lowell’s Manning School of Business, Latham’s private sector experience includes working in business development and marketing for some of the world’s largest companies, including IBM and Hewlett-Packard.