Of Sawdust & Chips — Part II

Business development and Oregon’s economy

It’s almost impossible to overstate how devastating the 1980s recession was for Oregon. 

The early 1980s had the largest percentage of job loss since World War II. For Oregon, this truly was the “Great Recession,” hitting the state harder than the more recent recession of 2008, and it would change Oregon forever. 

This recession would result in making economic development a permanent part of the Oregon political landscape, changing the state and fueling economic growth, for good and for bad, in ways that were almost unimaginable prior to that crisis. 

It started with the overthrow of the shah of Iran in 1979. In the chaos that followed, the price of oil skyrocketed, fueling an already escalating inflation rate in the U.S. The Federal Reserve increased interest rates in a series of sharp blows aimed at reducing inflation. The increased interest rates had a devastating effect on home building. 

By the end of 1981 the home building industry in the U.S. had collapsed, resulting in a drastic slowdown in the wood products industry. And because Oregon’s economy was captive to the bust and boom of the housing cycle, the state was thrown into a major recession. 

Revenues plummeted. The state jobless rate soared as the timber industry shed tens of thousands of jobs. Thousands left and Oregon actually lost population as, formerly stable middle-class communities were ripped apart. So many people were moving away, the U-Haul company offered free trailers to people moving into Oregon.

Oregon had no economic development department and there was no organized effort to “recruit” new business from out of state. There was no lottery. There was no “Silicon Forest” or “Silicon Shire.” The state’s economy was dominated by forest products and agriculture. 

With the Oregon economy in crisis, state policy makers scrambled to diversify. 

Vic Atiyeh became the first governor to actively work to recruit new industries into the Oregon economy. He was the first governor to court business in Asia, laying the groundwork for an Oregon economy that would rely more heavily on international trade, earning him the nickname “Trader Vic.” He traveled to California’s newly emerging Silicon Valley to court companies seeking to expand. 

The state lottery was enacted by ballot measure in 1984 for the express purpose of funding economic development. This created a dedicated source of funding to support business recruitment and economic development, making a state economic development department inevitable.

Neil Goldschmidt was elected in 1986 on an economic development platform called “The Oregon Comeback.” He was the first governor to promote an organized, professional approach to economic development at the state level. Prior to Goldschmidt, economic development in Oregon was comprised of four to six people reporting to the governor’s office with broad mandates for community development.  

Goldschmidt created an aggressive economic development department — one that was still a part of the governor’s office — aimed at recruiting diverse high-wage rate employment through outreach, marketing and incentives. Economic Development would become a fully functioning state agency in 1991 under Gov. Barbara Roberts. 

By the end of Goldschmidt’s term, Oregon’s economy had been successfully transformed from natural resource dominance to high technology and innovation. While timber and agriculture would remain important industries, they would no longer dominate the state economy, and Oregon was no longer subject to the boom-and-bust cycle of the timber industry. 

Although eventually the Oregon economy would recover, many of Oregon’s rural communities would not. They had lost their economic base of timber and fishing, and they didn’t share in the new economic prosperity. Many of the mills that closed in rural communities never came back. Some came back for a while, but many could not compete with the more efficient, automated, small-log mills often located closer to transportation corridors and a larger labor pool. 

By the end of the decade, Oregon would be unrecognizable to my friends at the Waterfront Tavern in 1974. Many of the communities where they lived, worked and played are today struggling for their very survival, while urban Oregon, especially in the Portland metro area, booms and grows as could never have been predicted. And Oregon continues to grow with more people moving here than to any other state. 

The path ahead is being driven by economic development. It was not the Great Recession that changed Oregon forever; it was economic development. It was economic development decisions that put Oregon on the path to the explosive growth we are now seeing in parts of the Willamette Valley.

And the decisions that were made in the 1980s that led to where we are now were made with little or no public involvement.

Economic development is not just some benign government program to create jobs; it is a powerful and dynamic driver that determines what and who we will become. But it operates in the shadows, below the radar.  And it needs to come out of those shadows and more into the light of public involvement. 

See Part One in the Feb. 9 issue.

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