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How Did Rich Connecticut Morph into One of America's Worst Performing Economies?

August 1, 2013 in Economics

By Jim Powell

Jim Powell

Connecticut has so many advantages that it might be hard to understand how it became one of America’s worst-performing state economies.

As we know, Connecticut is located along an important commercial corridor between New York and Boston. It’s well-served by railroads and highways. Major airports are accessible. Connecticut has many charming towns, historic sights, stylish shops and nice beaches. CNN determined that of America’s 25 towns with the highest median family incomes, four are in Connecticut — New Canaan (#1), Darien (#2), Westport (#5) and Greenwich (#14). The most expensive American home ever offered for sale is Copper Beech Farm which, with an asking price of $190 million, has 50 acres of waterfront property in Greenwich.

The most fundamental lesson here is simply that investors, entrepreneurs and other productive people want to go where they’re welcome.”

Although Connecticut lacks a major high tech region, there’s a concentration of executive talent capable of managing large organizations. Many are in financial services.

Despite these attractions, during the past two decades some 300,000 more Connecticut residents have moved out of the state than have moved in. This compares with the current population of about 3.5 million.

Why the exodus?

Dismal performance

Perhaps with the complacency of old money, Connecticut policymakers came to believe they didn’t need to compete for investors and entrepreneurs — the key people who make prosperity happen. Keep in mind that government basically doesn’t have any money other than what it extracts from the private sector via taxation.

As a columnist for the Hartford Courant remarked, “businesses here have become vulnerable to appeals from places [like Florida and Texas] that Connecticut leaders once thought they could safely hold in low regard.”

When investors and entrepreneurs consider important decisions like where to establish a residence, where to operate a business and, yes, where to die, they compare their options. From a financial point of view, Connecticut turns out not to be a great option. For instance:

  • Connecticut ranks #50 — the worst — in annual economic growth. According to the Department of Commerce’s Bureau of Economic Analysis, Connecticut’s economy contracted for the second year in a row. “Connecticut is the laggard,” reported Connecticut Department of Labor economist Daniel Kennedy.
  • Between 1996 and 2006 - before the financial meltdown and recession — the number of Connecticut small businesses declined by 2.2 percent, while the average experience of all 50 states was a 10 percent increase. Only Ohio …read more

    Source: OP-EDS

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