State officials were told last week that the best thing they can do to guarantee a healthy economic future is to smooth the way for the would-be businessmen around them.
"Governors should make heros out of entrepreneurs," Los Angeles businessman Donald Gevirtz said at a conference here on state economic development strategies. "If they make a technological breakthrough or get 30 percent growth for five years, bring 'em to the statehouse and give 'em a medal."
Forget about chasing General Motors Corp.'s Saturn project, economists told the state officials, referring to the competition to land the big auto company's newest operation. Don't get into bidding wars for high-tech plants. It's far better to cut tax rates and simplify licensing and regulatory systems to reduce the "barriers" to aspiring businessmen and risk-taking investors, they were told.
The advice was greeted with a mixture of skepticism and enthusiasm from the 140 state government officials who attended the symposium on "development policy in an era of innovation and change."
The project, financed by a Commerce Department grant, was a joint effort of the Council of State Planning Agencies (CSPA) and SRI International, a consulting group headquartered here.
The officials from 27 states, the province of Ontario, and West Germany came here hoping for tips on ways to promote new jobs -- a growing preoccupation of state and local governments in this era of declining factory and farm employment.
The message they heard had clear echos of the Reagan administration's supply-side economic philosophy. But it challenged much of the conventional wisdom on development strategies.
On the first evening, economic consultant Roger Vaughan told them that they should shift their focus from the creation of jobs to the creation of wealth -- and realize that the entrepreneur who starts a new business is the key to the economic future of their states.
In the handbook Vaughan and his partner, Robert Pollard, wrote with CSPA project director Barbara Dyer for the conference, they said states should worry less about their unemployment statistics than the rate of new business formations. Half the jobs created each year, they said, come from self-employment or the formation of new businesses.
A parade of speakers cast doubt on some of the most popular economic development schemes -- including recruiting out-of-state companies by granting tax concessions or competing with multimillion-dollar incentive packages to be the site of something like GM's Saturn facilities.
Far better, they said, to be sure that the tax system rewards risk-takers who start new companies and that regulations affecting them and their investors make it easy for them to expand.
The conference keynote speakers said there is a role for government investments in education, training and public works. But even there, they recommended entrepreneurial approaches. Force schools and colleges to compete, Vaughan said, by giving vouchers to would-be students and letting them shop in the education marketplace.
The strong emphasis on a free-market approach to job-creation was endorsed by the governor who helped put the conference together, New Hampshire Republican John H. Sununu.
Sununu, who started his own engineering company in college and had 130 employees by the time he graduated, told the conferees that states "are just papering over their problems" if they don't "clean out the negatives" in their tax and regulatory systems that inhibit formation of new businesses.
Arizona Gov. Bruce E. Babbitt (D), the cosponsor of the session, expressed general support for the entrepreneurial approach but said that it "leaves us with the excruciating task of dealing with the losers and those displaced" by economic change.
Assistant Secretary of Commerce Bruce D. Merrifield, said the Reagan administration's policies had helped create "a historically unprecedented climate for entrepreneurship" and urged the state officials to remember that "when government gets into the picture, it messes it up."
But others warned that the entrepreneurial strategy was no panacea for either rapidly growing states or those with declining older industries. Beth S. Jarman, executive director of the Arizona Department of Commerce, said that selling Babbitt's program for spurring new business "is the toughest political job I've ever done . . . . It's very difficult to build an entrepreneurial constituency, because they don't want to join anything," she said.
George D. Oriston, a Nevada economic development official, said the emphasis on entrepreneurship "leaves me empty . . . . Our state is going for quality of growth, and there are a lot of new firms we're going to turn down."
Jack Russell, a Michigan official, said conferees were "too easily seduced" by the notion of thousands of new businesses springing up and said his state could ignore the future of the Big Three auto companies only at its peril.
Robert Benko, an aide to Pennsylvania Gov. Richard L. Thornburgh (R), said, "This conference has persuaded me that entrepreneurs have become another interest group."