Sue Lani Madsen: Agriculture more important to Washington than high-tech
“Agriculture drives the state economy and construction drives state revenue.”
That assertion came from former chief economist for the state of Washington, Arun Raha, speaking to architects gathered for an annual meeting in 2008.
It rang true then, but is it still true with the rise of the tech sector?
I called our current chief economist, Steve Lerch, and asked his opinion on whether there’d been a significant change in the economic picture. Lerch was sympathetic, but it’s not the way his team looks at the economy when forecasting revenues.
He agreed construction drives revenue through sales taxes and gross receipts taxes (the B&O tax) paid at every level of the construction process. But construction only happens when individuals, businesses and government have money to spend. Where does the wealth come from?
What drives the economy is harder to pin down. We briefly discussed the indirect impacts of agriculture – transportation, suppliers, food manufacturing, exports and other supporting activities. Agriculture touches all areas of the economy.
Lerch recommended an interactive Input Output Model on the governor’s website to study the multiplier effect of agriculture in the economy. I found the spreadsheet, with 3,286 cells calculating data values to 14 decimal places. It was clearly not a place to dabble without a Ph.D. in economics.
The WSU IMPACT Center of the School of Economic Sciences published a readily accessible report in 2011, based on 2008 data. Agriculture is a broad sector term, including crop and livestock production, food processing and manufacturing, and related support industries. Agriculture created 131,000 jobs and had a total $34.8 billion in economic impact.
Updated information in the Washington Policy Center’s recent policy note on agriculture puts the current economic impact at $51 billion with a total of 160,000 jobs.
To better understand the multiplier effect, think about hops, barley and breweries. The Inland Northwest Ale Trail (http://inlandnwaletrail.com/) is a promotion of Visit Spokane with a guide to 41 local craft breweries. Ale aficionados spend money at the breweries. Brewers spend money on equipment, bottles and ingredients. Food processors turn the raw grains and hops into useable ingredients. Farmers grow the grains and hops. No farms, no breweries.
A study by the UW on the economic impact of Microsoft claims $43.8 billion in direct and indirect activity with 39,300 employees. Seattlepi.com quotes Theo Eicher, of the UW Economic Policy Research Center, as saying “[Microsoft] drives the information sector which then drives the Washington state business sector.”
His statement makes sense if the Washington state business sector is defined as everything you can see from the top of the Space Needle. The pie charts from Eicher’s 2010 presentation to the media show all but a handful of employees – four, to be precise – worked in King County locations. Only 7 percent of Microsoft employees lived outside of King County in 2008.
The same presentation showed Microsoft employment growing at a faster pace worldwide than in Washington. If Microsoft is driving our economy, it’s clearly taken its foot off the gas pedal. Microsoft could choose to move operations out of the country tomorrow. King County has experienced the downside of being dependent on a single company for its economic drive in the past, and likely will experience it again.
In contrast, agriculture is rooted here.
Also unlike the information sector, agriculture creates a fundamental and essential product. It’s hard to contemplate, but we could all live without Windows 10 and YouTube. But no farms, no food.
The WSU IMPACT study came close to repeating Raha’s statement, asserting that “Agriculture is the economic driver for most communities, both small and large, east of the Cascade Mountains.” Agriculture creates three times as many jobs as Microsoft, spread throughout all 39 counties.
Seems fair to conclude agriculture drives the state’s economy. It certainly drives the Inland Northwest.
Sue Lani Madsen can be reached at rulingpen@gmail.com or on Twitter: @SueLaniMadsen.