Table Of ContentThe Southwest Economy in the 1990s:
A Different Decade
The Southwest Economy in the 1990s:
A Different Decade
Proceedings of the 1989 Conference on the Southwest Economy
Sponsored by the Federal Reserve Bank of Dallas
edited by
Gerald P. O'Oriscoll, ]r.
Stcphcn P .A. Brown
The Federal Reserve Bank of Oallas
.,
.....
Springer Science+Business Media, LLC
Library of Congress Cataloging-in-Publication Data
Conferenc:e on ,he SOUrh. ..., Economy (1989 : DaD .., TeL)
The SOU'h ....' economy in rhe 1990s : a differen, decade : proceedings of
the 1989 Confere",", on the South. ...t Economy / sponaored bJ rhe Federal
Reserve Banlt of Dau.. ; edited bJ Geniei P. O"DriIlCOII,]r., Srephen PA.
Brown.
p. an.
Includes bibJiosraphical refere",",".
ISBN 978-1-4613-6807-6 ISBN 978-1-4615-4040-3 (eBook)
DOI 10.10071978-1-4615-4040-3
1. Economic forecutins-Sourhwesrern States-Con_ _.
2. SOU'hwestern Statea-Economic amdirions--Consresses.
3. Sourhwestern StareI-Economic pnIicy-Con,resses.
L O'Driscoll, Geniei P. U. Brown, Srephen P. A (Srephen Paul
AdoIph) 1948- IU. Federal Reserve Baok of DaUaa. IV. Tirle.
HCI07.AI65C66 1989
330.976'OOn2-dc20 90-5349
Copyrigh' © 1991 by Sprinser Science+Busin.ss Media New York
OrisinaJly pIlblished by Kluwer Academic Publishers, New York in 1991
Sofll:owr reprint ofthe hardcover Ist edition 1991
prirlllt/ .11 1IliI/-jiw p""...
AU righrs reserved. No parc of ehis publication may be repro
duced, srored in a reuieva! syscem, or uansmitted in any form or
by any mean., mechanica!, phococopying, recordin" or orher
wise, wiehouc ehe prior wrirren perntission of ehe publisher,
Springer Scicnce+Busincss Media, LLC.
Contents
Introduction
Overoiew-The 1990s:ADifferentDecade xi
AbouttheContributors............................................................................ xv
General Meetings-The 1990s: ADifferent Decade
WelcomeAddress-The1990s:A DifferentDecade 3
Robert H. Boykin
TheFutureoftheSouthwestEconomy: ChallengesandOpportunities 5
Admiral Bobby R. Inman
ResearchandPublicSeroicein Comprehensive Universities 13
William H. Cunningham
From Outlookto Opportunity:Making the 1990sWork 19
John B. McCoy
Session One-Meetingthe Challenges in Education
IntroductoryRemarks-MeetingtheChallengesinEducation 29
William H. Wallace
TheCaseforEducationalChoice 31
John E. Chubb
v
vi Contents
Schools inthe 1990s: The OpportunitiesandRisks
Facing TexasandOtherStates 39
Eric A. Hanushek
AmericanEducationAfterANation at Risk .45
Milton Goldberg
Meeting theChallengesinEducation 51
Paul F. Roth
SessionTwo-The Challenges ofthe International Marketplace
The Canada-U.S. Free TradeAgreement:
ANewReality, A New Challenge 57
Carl E. Rufelds
TheMexicanEconomy 65
William C. Gruben
The ChallengesoftheInternationalMarketplace: TheFarEast 75
Lawrence B. Krause
Session Three-eritical Issues
TheRoleofFinancialInstitutions inEconomicDevelopment 81
Jerry1.Jordan
TechnologicalInnovation in theSouthwest 93
Keren Ware
TheEnvironmentandEconomicGrowth intheSouthwest 99
John A. Baden
Energyin theFutureoftheSouthwest 121
Stephen P.A. Brown
Contents vii
Session Four-The SouthwestEconomy: The NextYearand the Next Decade
Arizona'sEconomic Outlook 127
Lee R. McPheters
Louisiana inthe 1990s:A DifferentDecade 139
Loren C. Scott
TheNewMexicoEconomy 147
M. Brian McDonald
TheOklahomaEconomy: TheNext YearandtheNextDecade 163
Larkin Warner
RegionalEconomicCyclesandthe TexasEconomy 181
BartonA. Smith
The views expressedare those of
theauthorsanddonotnecessarily
reflectthepositionsoftheFederal
Reserve Bank of Dallas or the
Federal Reserve System.
Preface
T
he 1980sbeganduringagreatupswingintheSouthwesteconomy, but
what lay ahead was a decade of plummeting oil prices, deflated real
estatevaluesandunprecedentedbankfailures.ThethemeoftheFederal
ReserveBankofDallas'secondannualconferenceontheSouthwesteconomy,
"The 1990s:ADifferentDecade," reflectedourbeliefthatthe beginningofthe
new decade would mark a turn toward economic strength in the Southwest.
The conference, heldOct. 26-27, 1989, at Loews Anatole Hotel in Dallas,
Texas, broughttogethermore than 250interestedindividualsandspeakersfor
anexchangeofinformationandideas.Topicsrangedfromthecurrentcondition
ofthe Southwest economy to the factors shaping the future.
TheinfluencesontheSouthwesteconomyarediversebutinterrelated. For
example,the Southwestfaces acomplexdilemma in reforming itseducational
system. As conference speakers illustrated many times, education reform and
the qualityofourschoolsare closelylinkedto the region's, ifnotthe nation's,
ability to compete in future world markets.
These proceedings follow the basic organizational pattern ofthe confer
ence. Keynote and luncheon addresses appear in the first section, General
Meetings-The 1990s:ADifferentDecade,whichincludesspeechesbyBobby
R. Inman, admiral, UnitedStatesNavy(retired), andprivateinvestor; RobertH.
Boykin, president and chiefexecutive officer ofthe Federal Reserve Bank of
Dallas;WilliamH.Cunningham;presidentoftheUniversityofTexas,Austin;and
John B. McCoy, chairman and chiefexecutive officer ofBanc One Corp.
Session One, Meeting the Challenges in Education, provides insight from
five experts,whosurveythecurrentstateofeducation, pastattemptsatreform
andpossiblesolutionsforproblemsintheeducationalsystemsoftheSouthwest.
SpeakersinSessionTwo,TheChallengesoftheInternationalMarketplace,
examine U.S. trade relations with two neighboring countries, Canada and
Mexico, and emerging markets in the Far East.
ix
x Preface
InSessionThree,CriticalIssues,speakersprovidenewinsightonfourtopics
that have influenced and will continue to influence the region's economic
health: finance, energy, technological innovation and the environment.
Session Four, The Southwest Economy: The Next Year and the Next
Decade, presentsastate-by-stateforecastfortheSouthwest,includingArizona,
Louisiana, New Mexico, Oklahoma and Texas.
Thisconferencewouldnothavebeenpossiblewithouttheeffortsofmany
people.WewishtothankLeaAnderson,TaraBarrett,SusanAugustBrown,Britt
David, Kim Ernst, Harvey Rosenblum, Paula Tucker, Sammie Vaught and the
speakers, who helped make the conference a success.
Wealsowouldliketothankoureditorialstaff,RhondaHarris,DianaPalmer
and Virginia Rogers, who helped make this volume possible.
Gerald P. O'Driscoll,Jr.
Stephen P.A. Brown
Overoiew-The 1990s:
A Different Decade
Sally Bell
I nasimplisticsense, itisobviousthatthe 1990swillbeadifferentdecade.
Time,afterall,flows smoothlyfromDec. 31,1989,toJan. 1,1990,withthe
gentletickofaclock. Butfew wouldquestionthatthe 1990strulywill be
differentfromthe1980sinveryfundamentalways-somegood,somebad, but
most still up for grabs based on the collective decisions we make now.
TheSouthwestentersthenewdecadeuncertainaftermanyheadyyearsin
whichbusinessleadersseeminglycouldnotmakeawrongdecision.Nationally,
educationisinashambles.Thenationcannolongersmuglyrelyonuncontested
dominance economicallyor politically. We wonderwhether we can compete
with the Pacific Rim nations, and we shake our heads in simple astonishment
as Eastern Europe moves to rejoin the Western world. Many worry that the
environmentsustainingusmayhavebeensoabusedthatitwillturnrenegade
in which case, our otherworries will not matter.
Butthe comingdecade holdsunparalleledopportunitiesaswell, ifweare
thoughtfulenoughtodiscernthemand boldenoughtoseizethem. The 1990s,
afterall, aretheearlydawnofthesecondmillennium.TheSouthwestisslowly
recovering, sprouting the seeds of new industries that hold the potential for
transforming our economy even as traditional bedrock industries erode.
BusinessisrealiZingthatitssocietalrolegoesbeyondmakingmoney;ifitwants
to lead the way to a prosperous decade, business must be in the forefront of
decisions made now in education, environmental policy and a restructured
economy. The problemsofthe 1990sareapparent. Itis up toustoshapetheir
solutions to our liking.
Such was the theme ofthe Second Annual Conference on the Southwest
Economy, Oct. 26-27, 1989, sponsoredbythe FederalReserve BankofDallas.
Expertsoneducation,internationaltrade,finance,theenvironment,energyand
xi
xii Ove17Ji~The 1990s:ADifferentDecade
individual state economies addressed a capacity audience ofbusiness leaders
at Dallas' Loews Anatole Hotel.
Robert H. Boykin, president and chiefexecutive officerofthe Dallas Fed,
wasted no time in presenting the Southwest's challenge. Most ofthe region is
slowlyrecoveringfromthedebacleofrecentyears,hesaid,anditiswell-situated
for growth in the 1990s if it repositions itself now to capitalize on the
opportunities ahead.
Although the region's problemsseemdiverse, theyall are related, Boykin
said. The region must revamp the educational system to produce a well
educatedworkforceifitistohaveanychanceofcompetinginternationally.Yet
success in a global economy undergirds the economic strength ofeach state,
which ultimately forms the base to pay for educational reforms. The region's
launch into new arenas cannot be made without bold moves from a banking
industry now timid after the buffeting ofrecent years.
In his conference kickoffaddress, BobbyR. Inman struck the same notes
ingreaterdetail, urgingSouthwestleaderstoexploresolutionstotheproblems
"before, rather than after, these problems overwhelm us." Inman, a private
investor, is a former director of the National Security Agency and founding
chairman ofAustin's Microelectronics and ComputerTechnology Corp.
Inman said the region mustdevelop all segments ofits economysimulta
neouslyifithopestoachieverisinglivingstandardsfortoday'schildren. Facing
the necessity of dealing with a unified marketplace in the future, the region
cannotdepend onitsoldstandbyresources ofcotton, cattleandenergyfor its
prosperity,hesaid. Norcanitrelyontheburgeoningserviceindustriestoboost
the quality oflife because service jobs typically paysignificantlyless than the
manufacturing jobs they replace.
Ensuingsessionsproducedsimilarpoints.The nationcannotremaincom
petitive unless its educational system can produce skilled workers to match
those ofother nations, said speakers in a session on educational challenges.
Speakerswho addressed critical issues for the Southwestsaid the region may
find prosperity again in the 1990s if it summons the courage to make basic
changesintheeconomy. In theashesoftoday's bankruptfinancial institutions
liesthe possibilityofa reinvigorated industrywith the knowledge and insight
torecognizetheinnovationsthatwillcreatetomorrow'sjobs,saidKerenWare,
directoroftheTexasDepartmentofCommerce'sOfficeofAdvancedTechnol
ogy.Indeed,the1990scanbecomethe"mostprosperousdecadeofthecentury"
if the basic challenges are met successfully, saidJerry L. Jordan, senior vice
presidentand chiefeconomist for First Interstate Bancorp ofLos Angeles.
PoliticaluncertaintiesintheSovietUnion,EasternEuropeandChinamake
a solid and diverse economy at home more important as we enter the new
