State's Economy Relies Less on Market Sector
So just how bad has New Mexico’s economic growth been over the years, especially when compared to surrounding states?
The simple answer: awful and dead last.
Population figures help tell the story because population growth is based on economic growth and opportunity.
In 1950, New Mexico, Utah and Arizona had roughly the same populations, and Nevada had almost no one. But by 2016, those states had left New Mexico in the dust.
Arizona’s population had increased nine-fold, while Nevada’s population has increased by more than 18 times.
New Mexico saw a threefold population hike during that time.
So why have other those other states, especially Arizona, boomed while New Mexico has basically stood still?
According to Matt E. Ryan, an associate professor of economics at Duquesne University in Pittsburgh, it’s because New Mexico decided to focus on the public sector for its economic growth. The other states relied on the private sector and market forces to drive their economies.
Ryan laid out the differences between New Mexico’s and Arizona’s divergent paths in a column last year for ABQ Free Press. The piece was based on his 2010 study of the two states.
“Fifty years ago, Arizona’s economy was roughly 50 percent larger than New Mexico’s. Today, the size difference is over 230 percent,” Ryan wrote. “How could remarkably similar states within the same country experience such a disparity in economic fortunes?
“In short, one possible explanation for the difference in economic outcomes between the two areas is a difference in the degree to which each state’s economy relies on markets to coordinate economic activity.”
Here’s more of Ryan’s 2016 column:
“The original study showed a persistent and distinct gap in the percentage of each state’s economic activity derived from private sector, with Arizona relying on the private sector to generate growth to a larger degree than New Mexico.
“The most recent data shows that this gap has remained since the original study; in fact, with updated data on the years included in the original analysis, the reported discrepancy in private sector dependence was, if anything, understated. In short: Arizona’s economy relies more heavily on the market sector than does New Mexico’s.
“Another means of assessing the degree to which economies embrace markets are economic freedom indices. The Fraser Institute releases annually ‘The Economic Freedom of North America,’ a three-pronged analysis of every American state and Canadian province that, through assessing the size of government, state-specific taxation, and labor market freedom, yields a single number that captures the degree to which states and provinces embrace the market system relative to the rest.
“In 1981, the first year of their rankings, Arizona was rated as the eighth freest state and province of the 60 in the survey, while New Mexico was 36th. The bad for New Mexico only got worse. New Mexico steadily regressed relative to the rest of America and Canada, and ranked 46th in North America in 2013, the most recent data available.
“By comparison, Arizona, which saw its ranking slide into the mid-20s by the early 1990s, has since regained its standing and sits at 9th. While New Mexico’s rating specific to taxation only trails Arizona’s by a relatively slight margin, the size of government rating along with the labor market freedom rating contribute to New Mexico’s low result.
“Markets are how people become rich. The economic story of Arizona and New Mexico, and their divergence over the last half-century, is yet another example of this persistent economic truth.”
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