Connecticut

By many measures, Connecticut is the nation’s highest-income state and quite likely its wealthiest. But it’s also the state with the greatest rate of increase in inequality between rich and poor. It is high on lists of states competitive in the global knowledge economy, yet it has grown achingly slowly and has not enjoyed an appreciable gain in jobs since the recession of 1990-91. Connecticut has drawn freely on its Yankee heritage of inventiveness and openness to technical innovation. Yet at times it seems headed for a comfortable French-style retirement, as hedge-fund managers on their estates in Greenwich savor life untormented by the travails of low-income workers in Stamford and Norwalk.

Connecticut was founded by Puritans who considered Massachusetts too lenient and backsliding. Connecticut Yankees for years were flintier and more unyielding, more tightfisted and set in their ways than other New Englanders. Yet they were also open to certain reforms. In 1784, Connecticut voted for gradual emancipation of the state’s slaves—one of the first societies anywhere to do so. Life here still bears the imprint of the 17th-century settlers, even though most Connecticut residents today are descendants of Catholic immigrants who arrived here between 1840 and 1924. This small chunk of rocky terrain has been an odd duck politically, the last state to back the Federalist Party (in 1816), one of the few to vote to re-elect Herbert Hoover (1932), and one of the last states to impose an income tax (1991).

Connecticut’s affluence came not from any windfall but from a knack for tinkering and making good productive use of savings. George Washington called it the “provision state” for the supplies of food and cannon it provided his Revolutionary War forces. Connecticut made clocks, hats, combs, cigars, silk thread, pins, matches, and furniture. It invented and still manufactures Pez candy in the town of Orange, Nivea cream in Norwalk, the Stanley Powerlock tape measure in New Britain, and the Wiffle Ball in Shelton. The quintessential Connecticut Yankee, Eli Whitney, was the inventor not only of the cotton gin but also of rifles with interchangeable parts. The state has been a major arms maker ever since Samuel Colt won a War Department contract to manufacture guns for the Mexican-American War. During President Reagan’s defense buildup of the 1980s, Connecticut produced Air Force jets and Army helicopters and, in the Electric Boat Shipyard in New London, most of the Navy’s nuclear submarines. These industries, like Connecticut’s civilian manufacturers, depend heavily on meticulous work. For years, the state was the center of the brass industry, the nation’s main producer of precision instruments. Through decades of immigration, its workers never lost the Yankee knack: Connecticut ranks first in patents per capita. Over the years, the state has accumulated capital and invested shrewdly, with great skill at assessing risk. It is the home of several of the nation’s great insurance companies, and its laws are uniquely friendly to creditors and harsh on debtors.

But Connecticut has been finding its success at accumulating wealth hard to sustain. The state has never entirely recovered from the recession of the early 1990s, and has had the slowest rate of job growth of any state since. Its insurance companies were hit by huge casualty losses, and cuts in defense spending cost Connecticut nearly 150,000 manufacturing jobs. Its small central cities—New Haven, Hartford, Bridgeport—have been plagued by crime and have lost manufacturing jobs and people. In 1950, the three cities had 500,000 people in a state of 2 million; in 2007, they had 385,000 in a state of 3.5 million. Connecticut’s post-1990 economic growth has been concentrated in two corners of the state, on opposite sides of the invisible divide that separates Yankee fans and Red Sox fans. In the southeast is the state’s biggest employer and taxpayer, the Foxwoods Resort Casino, which opened in 1992 and is run by a battery of lawyers and lobbyists and developers working for the 650-member Mashantucket Pequot tribe. Its big competitor is Mohegan Sun, owned by the 1,600-member Mohegans. In the southwest, Stamford and Greenwich have become major financial services centers and the headquarters of the hedge-fund industry. But both were hard hit by the collapse of the financial markets and the recession that began in 2007. The hedge-fund business shed 10,000 employees in 2008 and was predicted to lose another 20,000 in 2009.

It’s not clear that Connecticut’s top-and-bottom work force, with many highly educated people and many with little education, is poised to spark growth. In recent years, its 18-to-34-year-old population has declined by about 200,000, the third-fastest rate of any state. An influx of immigrants from Mexico, Peru, the Dominican Republic, and other parts of Latin America has filled jobs that would otherwise go begging. Hispanics are now 11.2% of the state’s population, slightly higher than African-Americans, at 9.1%. Its state and local taxes are the eighth-highest in the nation. Small-business growth is inhibited by high taxes, heavy regulation, and requirements that health insurance policies cover every imaginable contingency—a comfortable enough situation for those who are well off, but a “Get out” sign to those who want to move up the ladder. Corruption has been widespread. Mayors of Waterbury and Bridgeport were sent to prison, and the Hartford mayor was arrested on bribery charges in January 2009. Republican Gov. John Rowland went to prison in 2005 for corruption. As former Republican state legislator Kevin Rennie wrote, “Affluence, high scholastic scores, and verdant hills have masked an increasingly corrupt political system that thrives on a complacent public and political elite.” The question is whether the achievements of the tinkerers and investors who built this state can be sustained while its new lead industries—gambling and hedge funds—are reeling.