When Better Than New Jersey Isn’t Good Enough

Charlie Arlinghaus

December 18, 2013

As originally published in the New Hampshire Union Leader

This week, New Hampshire achieved the dubious distinction of being put of the “Judicial Hellholes” watch list. New Hampshire’s economic competitiveness depends on more than taxes and on being something slightly more compelling than “better than New Jersey.”

The phrase New Hampshire Advantage is bandied about so often that it has become a foggy description for politicians to use as a generic aspiration. In reality, the phrase is meant to acknowledge that economic development is a contest for jobs in which states seek a competitive advantage over other states.

New Hampshire’s has long enjoyed a tax advantage over other states. But our advantages go beyond that. There is a general perception – and perceptions matter a great deal in the competition for jobs – that New Hampshire is not overregulated and puts up fewer obstacles to business operation than other states.

In recent years, business look more and more to some other measures as a sign of whether a state is a good location. Worrisome trends don’t threaten all at once. Instead they slowly eat away at your advantage and you gain fewer jobs than you might have. The difference between slow growth and strong  growth is never dramatic. Rather it’s cumulative over time.

The American Tort Reform Association this week released its annual list of judicial hellholes. Fortunately, New Hampshire doesn’t join the likes of West Virginia in this avoid-at-all-costs group. However, depressingly, we’ve been added the watch list as a sign that things aren’t going well and people who care about this things may want to tread cautiously with regard to New Hampshire.

The concern for policymakers is that the phrase people-who-care-about-these-things describes a demographic that includes not a few random cranks but instead most business leaders and economic development professionals. When your reputation gets out of your control, you become, well, New Jersey.

Consider that New Hampshire, despite being on the ATRA watch list still manages a slightly better than mediocre rating from the most important legal climate report – The U.S. Chamber of Commerce’s Legal Climate Rankings. New Hampshire is 21^st in the country. Unfortunately, over the last five years we’ve slipped gradually from 6^th in the country.

Trends mater and ours isn’t good. We’ve fallen behind Delaware and Maine and Vermont and Massachusetts and New York. The good news for us: we still get to claim “better than New Jersey” and hold that basket case out as a cautionary tale.

New Jersey is 32^nd in the nation and an example for us of what might happen if we aren’t careful. While we hit the watch list this year, New Jersey and Atlantic City in particular regularly shows up of the Judicial Hellhole poster list. More important, their status hurts jobs.

In New Hampshire, according to the National Center for State Courts we have about 4000 civil cases per 100,000 people. New Jersey almost triples that at 11,000. The impact of that litigation frenzy is predictable.

At one time, New Jersey was a very competitive state. Their tax and business climate attracted jobs from their neighbors like New Hampshire has done in recent decades. Today, the last vestige of that is low gas prices.

At one time, the pharmaceutical was centered in New Jersey making it the envy of states in the region and around the country. But litigation is at the core of that industry fleeing. Although 20% of all Pharma jobs used to be in New Jersey, that number has been declining for years.

There is a clear market signal that indicates why. Over 90% of all tort plaintiffs in pharmaceutical cases are from out of state. Plaintiffs who are venue shopping and then decide to choose your state is a message to companies to get out and getting out they’ve been doing. New Jersey isn’t doing much about it except losing jobs that have to go somewhere.

Historically, New Hampshire looks for just this sort of opportunity. Something that makes business flee a state that can’t get its act together should be food for our development. Unfortunately, we’re moving in the wrong direction. Sliding from 6^th to 21^st sends almost as bad a market signal as New Jersey and encourages companies to seek other pastures.

Any economic development plan can look to New Jersey as a wonderful example – of what not to do. But we should do more. It’s all well and good to be “better than New Jersey” but sometimes better than a pathetic basket case isn’t quite enough.