State's growth engines sputter

There are a number of reasons why the performance of the Massachusetts economy has been so mediocre in this decade.

I'd like to focus on the reversal of fortune of two key industries: finance and high technology. Both were important engines of growth in the 1980s and 1990s. Lately both engines have been stuck in low gear. Will they rev up again? And if not, what, if anything, will take their place?

Let's start with finance. ''For two decades, the growth in that business, particularly in money management, was incredible," said Alan Clayton-Matthews, an economist at the University of Massachusetts at Boston. Between 1980 and 2000 the money management industry here added jobs -- including plenty of good jobs -- at a rate of 8 percent a year, a total of 44,000 jobs over the period.

Since 2001 the numbers have gone in the opposite direction. Roughly 10,000 jobs have disappeared, with declines coming nearly every single month. The most important reason for the shift is obvious: The great stock market of the 1980s and 1990s has given way to a ho-hum market. Stock prices are no higher today than they were in 1999.

In the good old days, mutual fund companies showed up each morning to find that the soaring market had delivered more assets for them to manage. Today they have to work hard to attract those assets, and Boston's biggest fund firms -- Fidelity, Putnam, and MFS -- have struggled to bring in new money. In August, Putnam and MFS had net outflows; Fidelity took in just $70 million. All three have lost market share to competitors in other states, which in turn has contributed to the weak job market.

If that were not enough, the rest of the finance industry -- banks and insurance companies -- has been undergoing consolidation. Fleet and John Hancock are both essentially gone forever. ''Where we used to have a substantial presence, we are now really a satellite of others," said Frederick Breimyer, president of the New England Economic Partnership, a research organization.

Information technology has always followed a boom and bust pattern. The boom of the 1980s was followed by a collapse, which was followed by another boom and yet another collapse. Between 1995 and 2001 Massachusetts added 66,000 high-tech jobs, according to Economy.com, a Pennsylvania forecasting firm. Almost all those jobs, 62,000 to be exact, have since been eliminated. Easy come, easy go.

The electronics industry nationwide has yet to recover fully from the bursting of the dot-com bubble. To the extent there are pockets of growth, they lie elsewhere, mainly in California, where companies like eBay, Google, and Apple have come up with products that generate real excitement.

Here's a pop quiz: Other than EMC, can you name a substantial Massachusetts high-tech company? Don't feel bad if you can't. We don't have many anymore. There are just a handful of local electronics firms with more than $1 billion in sales. There are still smart people working in high technology in Massachusetts, but let's be honest: Would anyone today have the audacity to call Route 128 ''America's Technology Highway?"

With finance and technology slumping, Massachusetts doesn't have many high-growth industries to pick up the slack. ''We've been backed into a corner with 'ed and med,' " said Breimyer, using shorthand to refer to education and medicine. The latter includes the biotechnology sector. Massachusetts universities have lost none of their luster.

If you don't believe me, try getting your kid into one of the prominent local colleges. Boston's hospitals remain among the best in the nation. Both industries create jobs and have the potential to launch a new generation of hot companies. Almost 50 years ago a smart young man named Ken Olsen left the Massachusetts Institute of Technology to start Digital Equipment.

But asking 'ed and med' to carry the load is asking a lot. They could use some help from old standbys like finance and high technology. It remains to be seen if they will get it. ''These sectors are not pulling their weight," said Breimyer. ''Is the change permanent? I can't say."

Unfortunately, neither can anyone else.

Charles Stein is a Globe columnist. He can be reached at stein@globe.com.