The Challenge for Growth in Indiana, Part II

Indiana ’s evolution as a production-oriented economy, utilizing a labor force with lower than average educational attainment levels, didn’t happen overnight.  Like our neighbors in the Midwest industrial heartland, we’ve reaped the rewards, and suffered the occasional pain, from producing steel, machinery, cars and trucks for the rest of the nation for the better part of the last century.

During the recent recession, it has been the pain that has come to the fore.  Yet even before the national economy turned sour, when jobs flowed like water and unemployment rates were scraping the ground, the state economy’s production focus kept us from fully sharing in the fruits of growth.  The net result is that Indiana workers, who as recently as 1982 were paid wages at parity with workers nationally, now earn on average about 88 cents on the dollar of national wages.

If we were to decide now, at the start of the new century, that we wanted that focus to change, we should understand right away that it could take years, perhaps decades, to see meaningful results.  That’s longer than the attention span of most elected officials, as well as those of us who elect them.  But still we can ask, how could we go about changing the Indiana economy so we can start climbing, instead of falling, in

 the rankings of economic performance and prosperity?

There are a lot of good ideas out there.  Many are already being tried in communities around Indiana .  Here’s a few that come to mind.

One is to pursue what might be called targeted development.  Since the needs are so great, and the public resources so limited, doesn’t it make sense to concentrate our efforts on a smaller number of industries that have the best promise for growth?  So perhaps we should hire a consultant or use our own judgment to look out into the national economy and place our bets on specific industries that first, have good prospects for creating the kind of jobs we want in the future, and secondly, mesh well with the existing economic base.

That process can come up with some ideas that sound strange to long-time residents.  After all, who ever thought that a major music resort could exist in the Ozarks?  Or that the sleepy tobacco backcountry of North Carolina could become a center of research and technology?

One of the problems with targeted development occurs when large numbers of communities go after a small number of targets.  Life sciences initiatives, for example, are underway in

 more than forty states.  Business people are particularly enthralled with targeting, because it closely mirrors the way they manage their own companies.  But the responsibilities of the public sector are different -- and with starving areas like road maintenance -- for public administration to take gambles on specific projects may not always be wise.

A more general, but equally promising, idea is the encouragement of entrepreneurship, for both new and existing companies.  The churn of new ideas, and the new products and companies they give birth to, is a powerful force for growth.  Studies have shown that cities and regions with the fastest net new job growth also have high birth rates – and death rates – for companies and jobs.  Areas where the workforce is dominated by safe, long-tenured jobs, on the other hand, have slower job growth.

That’s quite a break with tradition in many parts of the state, where loyalty to specific companies, sometimes even extending over several generations, is cherished.  But if the Indiana economic engine is to be rejuvenated, some of our traditions and ways of doing things will doubtless have to change as well.  The question is, will we have the wisdom, the foresight and the courage to do what needs to be done?

Patrick M. Barkey