States on the Ropes

 We've written in past postings about the inability of Midwestern state governments to meet the challenges of a globalizing economy. For years, these state governments have been too small, too parochial, too dominated by rural interests to respond to the real needs of a global and urbanizing society.

Now, they're just too broke.

This is a national problem, not just a Midwestern one. But the Midwest, which depended for so long on a now vanished industrial basis, is perhaps deeper in the hole than other states and needs more desperately to find solutions, not only to recover from the current recession but to restructure its entire economy.

A number of recent articles have talked about what states are or are not doing to meet the needs of education, infrastructure and job creation. There's no magic bullet. Much of what they're doing involves cuts, in programs or jobs.

The New York Times, in a story from Denver, said that Colorado is holding public meetings across the state to look for ideas on how the state can help create jobs and on what existing programs don't work and should be dumped.

Several communities in Colorado have been pioneers in "economic gardening" -- the idea that job creation lies in nurturing start-up companies locally, helping them grow into bigger companies, rather than throwing money at big companies to keep them from moving to other states. This makes sense, if only because most of these big companies aren't growing any more: most are expanding overseas while keeping a core presence here.

Florida also had an economic gardening program going, but the new governor there, a one-time health-care mogul named Rick Scott, killed it. Scott is one of the governors who also killed plans for a high-speed rail line through his state and turned down federal funds for the project. All these vetoes may or may not help Florida balance its budget, but they guarantee the state a dismal economic future.

Several Midwestern states were cited in this article.

It reported on Indiana's decision to declare methane gas from landfills to be a "renewable energy resource," eligible for development fund incentives.

Next door, in Ohio, Gov. John Kasich vetoed a bill that would have increased the amount of water industrial users could withdraw from Lake Erie. The idea was to encourage the growth of companies that can use the vast freshwater resources of the Great Lakes -- Milwaukee is building a new industrial cluster on this idea -- but Kasich apparently thought that any diversion of water for industry, most of which would be recycled back into the lake, would hurt tourism.

Other states, including Wisconsin, are closing down or reorganizing their economic development offices to staff them with business people, not government employees.

All of this is experimental, and there are two things to be said about it.

First, any experiment in these recessionary times is worth trying. Clearly, what Midwestern states have been doing in recent decades to create jobs and stimulate their economies isn't working. If there are good new ideas out there, they need to be tested.

Second, it's fair to doubt that states and state governments can really accomplish anything that will have a lasting and substantial impact.

We're in a global economy now, and most states are simply too small to be effective. So far, these states are in denial, still trying to control the economy within their stated lines, bribing companies to stay or to move from neighboring states. Add to that the recession-related budget squeezes, which are leading to cuts in programs such as education and infrastructure -- the keystones to economic development and job creation.

As we've written before, one possible remedy is regionalism -- states banding together to leverage strengths, save monery and create regional industrial clusters. Some Midwestern cities and counties are doing this but, so far, states seems willing to try almost anything else except this obvious solution.

Comments

[Chris Hardie]

Thanks for this commentary and insight - much appreciated. It helped inspire this follow-up blog post about "job creation at a human scale" (and I linked back here as well).

http://www.chrishardie.com/2011/09/job-creation-at-a-human-scale/

Chris