“Help Wanted” for an Upper Midwest Economic Development Strategy

by Bill Glahn and Georgie Hilker

Last month, the Star Tribune reported on efforts by the State of North Dakota (targeted toward Minnesota) to attract workers for some 25,000 unfilled jobs in their booming state (April 13th, “N.D. hopes to lure workers with promises of the 'Good Life'”).

The reaction on this side of the Red River must involve more than merely shipping our workers west.  Our state’s political and business elites should seize this opportunity to do something more.  Minnesota is perfectly positioned—both geographically and economically—to  play a larger role in shaping our region’s economy and the time is now

Minnesota’s present mix of highly progressive tax and crippling regulatory policies are not compatible with becoming the region’s economic hub.  To gain a leadership position, we will need to rethink a range of policies—from taxes, to economic development, to our relationship with neighboring states, and beyond.  The formula for success involves a lot of  hands-on work getting the nuts and bolts of government right, and makes for horribly boring press conferences, but here’s a start:

Build on What We Have

Minnesota, and more specifically the Minneapolis-St. Paul metro area, serves as the regional hub for a vast inland empire stretching from western Wisconsin and northern Iowa to eastern Montana and Manitoba, Canada.  [To get a visual feel for the size of the region, study the map of the Minnesota Twins radio network.]

For example, Minnesota has 7 times the population of North Dakota.  All those oil field developers and related industries have a need for a wide array of business services—banking, accounting, consulting, engineering, insurance, legal, public relations—not necessarily available in Bismarck and Fargo.  Why not cater to this market and steal a march on Denver and Seattle?

Likewise, the major-league sports, shopping, and entertainment venues offered in Minneapolis-St. Paul; the world-class health services available in Rochester; and the Ports of Duluth and St. Paul and the MSP airport with their worldwide trade access, should make Minnesota the linchpin of the entire region. 

Embrace the Energy Revolution

Just like Houston in Texas or Calgary in Alberta, Minnesota could serve as the hub of a North Central energy empire:  oil, natural gas, and coal in the west, hydropower to the north, pipelines, refineries, and, yes, wind power at home.

North Dakota is not the only state in the Midwest with abundant natural resources; it is simply the state most willing to develop them. 

Minnesota, too, has resources—iron ore, copper and nickel, and sand—all available for development, in an environmentally-sound manner, of course.  Again, the skilled, blue collar (and likely union) mining jobs up north and down south will create demand for  “knowledge-worker” services offered in the Twin Cities and regional centers, including Duluth and Rochester.

Create a Silicon Prairie

California’s Silicon Valley benefits from its close proximity to world-class universities.  Rather than perpetuate rivalries with neighboring universities in North Dakota and Iowa, why not join forces and seed a Silicon Prairie in the Upper Midwest?  It would merely require abandoning the partisan view of Minnesota as a progressive island in a sea of conservatism and, instead, seeing Minnesota as the vital core of a larger, regional economy.

Be the Convener

We must stop thinking of bordering states as competitors and start considering them as our collaborators.  We should start hosting regular business summits with our regional partners and build upon the strengths each one of them brings to the marketplace.

In considering the North Dakota job openings, we need to think creatively about how to supply their needs for goods and services with the well-educated and skilled workforce available here.  In doing so, we can  begin to build the kind of regional economic framework that will ensure the Upper Midwest will no longer be considered "flyover land".

Charlie Quimby Responds to “Start-Up Minnesota”

Last week, I wrote a blog post ("Start-Up Minnesota"), proposing 10-year tax breaks to encourage new company formation.  Author Charlie Quimby responded with the post below.  He actually wrote it last week, but I am only now getting to posting his response.  Quimby wrote,

Bill, I'm sorry, but this proposal is nonsense.  It is so far off, I would almost support it just to show how little impact it would have.  As someone who has started barely profitable as well as successful businesses, I can assure you taxes were not a factor in either case.

Without reading how the [Joel Kotkin] study came up with its [business formation] rankings, I'd say these are all reasons more important than tax policy:

1)   lower than average unemployment rate (a lot of business starts come from people who   haven't found work; these are also likely to evaporate when better opportunity comes along);

2)   higher than average net income (people who're comfortable are less likely to take entrepreneurial risks);
3)   presence of significant angel investment capital (this could perhaps be impacted by tax policy, but the coasts will still have biggest bucks);
4)   general decline of university-funded research here;
5)   large employer base (those Fortune 500s) that is more likely to source nationally than just locally;
6)   competing metro areas that have better positioned themselves in high-tech growth markets.

Management and technical skills, access to customers, available workforce with right skills, access to capital and even family ties are all more important than tax policy when an entrepreneur thinks about where to start a business.  Most start-ups won't have a tax problem in the early years.  It's not to say there aren't reasons why businesses start elsewhere—I expect North Dakota has a high rate right now—it's just that they aren't going there because of the tax system.

A better measure (and I say this without the number at my fingertips) is business survival rates.  Start-ups don't necessarily produce good jobs over time.  You could look at Nevada a few years back. I think it probably led the nation in job creation and start-ups, but a lot of that was illusory, based on investing in a building cheap housing that is now vacant or produced big losses for people.

I always appreciate Charlie’s responses to my proposals.

Start-Up Minnesota

Perhaps the most-cited statistic in Minnesota is that the state is home to 19 Fortune 500 corporations, the 2^nd most, per capita, behind Connecticut.  Minnesota rightly takes pride in its place within the corporate pantheon.   Despite high profile departures, like Northwest Airlines, the number has remained around 19 (plus or minus one or two) for the past decade.

However, every time I hear about the 19, I get a little more uneasy.  Scanning the horizon, it’s tough to see where the next 3M or Medtronic is coming from.  Perusing the Fortune 500 list, you see companies that have been around for decades, some more than a century.

The Consent of the Governed

Yesterday, I posted on this site an essay by my friend and neighbor John Snyder, ruminating on the topic of The Consent of the Governed.  It turns out to be a rather timely topic.

The words come from The Declaration of Independence, contained within the phrase,

Governments are instituted among Men, deriving their just powers from the consent of the governed

The public opinion firm Rasmussen Reports conducts polls on the question every few months.  This month Rasmussen found that only 19 percent of American voters believe that the Federal government enjoys the consent of the governed.

In the several years Rasmussen has polled on the question of consent, the result has hovered at or below the 20 percent mark.  It’s remarkable that, nearly 240 years into our republic, fewer than 1 in 5 voters think our current Federal regime is worthy of their consent.

In a column this week, George Will takes on the topic, writing,

The fundamental division in U.S. politics is between those who take their bearings from the individual’s right to a capacious, indeed indefinite, realm of freedom, and those whose fundamental value is the right of the majority to have its way in making rules about which specified liberties shall be respected.

These days you don’t have to be a Nevada cattle rancher to see that these two visions are becoming less and less compatible.  Reasonable people can question why every Federal agency needs its own SWAT team.

Ok, but what to do about it?  To date, the most notable reaction is people voting with their feet.  I find it more than interesting that fastest growing states are the ones that place more value on individual freedom (North Dakota, Texas, Utah, etc.).  The slowest growing states seem to be those that value the power of government more (Rhode Island, Vermont, Illinois, etc.).

As a practical matter, however, it won’t be possible to sort all 314 million of us into geographic areas the either honor freedom or like making rules.  In the interim, I think it would help everyone to either create, or strengthen, institutions that provide an alternative to government.  By creating some competition, government will need to become more responsive to the needs of its citizens.

A few examples would include school vouchers in education, San Francisco’s Patrol Special Police, and private mutual-aid societies like the Odd Fellows and Sons of Norway.  The modern Bismarckian welfare state did not invent concepts like health insurance and old age pensions—it merely monopolized them under government control.

Only by giving people a meaningful way of "opting out" can we hope to keep everyone together.

1 Minnesota

If you receive your news from local media than you believe that Democrats in the Minnesota state legislature have been going from triumph to triumph:  raising pay for the poor, ending economic inequality, and showering free health care upon a grateful populace.

Truth be told, although a legislature can do much to hold back economic growth, they cannot lift the fortunes of any one group or class (short of mailing out checks) any more than King Canute could command the tides to recede.