Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and a professor of economics in the Miller College of Business at Ball State University. His column appears in Indiana newspapers.
Thanksgiving weekend sees most of us huddled with three or more generations of family. That makes these holidays a good time to think about long-term economic changes and how they affect us. For example, let's think a bit about where economic development occurs. Let us begin by picking two dates 70 years apart, say 1940 and 2010.
In 1940 about one-third of all U.S. workers were involved in manufacturing, another 15 percent in agriculture, 5 percent in providing energy and more than 10 percent in moving goods. Altogether, about 65 percent of folks worked in industries in which most of the goods produced were 'exported' to places outside of where they lived. This was a less affluent time, and much of household income was spent on food, clothing and heat. Not surprisingly, by 1940, cities had sprung up around the places where people manufactured goods, mined coal or loaded goods, coal and food products onto transportation equipment. So, the great centers of affluence were clustered around factories.
Now take into account that over the coming seven decades households got richer. This is because we got better at food production, mining, manufacturing and moving all that stuff around. This brought about two major changes. First, instead of 65 out of every 100 workers mining, growing, making and moving goods, now fewer than 14 could meet demand. Second, as households got richer, they bought fewer things that could be exported from the region and spent more money on things that could not be readily moved around. So, health care, financial services, restaurant visits, amusements and recreation, telecom services and housing became a growing share of our spending patterns. Manufactured goods and food spending shrank as our share of income. So what does this mean to the geography of wealth and affluence?
Well, in 1940 the only vibrant cities had big factories, rail yards and lots of associated workers. In 2010 the only vibrant cities had lots of people in many occupations whose product is mostly consumed locally. This doesn’t mean there aren’t a few fantastic towns with factories, but it is the vibrant town that ultimately makes the difference.
This begs the question, "If this is so, why is our community so dead-set on luring the next factory to town instead of making our town a good place to live?" The answer here is simply that too many folks simply don't know what else to do.
I believe we still need to attract business at the state, and maybe the regional level. A new factory anywhere in Indiana will draw workers from a dozen counties. Still, the simple truth is that for Hoosier counties, efforts to lure a new factory in hopes it will spur economic growth is like filling the bath tub during a house fire. It involves something that seems like it might be able to put out the fire, and it keeps you busy; but it won't make much of a difference in the long run.