ECONOMIC ANALYSIS: It’s time we get started on a new state economy

Have you ever plunked down a lot of money for something and worried if you made the right choice? You have plenty of company. To cope with that insecurity, some of us try to persuade our friends to follow our footsteps. We put forth convincing arguments why our brand of car, or our new electronic gizmo, is really the best thing, and feel comforted and vindicated when they make the same choice we made.

For too many years, that simple notion has been at the core of Indiana’s efforts toward attracting new residents and businesses and, ultimately, its economic development strategy. After all, we are all people who live in Indiana, out of necessity, circumstance or choice. So, of course, it must be the best choice for everyone-because we made it ourselves.

That line of reasoning can quickly devolve into an empty exercise in cheerleading, touting our state’s assets-to one another-and calling for renewed efforts to “get the word out” on Indiana’s advantages. In such an environment, those of us who are more inclined to open the hood and take a harder look at how the state’s economic engine is running have often been dismissed as being out of step.

I am happy to report that in almost every corner of the state, those days are solidly behind us. Perhaps the best evidence of that fact can be found in the opening pages of the state’s new blueprint for economic growth, the development plan just released by the Indiana Economic Development Corp.

Say what you will about anything that has been simmering on the stove for 10 months with so many cooks hovering over it, the IEDC plan is crystal clear on one crucial point-the state economy is on an unacceptably poor trajectory and sustained action is needed to get us back on track. The document cuts right to the chase and zeroes in on our most glaring deficiencies-low earnings, low educational attainment and poor work-force preparation, and low levels of investment.

That’s been hard for us to admit in the past, but it’s not as hard as figuring out what to do about it. Indeed, there are many out there-including many of my fellow economists-who think there’s really not much of substance the public sector can do about it. After all, the few millions of dollars that can be scraped out of the threadbare state treasury to support public initiatives like those the IEDC proposes are dwarfed in magnitude by the billions of dollars of private-sector investment that will ultimately make or break the success of their efforts.

But leadership still matters, and state government’s influence on the economy goes well beyond the clout of its checkbook The state doesn’t have billions sitting in a bank account ready to be invested in plants and facilities to put Hoosiers to work in highpaying jobs, certainly. But it is the entity that maintains and supports the legal, physical, educational and knowledge infrastructure that plays an enormous role in determining the returns on those investments.

And the influence the state can wield to bring those functions into alignment with a coherent, consistent vision of how new growth could unfold should not be underestimated. Witness the creation of the Research Triangle in North Carolina, long known as a tobacco-producing state with low wages and poor education. The transformation occurred with the help of a sustained, deep commitment from the state and the research universities in the area.

Are the same sorts of master strokes anywhere to be found in the pages of the IEDC plan? There may be, but it’s also a foolish question. As the plan itself points out, just getting back to the national average in percapita income in the next decade requires us to buck the trend and start growing faster than the nation in each of the intervening years. If you think there’s a secret to doing this that you can bottle and sell, then you’re not living on this planet.

What it will take is a sustained, coordinated effort by political friends and foes alike to commit to, and then execute, a vision of growth that can attract the investment and jobs that put bread on our tables. It will take at least a decade, but it’s worth the effort.