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Michigan must divide in order to conquer

Mar 9, 2015

The Next Idea

When people think of Michigan, a number of iconic images come to mind – a long assembly line, acres of cherry orchards, miles of gorgeous coastline. This wide variety of industry, agriculture and tourism contributes to the resilience of our $400 billion economy and is what makes Michigan special. But these industries and regions also have very different requirements to help them grow. The challenge lies in how to foster growth in each one without competing against each other so that some Michigan residents win only when others lose.

In some cases, Michigan's disparate economies have led to regional rivalries that hinder economic development, says Lauren Bigelow.
Credit Flickr

Michigan has the 13th largest economy in the country.  Our history of success in an array of industries has resulted in distinct economic identities among the state’s regions. As a result, these regions have developed their own personalities that have often made it difficult for them and their municipalities to compromise and cooperate. There is a persistent perception of a zero-sum game, one where Lansing competes with Grand Rapids for a manufacturing plant, or Oakland County and Wayne County compete to woo the same professional services firm. 

One cautionary tale that’s worth remembering is how Michigan lost the Saturn plant to Tennessee in the late 1980s. There were a number of factors that went into the decision to break ground in Spring Hill, but a crucial one was the complete support that the state of Tennessee threw behind one community. In Michigan, General Motors was being courted by Pontiac, Flint, Lansing and several other municipalities who were competing with each other with a winner-take-all attitude. That strategy helped ensure that no one in Michigan won.

Amidst all of the complex economic challenges our state faces, we must look for ways to support our varied regions in a manner that’s more tailored to their strengths. How can we divide the dollars and decision-making in a way that the tier-one auto parts supplier and the cherry farmer have more equal access to the help they need?

So what’s the Next Idea?

Michigan is not the only state with varied economic regions, so there’s no need to reinvent the wheel. We can learn from successful models elsewhere to create our own. The first one to look at is Pennsylvania’s Ben Franklin Technology Partners (BFTP), which is a technology-based economic development program that provides resources for startups and established companies. 

With BFTP, Pennsylvania’s leaders split the state into four regions to build on their strengths, capitalize on new opportunities, and address the specific needs of their diverse communities. Each region has a headquarters and they strategically positioned 10 satellite offices across the state. These offices are staffed by a finance and investment team that are more deeply engaged in that region, know its demographics and challenges, and can more accurately assess the strength or weakness of a company. This way, the city dweller isn’t making an investment decision about a farmstead, and policymakers aren’t choosing between the iron worker in Bethlehem and the biotech start-up at Penn State University.   

There is a persistent perception of a zero-sum game, one where Lansing competes with Grand Rapids for a manufacturing plant, or Oakland County and Wayne County compete to woo the same professional services firm.

Pennsylvania’s approach has been quite successful. During the last 25 years, the BFTP boosted the state’s economy by more than $23 billion and generated 140,000 new jobs. In four years, from 2007-2011, Pennsylvania increased state revenues by $502 million as a direct result of BFTP investments; this represents more than a 3.5-to-1 return on the state’s nearly $140 million investment in BFTP. Considering that the time frame was during the height of the recession, these numbers are realistic for Michigan to emulate.

The Michigan Economic Development Corporation (MEDC) is the logical place to start, but that depends on whether it could be empowered to do the work. About 20 years ago, the MEDC was created to help ameliorate the problem of Michigan’s competing municipalities. Its intent was to have a comprehensive vision of the economic needs of the state and to help move Michigan forward as a single voice in the marketplace. The MEDC has had some success, but it is often a target in the state legislature, where some lawmakers would like to dismantle it and put the funds under their control. If that were to happen, it would take Michigan back to the pre-1995 era, and with a more deeply polarized political system, we would see even less collaboration between the state’s regions.

There is a lot at stake here, and much of it involves maintaining Michigan’s competitiveness.  We are finally turning around after seven straight years of population decline where we lost thousands of our skilled workers and small companies. However, Michigan still struggles to retain graduating students from our nationally-ranked research universities, and our companies are challenged to recruit top talent. We need cooperation within the different economic regions in order to attract and retain solid companies. We need to create a vibrant landscape of employers who can hire our young scientists and nascent managers, as well as the middle managers and executives who currently view Michigan as a dead end in their career. 

Through a range of initiatives, we have been diversifying our economy. The focus on Michigan’s innovation ecosystem has resulted in a network of company incubators and capital investment programs that are the envy of many other states. This ecosystem has created hundreds of companies, thousands of jobs, and will help to buffer the state economy should another crisis occur in the automotive industry. The more diversified economy will also help to maintain a broader range of talent and make Michigan a more attractive option to prospective companies. For this great momentum to continue, Michigan’s regions must find better ways to cooperate or risk losing jobs and revenue to states that are better prepared -- states like Pennsylvania.

Lauren Bigelow is CEO of Growth Capital Network, a strategic consulting firm based in Ann Arbor, as well as manager of the Accelerate Michigan Innovation Competition.

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