April 17, 2006
What Does a Diversified Economy Look Like?
The microwave oven has been a staple item in most Americans’ kitchens for so long that there is now a generation of young adults who’ve never lived without them. And for that same generation, the doughy, limp texture of foods like pizza instantly cooked on a microwave, in contrast to the crisped, browned texture produced in a longer time by conventional heat, is associated with the food, not the technology. If you’ve grown up eating from a microwave, that’s the way it’s supposed to taste.
So it is with the issue of diversification in the Indiana economy. We are the most manufacturing intensive economy in the nation, and have been so – or nearly so – for several generations. Outside of Indianapolis, the dominance of manufacturing is even stronger, with individual cities like Elkhart and Kokomo anchoring economies where manufacturing’s share of the economic pie is 3 or 4 times larger than the national average.
We’ve gotten quite comfortable with that. In fact, being able to point to a single industry as the main driver for the overall economy, as countless communities around Indiana and the entire Midwest can say for manufacturing, seems perfectly normal.
And yet it is not normal. The continued dependence of our region, and our state, on manufacturing stands out as an exception to the remarkable trend of diversification apparent in most other parts of the country. The oil industry no longer determines the economic fate of Texas, nor do textiles or tobacco hold sway of the economies of states like Massachusetts or Virginia anymore, either.
Consider, for example, the economy of northern Virginia. It’s hard to describe it in a single sentence, or even in a paragraph. The Federal government clearly has a huge presence, but it is equally home to the defense industry, technology companies like AOL, headquarters operations for countless contractors and consulting firms, as well as courting a substantial numbers of tourists who visit Washington and the civil war battlefields.
We’re moving in that direction, too, although not by choice. In the years 2001-2004, manufacturing employers eliminated more than 900,000 jobs per year, nationally. Even if that shocking trend smoothes out a bit over the coming years, it still points us in a direction where manufacturing jobs continue to shrink in number, and even more in relative importance
Faced with this daunting prospect, the question is often heard in communities around the state, what will take manufacturing’s place as our economic anchor?
I think I know that answer to that question, but it is not one that puts people at ease. Because the answer is this – nothing will take manufacturing’s place. For one thing, manufacturing’s not going away, it’s just changing. What we make and how we make it has evolved and will continue to evolve, uprooting some businesses and creating opportunities for others. Even with fewer cars in the employee parking lots, manufacturing companies will continue to be very important part of the economic mix in our state for the foreseeable future.
What fills the void left by the larger footprint these companies used to have here? The experience of other states is this – everything else. Economic diversification doesn’t really make headlines. There will likely be no large new employers coming to every town, gobbling up workers by the hundreds or thousands, offering lifetime employment for generations the way manufacturing companies once did. The dribs and drabs of job growth as new and existing businesses adjust and adapt to the circumstances and opportunities that present themselves may not make the front page, but the will ultimately determine each community’s fate.
In some parts of the state, leadership is starting to think about helping that process along, by improving tax climates, infrastructure, and workforce preparation. But for many Indiana communities brought up in an era of manufacturing dominance, diversification still doesn’t taste right.
About the Author
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