Economies aren’t living organisms, but sometimes it’s useful to think of them as such.  Just as you cannot command your body to grow taller or bounce back from an illness or injury, neither can the economy be persuaded by mere commands to perform more to our liking.  The laws, policies, and regulations we impose on business get thrown into the mix, affecting, but not controlling, the millions of decisions that ultimately produce the outcomes we all live with.

It’s a lesson that many political leaders seem to never learn.  We pass tough-sounding laws on everything from the minimum wage to the financing of political campaigns, and then act surprised when the outcomes fail to conform to our rhetoric and expectations.  The simple truth is that the economy is a complex animal, and is not easily made to jump through whatever hoop we may have in mind.

That message is especially relevant as we take up the challenge of reinvigorating the Indiana economy.  Although the recession is over and many of us are expecting respectable job growth in the coming year, our state’s ultimate economic progress depends on our ability to reverse some of the trends in our economic development that are holding us back.

One of those is the exodus of corporate headquarters.  No one in Indiana can be cheered at the events that have sent the top offices of major companies like Lincoln Life, Ball Corporation, or Indianapolis Power and Light to other states.  Headquarters jobs are, as you would expect, the cream of the crop in terms of wages and impact, but their loss goes farther than that.  Having the decision-making power for investments and expansions housed in your state gives you a leg up in the competition for attracting those dollars and the jobs they ultimately generate.

Even though the news on corporate migration isn’t all bad for Indiana, with the birth of WellPoint in Indianapolis and the acquisitions made by Zimmer in Warsaw, the stubborn fact is that we are not a destination of choice for the executive suite.  In the late 1990’s, we ranked 30th out of the 50 states in per capita sales of publicly traded companies housed in state, behind every other Midwest state.

The question of how we should respond to this trend is now upon us.  For if we are to reverse the trend that has seen Indiana incomes fail to keep up with the rest of the nation, part of the solution must be shedding our status as a branch plant state, beholden to board room decisions made elsewhere.

The impulse to tackle the problem directly, by appealing to companies with incentives and tax breaks to move their headquarters here, is doomed to failure.  There’s not enough money in all of our pockets to convince a Dell, a Cisco, or a McDonalds to pack up and move to Indiana.  And even if we tried to claim success with a few high profile converts, it would do nothing to defuse and redirect the process that is causing net corporate loss in the first place.

The reason why Indiana has so few headquarters today is that we aren’t planting enough seeds – in the formation of new companies – for the future.  Our state’s economic base is dominated by larger employers more than any Midwest state.  And in manufacturing, still the most important source of export income for most Indiana communities, we have the largest number of employees per business establishment of any state in the nation.

Even though the forces that make companies merge, split, or even perish will always be beyond our control, companies that are born here are more likely to stay.  And even if we don’t emerge a winner at every stage of the process, if we don’t have enough chips in the game we don’t have much of a chance.