Engines of Prosperity?

Quite predictably the release of the 2010 Census was accompanied by a chorus of Michigan needs to be like the South admonitions. It happens with nearly every new release of economic and demographic statistics or rankings. But once again the data doesn’t square with the argument that the South is winning.

Obviously it all depends on your definition of winning. Yes it is true that the South – but also the West – for decades has been gaining population at far faster rates than the Northeast or Midwest. But what is not true is that population growth is a predictor of  prosperity. In fact the South, despite its population gains, by and large, is characterized by low income, relatively high unemployment, high poverty and low education attainment.  My guess is few of us define that as winning.

Daniel Howes in a recent Detroit News column makes the case for the South as the model for Michigan. He writes: Yes, Michigan, there’s a price to be paid for clinging too long to the bad old ways, for thinking you can price people and products higher than market rates, for ignoring the unmistakable signals of progress issuing from the South and Texas, America’s new engine of prosperity.

We agree that prosperity is the right goal. To us that means a broad middle class best measured by high income and low poverty. So lets see how the 12 Southern states (as defined by the US Department of Commerce) and Texas are doing as engines of prosperity.

First lets take off the table that all of these states did far better than Michigan last decade. Every state did better than Michigan last decade. So we have forty nine states that are potential models. The question is which of the forty nine do we want to emulate.

We have used Minnesota –  because it is the most prosperous Great Lakes state – as a comparison state often, so lets try something different this time. We will compare these six to Washington state. We  use it because it meets Howes test of doing well in the 2010 Census. It is one of only eight states to gain seats in Congress. Texas and Florida gain more seats than Washington but nine southern gain less.

Virginia does well on all the metrics we are going to explore. It has always been on our list of high prosperity states. It is a top ten state in both per capita income and in college attainment. It also has a low poverty rate and unemployment rate.  The story is much different for the other twelve. All are below the national average in per capita income ranking from 24th (Florida) to 50th (Mississippi). All have poverty rates above the national average of 14.3%, ranging from 14.9% in Florida to 21.9% in Mississippi. And all are below the national average in college attainment. Ranging from 27.5% (Georgia) to 17.3% (West Virginia) compared to 27.9% for the nation. In fact, seven of the bottom ten states in college attainment are in the south.

Washington state (and Virgina) by comparison ranks substantially better on all of these metrics than any of the other twelve states. It is in the top twelve in states in both per capita income and college attainment. Its poverty rate of 12.3% is substantially below the national average and the twelve states. On the metric that most use to measure economic success the unemployment rate in Arkansas, Alabama and Texas are lower than Washington, the other nine higher.

We agree wholeheartedly with Howes’ conclusion: There is a way to reverse this sorry trend, and it begins with recognizing that the formula and forces that pushed Michigan to its peak of prosperity are a big part of the problem, not the solution. That’s not hard to find — just look at the winners. Our central premise is what made Michigan prosperous in the past, won’t in the future. Where we disagree is who are the winners. To us the answer is obvious, we would rather have a Michigan with an economy like Minnesota, Washington and Virginia than the rest of the South and Texas.

All of this, of course, matters enormously for what Michigan should do to reposition its economy. If Southern states and Texas are winning then we should adopt their policy regime. But if winning is the high income/high eduction attainment economy of states like Washington, Minnesota and Virginia that requires far different policies than trying to be like the South. Policies that focus on human capital and public investments in education and quality of place. That is the path to prosperity in a flattening global economy.

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