Below we will release shareable graphics that demonstrate some of the staggering data uncovered in the report. Follow the links below to download the graphics to share on your organization’s or personal social media. As you share them, we encourage you to use the hashtag “#StatePoliciesMatter” to help spark conversation around Michigan Future’s latest report.

If you haven’t done so read the full State Policies Matter report here.

INFOGRAPHIC #1: Right-click on the image and select “Save Image As.” INFOGRAPHIC #2: Right-click on the image and select “Save Image As.”

INFOGRAPHIC #3: Right-click on the image and select “Save Image As.”

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Although it is true most of the folks I work with and respect don’t agree. They are far more representative of the broad bi-partisan consensus that government can and should identify key industries that if successful are thought to be particularly important to future economic growth and prosperity.

Two New York Times articles raise questions about the effectiveness of that consensus. Both worth reading. The first is a comprehensive story of the failed investment by the state of Rhode Island in a video game company started by retired baseball star Curt Shilling entitled Thrown for a curve in Rhode Island.

The article details how (1) the state  –– with broad bi-partisan support –– allocated new funds to more aggressively invest in businesses that supposedly could help transform the state’s economy, (2) a Republican Governor threw his weight behind the Shilling led enterprise and (3) a business-led state economic development agency made a large investment in the company. The result, as the Times reports:

“The tiny, struggling state issued $75 million in bonds so that Mr. Schilling’s company, called 38 Studios, could relocate to Providence and unleash the world’s next killer fantasy game. Ideas that seem plausible in our darkest moments often seem plainly flawed in hindsight, and you can probably see where all this is going. A little more than two years after Mr. Carcieri (the Governor) first talked to Mr. Schilling about 38 Studios — so named for his baseball uniform number — the company went bankrupt, blowing a sizable hole in the state’s already strained finances.”

This, of course, is an extreme case in a state picking winners. Both the risk it took to the state’s finances and the role that celebrity played in the investment. But the core reason for the failure is not that unique: its hard for government (or anyone else) to know what industries, technologies or companies/entrepreneurs are going to be tomorrow’s winners. (For example, here in Michigan no administration knew ––  or  should have been expected to –– that Michigan’s most successful start up in decades –– Quicken Loans  –– would be in the home lending industry.)

In a big picture column for the Times, Yale economist and co-creator of the Case-Shiller Home Price Indices (and the related business), Robert Shiller explores the role of government in stimulating entrepreneurial start ups. Which is at the top of most every public officials lists of what grows the economy. In the column entitled Why Innovation is Still Capitalism’s Star, Shiller argues that its culture, not government programs, that are the key to innovation and new companies. Shiller writes: “CAPITALISM is culture. To sustain it, laws and institutions are important, but the more fundamental role is played by the basic human spirit of independence and initiative.”

Shiller expresses skepticism for government program’s like President Obaman’s proposed innovation institutes, but does writes favorably about government funding for research awarded through a peer review process. Two very different approaches to spurring innovation and entrepreneurship. One narrowly focused on a small set of industries and/or businesses, the other focused on the broad development of new ideas and indirectly stimulating entrepreneurship. Seems like the latter is something government can and should do, the former not so much.

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Why? Because as Forbes writes –– and we have noted repeatedly –– “One of the main factors businesses consider when deciding on where to relocate or expand is the available pool of college-educated workers. And that has cities competing for college-educated young adults. … And there’s one place this desired demographic, college-educated professionals between the ages of 25 and 34, tends to want to live: tight-knit urban neighborhoods that are close to work and have lots of entertainment and shopping options within an easy walk.” (Emphasis added.)

The reality is that the most prosperous places in the country, by and large, are big metros anchored by vibrant central cities. With the core characteristic of the central city being a high proportion of its residents with a four year degree. The all too prevalent Michigan belief that central cities are part of our past is simply wrong. As is the notion that cities are only where the poor live. College educated Millennials in particular are increasingly choosing to live in and around big city downtowns. Michigan needs it biggest cities –– Detroit primarily, but also Grand Rapids and Lansing/East Lansing –– to be talent magnets. If not, its hard to imagine Michigan being competitive in retaining and attracting the knowledge-based enterprises which are increasingly driving the American economy.

As Forbes recognizes, Detroit and Grand Rapids are making progress. But there is a long way to go. Its time for the state to make central cities a lynchpin of its economic development efforts.

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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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Clearly one barrier to making Detroit’s growth a priority is that most Michiganians don’t believe the city’s success is important to their future. We have not learned the lesson that it’s highly unlikely that we can have a prosperous state economy without metro Detroit working and for metro Detroit to succeed we need a vibrant city of Detroit. The other barrier which may be tougher to break through is, even for those who understand the centrality of Detroit to the region’s and state’s success, there is a prevailing sense that it can’t work. That the disfunction of the city is so bad that it is beyond repair. This pessimism about Detroit’s future is overwhelming outside of the city, but deep seated in the city as well.

So we end up with shrinking the city as the priority. Too much land, too few people, too little demand – now and in the future – for that land so we need to turn large sections of the city into open space or farms. Shrinking the city may be necessary, but not as the goal. Rather as a means to a very different end.  A way of freeing up resources to invest in the actions that will grow the city.

Detroit’s problem is not that there is no demand for central city living. The last two decades have seen a rebirth of urban neighborhoods that were written off as dead across the country. They have largely been revitalized by a combination of immigrants and college educated households – mainly young and without children. Detroit’s problem is that it has not participated at any scale with these trends. Detroit needs an agenda to take advantage of the renewed demand for city living.

We will explore in future posts in more detail what a growth agenda for Detroit should look like. As we laid out in our Revitalizing Michigan’s Central Cities report in 2003 the pillars of the agenda need to be a culture that is welcoming to all, the delivery of high quality basic services and being development friendly. None are strengths of the city today.

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The other key question I would ask is “what does Michigan need to look like for your kids (or grand kids) to want to live here?” Nearly all will be or are college graduates. Where they decide to live and work will, in large part, determine the future prosperity of the state.

Its not what most candidates are thinking about or what they are talking about. They are under enormous pressure by voters and interest groups to articulate their ideas about today – not tomorrow. But communities that don’t keep their college educated kids won’t be prosperous now or in the future. Its that important.

My guess is if candidates talked with their kids about where they want to live after college they will find that what they are talking about on the campaign trial is of little relevance to their kids decision on where to live after school . Items like what to do with taxes and how to save or restore factory jobs don’t matter very much to future knowledge workers.

If Michigan is going to be prosperous again we need elected officials who are focused on building a state where their kids want to live and work. We need to use the upcoming election to identify who those candidates are.

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