Book Reviews

By RALPH COLLINS WALTER

Robert W. Resek, Richard F. Kosobud, Editors. The Midwest Economy: Issues and Policy. Champaign, Bureau of Economic and Business Research, 1982, 362 pp.

The research is not only thorough, but also nonpartisan. There is no attempt to offer panaceas such as "high tech" or "enterprise zones." The book itself suggests that such politically popular programs are often ineffective and overly expensive. This is particularly well demonstrated in the essay on environmental quality and economic development by Ben B. Ewing et al., in which the authors demonstrate that the cost of pollution must be balanced with the cost of removing pollution. In the essay on metropolitan transportation, Ashish K. Sen and Claire E. McKnight report that necessary subsidies have the unintended effect of increasing the wages of the transit workers above free market levels.

If there is any political statement in the book, it is the implicit criticism of the Midwest's representatives in Washington, D.C. The states which have schools in the "Big Ten" athletic conference receive less than three quarters of every federal tax dollar back, which means the Midwest is subsidizing the Sun Belt. This fact does not reflect well on the Illinois congressional delegation, which includes the chairman of the Senate Foreign Relations Committee, Charles H. Percy; the House minority leader, Bob Michel; and the chairman of the House Ways and Means Committee, Dan Rostenkowski. Perhaps it is time for out representatives to become better logrollers and worse statesmen.

The editors and authors of the book were themselves statesmen-like in their even-handed discussion of their topics from a mid western perspective. One with a parochial Illinois view may have wanted more discussion, however, of the central role O'Hare plays in Chicago's economy than about Conrail, which serves cities east of Chicago and is discussed in John Due's essay on transportation.

Perhaps this attempt to be fair caused the editors to overlook the financial sector. Except for one reference in an essay by F. John Mathis on international financial issues, the role of Chicago as a banking and financial center is ignored. With financial services being a growth section, this omission is surprising. Additionally, there are significant events occurring in the Midwest's finance sector. Sears, the major midwestern retailer, is aggressively diversifying into all kinds of financial services. Chicago is battling with New York to maintain its lead in options and futures markets. Banking deregulation has caused the area's third largest bank, Chicago's Harris Trust, to be sold to a major Canadian bank. With all this turmoil and, hence, opportunity in the banking and financial markets, the midwestern governors should be apprised of this issue.

The dynamic financial sector contrasts with the primary theme of this book: Except for agriculture, the Midwest is declining economically. (The 1983 drought makes even the introductory clause unnecessary.) Although there is little in the way of affirmative policy recommendations, the book does convincingly argue that stopgap government programs, such as tax breaks for business or mass transportation subsidies, cannot reverse the region's economic decline. Further, some of the authors allude to parts or aspects of the long-term solutions: Alvin D. Star demonstrates the entrepreneur's key role in economic development in his essay on small business and the Midwest economic revitalization; Due points out the necessity of a well-maintained infrastructure in his essay.

As a piece of staff work, the book perhaps should not offer solutions, especially those which would be politically unpopular. However, the serious reader may be left somewhat unsatisfied by the failure of the authors to take a more aggressive stand on some possible long-term solutions. This fault in no way detracts from the quality of the research.

Ralph Collins Walter is a fifth generation midwesterner who is chairman of the Accounting, Business Law and Finance Department of the College of Business and Management at Northeastern Illinois University and is also a consultant to business.