The state of the State
THERE has definitely been an exodus of light and heavy industry away from the Midwest and Great Lakes region in recent years. This was the concensus at a recent two-day Midwest Economic Growth Conference in Chicago, sponsored by the Illinois State Chamber of Commerce, the Great Lakes Area Development Council and 105 state and local chambers of commerce. The conference was aimed at improving the Midwest's image as a business center and on mapping regional growth objectives. Keynote speaker Thomas A. Murphy, chairman of the board of General Motors Corporation, typified the attitudes of most economic leaders at the conference when he called for an end to "government overregulation."
"All it [business] wants and expects is the cooperation of city hall and the statehouse in creating a climate of taxation and of regulation that will not seriously interfere with its operations and with its pursuit of reasonable earnings," Murphy said. He added that government should "refrain from . . . attempting to direct the course of the free market in channels it arbitrarily deems best for social or political reasons." Murphy pointed to government intervention as a major malefactor in the Midwest's loss of industry to other areas and other countries. The conference met just after the announcements of layoffs in the steel and electronics industries in Illinois due to relocations of manufacturers.
Herbert E. Strawbridge, chairman of the Higby Co., which operates six department stores in Ohio, agreed with Murphy's analysis. "Steel claims it is being hurt by imports; that is a falsity. Steel is being hurt by the government's intervention with the economic system."
Many speakers at the conference disagreed with conventional thinking about regional competition. The theory that the so-called "Sunbelt" states are taking firms away from the Midwest is not really so, they said. In the first place, the experts contended that the migration of companies is not the major problem; rather it is the death of firms located in the Midwest and the lack of attractive incentives for new firms that has caused the trouble for the Midwest. Secondly, the Sunbelt has not captured the majority of the firms migrating from the Midwest. Those firms that have left have mostly gone to other northern states, according to Dr. Larry C. Ledebur, representing the White House Conference on Balanced National Growth and Economic Development.
A. James Heins, an economist with the University of Illinois, acknowledged that the Sunbelt states such as Arizona, Florida, Georgia, North Carolina and Texas have benefited from "shifting economic sands" in the last three decades. Yet he said that this was mostly as a result of national policies aimed at "assisting in the development of economically backward areas." He said the trend should not be viewed with alarm, nor should it be encouraged by Midwestern states in the future. "The South and the Southwest have enough advantage from nature and national policy without the assistance of misconceived economic policies," Heins said.
Most speakers agreed with Heins on this point. Some, like Chairman Strawbridge of Higby Co., went further, claiming that the Sunbelt is in trouble: "It has become too successful for its own good, too many people, too much industry, too much farming and insufficient water to make power."
What are the Midwest's advantages and disadvantages as compared with other regions? The conference identified the basic ones. Advantages include a superior transportation system, huge and highly trained labor force, some of the best farmland in the world, lots of cheap energy and an adequate supply of water. The Midwest's disadvantages were identified as a highly paid —and some said unproductive — labor force, too much unnecessary governmental regulation, and overzealous environmental, work safety and workman's compensation laws.
The future growth of the Midwest's economy does not look bad, according to the business, academic and governmental leaders at the conference. They said growth is tied to the nation's economic well-being, which is not as unstable as recent stock market declines would indicate. For instance, Chairman Murphy of General Motors pointed to indicators like recent gains in retail sales, consumer confidence, increased spending plans by industry, more construction activity and a general increase in government spending as signs of sound economic trends.
Murphy noted, however, that foreign labor costs were drastically lower than those in the U.S. He warned that unless federal, state and local governments reduce regulations on American business and offer incentives instead, American manufacturers will have a hard time competing with foreign companies. The key to such competition, Murphy explained, is in increased productivity coming from large capital investment in new technology.
Former Illinois Lt. Gov. Neil F.Hartigan, now president of Real Estate Research Corporation in Chicago, remarked that "statistics are there showing why companies leave or stay in an area." He called for policies at the state level to hold companies in the Midwest, policies enforced by "strong economic departments, instead of the figureheads that are now in too many [states]." Specifically, he noted a "lack of priority and money and muscle in the Department of Business and Economic Development" in Illinois.
Among other major topics of the economic conference was Midwest energy availability. The problem elicited some trepidation from Wendell J. Kelly, president of Illinois Power Co. Again government got the blame. Kelly warned that a severe shortage of electric power in the next decade is a "real possibility" unless government regulation is eased on the industrial expansion of coal and nuclear power.
2/ December 1977/ Illinois Issues