Investment Strategies

Innovation is the buzzword of this economic recovery: Two-thirds of our gross domestic product growth is attributed to it and jobs in these industries pay 70 percent more than other jobs. Yet politicians have a difficult time pulling away from traditional economic development programs that focus on shovel-ready projects or consumption-driven programs like Cash for Clunkers. Part of this reluctance, I believe, stems from a misunderstanding of what innovation actually is.
 

While the economy has slowly started to rebound and state fiscal positions are getting stronger, high unemployment rates stubbornly remain and state leaders are still struggling to find ways to bring jobs to their states. According to a new Stateline article, states are once again turning to big incentive packages to either retain or lure companies into their states. In addition, states are experimenting with other creative solutions - such as work share - to help usher recovery in to a still-fragile economy.

Stateline Midwest ~ May 2013

At the same time that the nation’s unemployment rate was falling in 2012, entrepreneurial activity was slowing. According to the Kauffman Foundation’s annual Index of Entrepreneurial Activity, an average of 300 per 100,000 Americans started a business in 2012, down from 320 in 2011. This translates into approximately 514,000 new business establishments created each month in 2012, compared to about 543,000 in 2011.

Stateline Midwest ~ March 2012

States in the Midwest were part of a national uptick in venture capital activity in 2011, but the region is still failing to capture its share of investments in high-growth, innovative economic sectors and businesses.

The latest MoneyTree report — conducted by PricewaterhouseCoopers and the National Venture Capital...

During the past three decades, states have developed various incentive programs designed to encourage economic activity in order to create, retain or expand business opportunities.  In addition to tax and financial incentives, some states have used customized, company-specific incentives to engage in bidding wars with other states, making interstate competition for industries and businesses increasingly intense. Others have offered incentives to recruit business and financial investment from abroad.

During the past three decades, states have developed various incentive programs designed to encourage economic activity in order to create, retain or expand business opportunities. In addition to tax and financial incentives, some states have used customized, company-specific incentives to engage in bidding wars with other states, making interstate competition for industries and businesses increasingly intense. Others have offered incentives to recruit business and financial investment from abroad.

 

Lawmakers across the Midwest are seeking ways to support and expand existing and new economic development programs. In North Dakota and Michigan, bills recently signed into law will ensure those states’ commitment to technology-based economic growth will continue.

The Great Recession hit rural areas hard as median incomes fell, poverty rates increased and the metropolitan-nonmetropolitan wage gap continued to grow.  In addition, nonmetro areas continue to lose young adults through out-migration, and rural populations are increasingly relying more heavily on transfer payments due to rising medical costs and an aging population.

The Midwest, once the national leader of the industrial economy, is now floundering in the knowledge- and innovation-driven global economy. The way back to economic vitality and growth, says James Duderstadt in a report for The Chicago Council on Global Affairs, will require changes in another traditional strength of the region: “our extraordinary array of colleges and universities.”

Currently, three states in the Midwest are among the nation’s 18 “ABC” states. The name refers to alcoholic beverage control, specifically the direct control that these jurisdictions retain over the distribution and sale of alcohol. In Ohio, the governor is pushing a plan that would transfer the liquor enterprise, and its profits, to JobsOhio. 

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