Tag: growth

Tale of Two Cities

tomkapostasy4 Comments

In a recent speech at the Carmel Rotary Club, Indianapolis Star editor Dennis Ryerson warned the audience of the risk of a central city meltdown in Indianapolis as he had observed in Cleveland 20 years ago.  As someone who has lived in each region for more than 20 years, this prompted me to collect some historical statistics and speculate on the differential success of these two mid-sized Midwest areas.

In 1900, Indy was two-thirds the size of Cleveland, which at 654,000 people, was the nation’s seventh or eighth largest urban area by various definitions.  Indianapolis was in the 21st-25th range.

By 1930, Cleveland had grown by an astonishing 173%, adding 1.1 million people for a total of 1.8 million, reaching a peak national ranking of 6th to 8th.  Indianapolis was the turtle in this race, adding a mere 200,000 residents to grow by 50% to reach Cleveland’s 1900 650,000 population level, while maintaining a 21st-25th highest population ranking.

By 1960, Cleveland had added another one million residents (50%), reaching 2.7 million residents and maintaining a top 10 population ranking.  Indianapolis grew a little faster on a percentage basis, adding 400,000 residents to reach the 1.1 million population level.  Its national population rank slid to 26th as Sunbelt and west coast cities began to grow.

In the next five decades to 2009, Indianapolis continued its modest 1-1.5% annual growth rate, adding 750,000 residents to reach a population of 1.8M, while sliding to 34th place in the national metro population rankings.  Cleveland reached a peak population of 3M in 1970 before declining to 2.8M in 2009, good for a 26th place metro population ranking. 

In summary, Cleveland grew by 1 million people from 1900-1930 and from 1930-1960, but added ZERO population in the next 50 years!   Indianapolis added a quarter, half and three-quarters of a million people in those 3 periods.  What could possibly account for these divergent trends in cities located only 300 miles apart?

The locations are not very different.  Indy claims to be the “crossroads of America”, while Cleveland has said it is “the best location in the nation”.  Cleveland is on the New York to Chicago train line, the Great Lakes and interstates I-80, I-90 and I-77.  Indy boasts I-70, I-65, I-74 and I-69 interstate access.  Indy has leveraged its location and lower labor costs to become a greater distribution hub.  Cleveland has enjoyed a decade as a mini-hub for Continental, while Indy once served as a minor USAir hub.  Both cities have attracted rural residents from a 100 mile circle, but Cleveland’s area is only half as large due to Lake Erie.

Both cities had strong historic banking companies.  All of the Indy companies are gone.  Cleveland maintained National City Bank and KeyCorp as major banks through most of the period.

Cleveland has maintained a large Fortune 500 headquarters lead.  Firestone, Republic Steel, Uniroyal, Goodrich. TRW, Std Oil, White Motor, Eaton, Sherwin-Williams, Cleveland-Cliffs, Hanna Mining and Reliance Electric appeared in the 1960 list.  Cleveland had grown from 12 to 15 firms by 2009, adding Progressive Insurance, National City, KeyCorp, Parker-Hannifin, PolyOne, Lubrizol and Travel Centers of America.  Indy had 5 firms in 1960: RCA, Lilly, Curtis Publishing, Stokely Van Camp and Inland Containers.  It maintained only Lilly, WellPoint and Conseco in 2009.

On the professional sports scene, Cleveland has maintained football and baseball teams, while adding basketball, but dropping the second level hockey Barons.  Indy added the Colts and moved the Pacers from the ABA to the NBA.  Indy has successfully pursued an amateur sports strategy, attracting the Pan-Am games, the NCAA and many collegiate tournaments.

The cities share historical strengths in their art museums and orchestras, with Cleveland’s ranked higher.  Indy has added the Children’s Museum and Eiteljorg Museum, while Cleveland added the Rock n Roll Hall of Fame museum and lost the Salvador Dali museum.  Neither city has a major state university, with IUPUI and Cleveland State growing in parallel.  Cleveland has Case Western Reserve as a local research university.  Greater Cleveland has a much stronger community college system.  The Cleveland Playhouse and theatre groups offer more than Indy’s scene.  Cleveland’s Coventry/University Heights area is more vibrant than Indy’s Broad Ripple.  Cleveland adopted Michael Stanley while Indy embraced John Mellencamp.

Both cities focused on manufacturing for growth, especially automotive and metal forming manufacturing.  Cleveland had a greater emphasis on basic manufacturing in steel, rubber and plastics.  Indianapolis attracted a significant amount of investment from Japanese manufacturers.  Indianapolis’ health care industry has benefited from Lilly, Roche and IU, while Cleveland has leveraged CWRU University Hospitals and the Cleveland Clinic.

Net, net, Cleveland should have continued to grow slightly faster based on the factors above.  The drivers for Indianapolis’ positive differential growth include:

Better public relations regarding momentum.  Cleveland’s river fire and “mistake on the lake” moniker have hurt.  Indy was able to overcome the “naptown” label through continued positive growth and publicity.

Indianapolis and Indiana have maintained a low tax and low service environment conducive to business investment.

Indy has benefited from being the state capital and the only large city in Indiana, while Cleveland has battled Columbus and Cincinnati for state leadership.

Indianapolis has avoided major racial conflicts.  The 1966 Hough riots in Cleveland contrast with the calming Bobby Kennedy speech after Martin Luther King’s 1968 assassination.

Indianapolis public schools have not fallen as far as IPS.  Busing and white flight had a bigger negative impact in Cleveland where a more established Catholic school system option existed.

Downtown Indianapolis has recovered based upon major public and private investment in the Circle Center Mall, convention center and sports arenas.  Cleveland’s investment in the Brown’s stadium, Jacobs Field, Cavaliers arena, major office buildings and “the flats” has never reached the critical mass required for downtown growth.  Indianapolis’ downtown residential growth has been modest, but adequate.

Indianapolis pioneered the concept of uni-gov, merging the city into the county.  Cleveland has remained an island within Cuyahoga County and a small island within the metro area. 

Indianapolis civic leaders found a variety of ways to preserve and grow the central city and avoid having widespread areas of decay.  As Mr. Ryerson noted, this strategy will be more difficult to maintain as the surrounding counties grow at the expense of Marion County.  Both cities could benefit from some degree of regional government and taxing authority that aligns the interests of suburbs with the central city.

  Cleveland Indy  
  7 counties 9 counties  
       
1900          654         429 66%
1910          913         489 54%
1920       1,426         569 40%
1930       1,784         656 37%
1940       1,817         702 39%
1950       2,154         829 38%
1960       2,734       1,071 39%
1970       3,000       1,248 42%
1980       2,833       1,305 46%
1990       2,759       1,381 50%
2000       2,844       1,605 56%
2009       2,791       1,824 65%
       
1900-30       1,130         227  
  173% 53%  
       
1930-60          950         415  
  53% 63%  
       
1960-2009            57         753  
  2% 70%  

2010 Graduates: Live a Great Life

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Graduates, I encourage each of you to “Live a Great Life”.  This is your right, your choice and your destiny. 

We each live in three worlds: the world of commerce, the world of choice and the world of community.  I believe that “a great life” comes from balancing these three worlds.  In eighth grade, our industrial arts teacher, Mr. Laurie, told us that our first project would be a foot stool and that it would have three legs.  One student spoke up, “Mr. Laurie, I think it would be better with 4 legs”.  Mr. Laurie calmly responded, “Tom, I have found that 3 legs provide the proper balance for a successful footstool.  If you tried 4 legs, it would take you the whole semester to make them the same length and the final stool would be 3 inches tall”.  As I learned in this school, balancing the three legs of commerce, choice and community is essential to “living a great life”.

World of Commerce

The world of commerce is important as we emerge from the Great Recession.  Completing high school is a great accomplishment.  But it’s not the end of learning.  You will continue to build your problem solving and communications skills and you’ll pursue new degrees and certifications.  Lifelong learning is now required for everyone.

Our guidance counselor, Mr. McGinnis, urged us to be serious about our careers.  He said “choose something which interests you, build skills in that field and focus on one industry”.  In spite of the many options and uncertainties in life, pick that one path and treat it like it’s the only one. 

Securing employment is difficult today.  You can improve your odds by thinking about jobs from the employer’s point of view.  Employers want clear “yes” answers to three simple questions: “Can you do the job?  Are you self-motivated?  Are you manageable?”  Focus on these and you will always be an attractive job candidate.

Be confident about your economic future.  Don’t listen to the nightly news.  The sky is not falling.  The U.S. economy grows by 3% per year on average.  That doesn’t sound like much, but since the Diamond Alkali factory in Fairport closed 30 years ago, the US economy has grown by 160%, from $5 trillion to $13 trillion dollars.  There will be recessions, but you will succeed.

Education, career skills and positive attitudes will make you succeed in the world of commerce.  Always invest in yourself first.  Save the first 10% of every paycheck.  Invest it for your retirement.  When you are 53, you will thank me.

World of Choice

We also live in a “world of choice”.  In 1974, we were emerging from a “world of tradition” and sought a “world of choice” where we could “express ourselves”.  Our parents cautioned us to “be careful what you wish for”.  The number of choices and options today can be overwhelming.  You now have great responsibility for your own future. 

First, you must accept and love yourself as you are.   Believe that you were created just as you are for a purpose.  My classmate, Jim Kulma, shared a book with us in 1972. It was titled “I’m OK, You’re OK”.  It sold 15 million copies because its advice was very sound.

This is not an invitation to be self-centered.  We all need to become more self-aware.  Discover your talents and your non-talents.  Listen to others.  Seek feedback and advice. 

Because we have so many choices, engagement in life is critical.  Many adults, in their roles as workers, family and friends, choose to not fully engage in life.  They try to avoid responsibility for themselves and their choices because they are afraid of making mistakes.  Unfortunately, “there is no place to hide”.  Others will hold you accountable anyway.  Embrace responsibility and make it a habit. 

Engage in life; explore and experiment.  When you are older, you will not regret these adventures, but you might regret the things you missed.  Have the confidence to “take the road less traveled”.  As we learned playing “Milk League” baseball, “you can’t get a hit, if you don’t step up to the plate.”

View life as an exciting journey.  Don’t make it a death march in pursuit of a single goal, like career success.  Don’t think “If I only had a better job, a winning team, a better spouse, a bigger house or a full head of hair, things would be different”.  Joy comes from living life, not from dreaming about or even from reaching goals.

Accept that “life is not easy”.  Life remains a challenge.  Use the “in spite of” strategy.  In spite of the challenges, risks, hurts and pains, I will choose to do X.  If the challenges become too great, get help.  Family, friends and counselors are ready to help.  They all want you to succeed.

World of Community

We all need to earn a living and make wise choices.  But, to be happy, we must also live in the world of community.  We live in a world that glorifies material success and the individual.  However, history, science and common sense tell us that happiness does NOT come from wealth and introspection.  Happiness comes from relationships.  Every wisdom tradition, including psychology, has found that people are truly happy ONLY when they live for something outside of themselves.

In our everyday lives, family matters most.  Family life is difficult.  But, we were created to live with others.  We give and we get even more in return.  On my wife’s nightstand, there is a picture of two identical dogs sitting on a beach, much like the Fairport beach, at twilight, with the quote: “Love does not consist in gazing at each other, but in looking outward in the same direction”.  Invest in a high quality family life.  It will provide the greatest rewards.

Fun social groups matter.  Make time for bowling leagues, youth sports, church groups, boy scouts, girl scouts and playing cards with friends.  These low-cost activities create a high quality life.

Your local community matters.  There is great value in the familiarity, pride, loyalty and common interests of the local community.  Village residents already know this.  Your big city neighbors yearn to find this sense of place, security and belonging. 

Our national community and government also matter.  In a society with 300 million members, it is tempting to be a “free rider”.   We have found that democracy is the best form of government.  It allows the hopes and values of the people to be translated into laws to guide society.  Society needs your active involvement in the political process.  Our future depends upon it.

Finally, spiritual belief matters.  We all have a deep need to matter and to be significant.  This is fulfilled by connecting to something larger than ourselves.  We all ask the same questions: “what is the meaning of life?”, “where did the world come from?”, “why was I created?”, and “what happens in the long-run?”  These religious questions are part of our deepest nature.  Finding your relationship with eternity, mankind, truth and god is a vital part of your journey.

We live in these three worlds of commerce, choice and community.  Your generation inherits a world that is more complex, fast-paced and demanding than those of the past.  Some scholars wonder if we are “in over our heads”, with the demands of life exceeding our capabilities.  I believe that we are blessed to be able to lead even richer lives today.  I agree with the author Harold Kushner who says that God always provides each of us with the strength and capacity to make our journeys with confidence. 

On behalf of the “class of 1974” and the Fairport community, I wish each of you success on your journey.  I am confident that you are very well-prepared for the exciting worlds which lie ahead.

Indiana 2050

tomkapostasy4 Comments

It will take some time for the official 2010 Indiana census to be complete.  The 2009 estimates and 1950-2000 census data can be used today to create a reasonably accurate picture of Indiana in 2050, 40 years from now.

Indiana grew by 24% from 1970 to 2009 and is likely to grow by 25% from 2009 to 2050.  The population will increase from 5.2 to 6.4 to 8.0 million residents.

In 1970, Indiana had only 4 counties with populations of 200,000 or more: Marion (Indy) at 794,000, Lake (Gary) with 546,000, Allen (Ft. Wayne) with 280,000 and St. Joseph (South Bend) with 245,000.  These four counties contained 1.9M people, or 36% of the 1970 population.  They grew to 2.0M in 2009 and an estimated 2.2M in 2050. 

By 2009, there were 6 counties above 200,000 populations, with Elkhart and Hamilton counties joining the list.  By 2050, it is likely that 10 counties will be above the 200,000 mark, adding Porter, Hendricks, Johnson and Tippecanoe counties to the list.

Between 2009 and 2050, Indiana is expected to grow by 1.6M people, or 25%.  Ten of the 92 counties will experience two-thirds of the growth across the next four decades.  Based on recent trends, Hamilton County will add 300,000 residents.  Suburban Hendricks and Johnson counties will grow by 100,000 residents (89%).  Marion and Allen counties will add 80,000 residents at 10-20% growth.  Tippecanoe, Hancock, Elkhart, Porter and Boone counties will each grow by 60-80,000 residents.

Five Indianapolis area counties will experience 70% or higher growth.  Hancock, Hamilton and Boone Counties will grow by 100%, with Johnson and Hendricks Counties close behind.  The nine counties in the Indianapolis area grew by 46%, from 1.25M to 1.8M people, in the last 40 years and are expected to grow by a further 43% in the next four decades, reaching a population of 2.6M.  This 790,000 person growth accounts for half of the state’s total growth from 2009 to 2050.  The Indianapolis area will grow from 28% to 33% of the total state population.

Eleven counties will change population ranks by three or more places.  Boone and Hancock Counties will climb 9-10 places.  Shelby, Clark and Hendricks Counties will rise 3-4 places.  Delaware, Wayne, Henry, Grant and Vanderburgh Counties will decline by 3-4 places.  Howard County may drop 7 places.

Indiana’s population will continue its 0.5% annual growth rate and reach 8 million by 2050.  Growth will be highly concentrated in a small number of urban counties.  The top ten counties, each with 200,000 or more people, will account for 50% of the state population.  The next 11 counties, each with 100,000 or more people, will account for another 19% of the state population.  These 21 counties will capture 80% of all growth,

averaging increases of 60,000 people.  The remaining 71 counties will experience growth of 4,000 people each on average.

       Pop   Pop   Est   2009-50     2009   2050   Chg 
SMSA County City  1970   2009   2050   Growth  Pct  Rank   Rank   Rank 
                     
Vincennes Knox Vincennes       42       38         38           –   0%       37 37       –  
Terre Haute Vigo Terre Haute      115     106       106           –   0%       17 19       (2)
South Bend Elkhart Goshen      127     201       273           72 36%        6 6       –  
South Bend Kosciusko Kosciusko       48       76       104           28 37%       19 20       (1)
South Bend LaPorte LaPorte      105     111       120             9 8%       15 16       (1)
South Bend Marshall Plymouth       35       47         59           12 26%       31 31       –  
South Bend St. Joseph South Bend      245     268       289           21 8%        5 5       –  
Richmond Henry Newcastle       53       48         48           –   0%       30 34       (4)
Richmond Wayne Richmond       79       68         68           –   0%       25 29       (4)
Muncie Delaware Muncie      129     115       115           –   0%       14 17       (3)
Louisville Clark Jeffersonville       76     108       148           40 37%       16 13        3
Louisville Floyd New Albany       56       74         94           20 27%       21 23       (2)
Lafayette Tippecanoe Lafayette      109     168       248           80 48%        8 8       –  
Kokomo Cass Logansport       40       39         39           –   0%       36 36       –  
Kokomo Grant Marion       84       69         69           –   0%       23 27       (4)
Kokomo Howard Kokomo       83       83         83           –   0%       18 25       (7)
Indianapolis Boone Lebanon       31       56       114           58 104%       27 18        9
Indianapolis Hamilton Noblesville       55     279       579         300 108%        4 2        2
Indianapolis Hancock Greenfield       35       68       144           76 112%       24 14      10
Indianapolis Hendricks Danville       54     141       261         120 85%       11 7        4
Indianapolis Johnson Franklin       61     142       242         100 70%       10 9        1
Indianapolis Madison Anderson      139     131       141           10 8%       13 15       (2)
Indianapolis Marion Indianapolis      794     891       971           80 9%        1 1       –  
Indianapolis Morgan Martinsville       44       71       101           30 42%       22 21        1
Indianapolis Shelby Shelbyville       38       45         61           16 36%       33 30        3
Ft. Wayne Allen Ft Wayne      280     354       434           80 23%        3 4       (1)
Ft. Wayne De Kalb Auburn       31       42         54           12 29%       34 32        2
Ft. Wayne Noble Albion       31       48         68           20 42%       29 28        1
Evansville Vanderburgh Evansville      169     175       189           14 8%        7 11       (4)
Evansville Warrick Booneville       28       59         84           25 42%       26 24        2
Columbus Bartholomew Columbus       57       76         96           20 26%       20 22       (2)
Columbus Jackson Brownstown       33       42         45             3 8%       35 35       –  
Cincinnati Dearborn Lawrenceburg       29       51         71           20 39%       28 26        2
Chicago Lake Gary      546     494       534           40 8%        2 3       (1)
Chicago Porter Valparaiso       87     164       232           68 41%        9 10       (1)
Bloomington Lawrence Bedford       38       46         50             4 8%       32 33       (1)
Bloomington Monroe Bloomington       85     131       171           40 31%       12 12       –  
  Subtotal 37 counties   4,091  5,125    6,543      1,418 12%      
                     
  All Others 55 counties   1,104  1,298    1,459         161 12%      
  (Pct of State)   21.3% 20.2% 18.2% 10.2%        
                     
  Indiana     5,195  6,423    8,002      1,579 25%      
        24% 25%          
                     
Indianapolis       1,251  1,824    2,614         790 43%      
(Pct of State)     24.1% 28.4% 32.7% 50.0%        

2009 and 2010 College Grads Struggle

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http://www.dailytoreador.com/la-vida/college-s-seniors-face-unusually-dismal-job-market-1.2245660

http://www.macon.com/2010/04/25/1106422/tough-assignment.html

http://www.marketwatch.com/story/2010-college-graduates-to-face-a-highly-competitive-job-market-but-one-that-may-pay-better-than-last-year-finds-careerbuilders-annual-forecast-2010-04-14?reflink=MW_news_stmp

http://www.tampabay.com/news/education/college/new-college-graduates-face-a-tight-job-market/1090306

http://www.economist.com/business-finance/displaystory.cfm?story_id=16010303

http://online.wsj.com/article/SB10001424052748704207504575130171387740744.html?mod=rss_com_mostcommentart

http://www.usnews.com/articles/education/best-colleges/2010/04/29/rosier-job-outlook-for-college-graduates.html

From sunbelt Florida to Georgia to Texas the local hiring reports remain negative for college grads for the second straight year.

When engineering students can’t find jobs, you know there’s a major problem.

When the Wall Street Journal  writes about white collar parents and unemployed children, you know there’s a major problem.

The recovery graph in the latest Economist article shows that recovery is far slower than in past recessions.

Only the US News & World Report headline writer could find a way to put a positive spin on the situation with “Rosier Job Outlook for College Grads”, but even they recognized that “the job market remains treacherous for college grads”.

Net job creation finally turned positive last month.  The leading economic indicators have been positive for 12 months in a row.  Some reports, like record 27% housing sale increases, are “off the charts” positive, even if driven by an expiring tax credit. 

Nonetheless, this will be a slow recovery.  The 2002-2008 recovery was panned as the jobless recovery.  Historically, financial crises require significant time to heal.  The overextended American consumer, government, banks and dollar need time to adjust.  The flexible US workforce has responded by increasing productivity by 6%, reducing the need to hire.  Corporations budgeted for capital projects and new hires in 2010, but have not yet released the funds. 

Like “the little engine who could”, it will take time for this economy to build up a head of steam.  As the economy recovers, hiring will increase and employers will welcome those new college grads to cost-effectively replace those retiring Baby Boomers whose investments have gained 70% in the last year.

Economic(s) Progress?

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Adam Smith started a conversation in 1776 about the economic and moral benefits of the “invisible hand” in the marketplace – making society better off, in spite of there being no coordinated plan.  Karl Marx argued that the unstoppable workings of history would inevitably lead to a socialist utopia.  In 1976, the sociologist Daniel Bell wrote of the “Cultural Contradictions of Capitalism”, whereby the underlying Protestant Work Ethic is corroded because of the hedonistic consumerism in a capitalist society.  Marx was wrong.  Bell was wrong about the end of capitalism, even if his critique of an aimless society still stings.  Where do we stand today on Smith’s breakthrough claims regarding the moral and economic superiority of the “free market”?

Support for the most simplified view of markets being truly perfect reached its peak following the Reagan/Thatcher years when the totalitarian communist alternative collapsed and the Atlantic version of a mixed economy demonstrated significant ongoing advantages compared with the Nordic version with greater state involvement.  Events of the last two decades – rise of China/emerging markets and fall of US/UK from the Great Recession – have undercut the plausibility of an extreme market solution being the best,  only or final answer.

It is obvious in hindsight that the business cycle has not been tamed, that financial markets are inherently unstable and subject to “animal spirits”, that markets are not perfect and that greed will continue to drive many market participants.  In spite of the positive societal benefits of financial innovations such as options, mutual funds, checkable deposits, portfolios and securitized assets, the broad financial sector seems to be an ongoing source of the greatest failures in capitalism.  The formal definition of “perfect market theory” has not reduced volatility, but it has led to a finance sector where every possible trick is used to generate “wealth”: Ponzi schemes, the carrying trade in foreign investing, borrowing short and lending long, off-balance sheet vehicles, hedge funds and extreme leverage to name a few.

A visible part of the general business sector appears to be equally enamored of finding every possible way to create financial wealth beyond “the old fashioned way, we earn it”.  Mergers and acquisitions continue because they can reduce competition, leverage overvalued stock prices and employ low-cost borrowing, even though on average they do not provide a net return to stockholders.  Corporations manage reported earnings, producing smooth growth for quarters until the next recession provides an opportunity to report losses due to extraordinary items and business conditions.  Executive pay increases as a share of revenues, as stockholders find themselves unable to solve “the agency problem”.  Corporations promote legal and public relations executives to the highest levels because the opportunities to create incremental wealth through influencing public policy are greater than investing in new products or markets.

On the other hand, it remains clear that capitalism remains a tremendous value creating mechanism for society, with productivity growth, innovation and personal incomes rising at strong rates without any long-term end in sight.  The system’s incentives do focus resources on innovation and dynamic value creation.  In spite of John Kenneth Galbraith’s old claims in “The Affluent Society”, there appears to be no limit to the demand for personal consumption at any income levels in society.  The recent work “Richistan” notes that individuals with $5M of annual income feel they would be secure if they only earned 50% more!

In a fundamental way, we’ve come back to the basic framework and issues of economics raised in the post-war period.  What is the right role for government in a mixed economy? 

We have learned some things in the last 50 years and the consensus view is more to the right than it was in 1950 or 1970.  The dynamic long-run wealth creating role of capitalism is better appreciated, including its role as a poverty and inequality reducing strategy.  Most agree that monetary policy matters, expectations about government behavior matter and “fine tuning” is only a theory.  Market competitors are the best anti-monopoly force, so regulation should be light and focus on anti-competitive actions rather than narrowly defined market shares.  Ongoing growth of real incomes in the bottom third of society can offset rising dollar inequality.  John Rawls’ philosophical justification for some income redistribution resonates for many moderates and liberals, but Robert Nozik’s emphasis on “fair rules” alone provides conservatives with a deeply felt alternative view.  Government actors are as subject to self-interest as consumers and capitalists, especially with regard to being “captured” by those they aim to regulate.  Countervailing forces such as labor unions are blunt instruments, which may not even benefit the groups they aim to support.

Many economists would like to see the public policy debates return to the post-war topics, with the two political parties sliding from left to right within the informed framework of current economic knowledge.  Capitalism provides great value as Adam Smith demonstrated.  There are inherent risks due to relying on self-interest (as Smith also noted).  There is a role for government in counterbalancing the business cycle, maintaining fair markets, managing the self-interest of government actors and ensuring public support for capitalism in spite of the unequal distribution of benefits.  The political parties exist to find a “happy medium” on these issues.

The current political climate does not readily support this possibility.  The Republican Party has become increasingly consistent, philosophical, libertarian and monetarist in its views.  Its leaders increasingly define a single economic viewpoint: minimal government, no taxes, minimal economic regulations, rules based monetarism, minimal anti-competitive policy or enforcement, zero income redistribution, etc.  While each of these views has philosophical and substantive research support, the combination of doctrinaire views leaves no room for a sliding scale in public policy, for the only preferred solution is “zero”. 

The Democratic Party has not lost its preference for “redistributing the pie” versus “growing the pie”.  It has not helped its union supporters to evolve into a German or Japanese style alternative way.  It has championed continued protection of its public sector employee supporters from accountability or competition.  It has reached the goal of universal social welfare coverage for health care.  In spite of some tactical moves to the center on economic issues (welfare reform, the means of health care reform, international trade), the Democratic Party continues to emphasize those policy areas that increase the role of the state versus the individual, rather than identifying ways to better leverage the value creating potential of markets.

It seems that it will take more than President Obama’s slogans of “hope and change” to get our political parties and politicians to focus on the potential for increased economic growth and pragmatically justified economic roles for the government.  Perhaps, we need another “political economist” to develop a breakthrough theory of the political sector as insightful and valuable as Smith’s view of the market.

Screening for Leadership Experience

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As firms return to a normal economy where success is determined by the ability to set and implement a distinctive strategy, develop new products, processes and customers, and align functional resources in a project based matrix structure, it is time one again to screen for leadership in the hiring process. For the last 2 years, with an abundance of candidates and a preference for risk aversion, hiring managers, human resources and recruiters have laser focused on finding the very best match between a candidate’s industry, functional and positional experience for an open position, without regard to long-term considerations. Hiring managers should insert more behavioral interview questions about leadership into the process and they should screen for evidence of leadership success in the resume review and screening interview process.

Ask ten experts to define “leadership” and you’ll get ten different answers and lists of competencies, but they’ll cluster into a few areas such as building teams, being self-aware, growing personally and professionally, displaying trust and integrity, communicating effectively, motivating/influencing/persuading, helping others to succeed, setting and sharing a strategic vision, taking risks, innovating, being responsible, making tough decisions, showing tenacity and taking a long-run view of what is best for the organization as a whole. A simple leadership checklist can be used to identify candidates who have the leadership experience needed to succeed.

Leadership Screening Checklist

1. Positional responsibility, staff count, manager count, functional variety.

2. Cross-team member, positional leadership, selection by others, larger projects.

3. Non-work leadership roles, professional and civic groups.

4. Progressively responsible roles and promotions across career.

5. Professional mastery/certification and CPE in one or more areas.

6. Five year tenure at most employers.

7. Variety of recommendations available/given in 360 degree fashion.

8. Internal or external teaching, training and documentation experience.

9. Projects/assignments in new, challenging or unpopular business areas.

10. Projects/assignments in high value, visibility or risk business areas.

11. Matrix experience in product development, IT, M&A, national account management.

12. Formal mentoring, association or accountability partner experience.

13. Strategic, product, marketing, financial or operational planning leadership role.

14. Top-level responsibility for a function or business unit of any size.

15. Variety of headquarters/field, line/staff and domestic/international experience.

16. Variety of industry, function and organization size experience.

17. Change management experience through start-ups, rapid growth, turnarounds, recessions, acquisitions or reorganization.

18. Implementation of new professional methods and technologies.

19. Human resources recruiting, retention, promotions, transfers and morale.

20. Responsibility for new products, sales, suppliers and negotiations.

Organizational success today requires leaders who are experienced and confident in challenging and ambiguous environments. Screening for this broader experience and capacity may be more important than hiring someone who has done exactly the required role at the closest competitor for the last five years.

10% Labor Force Growth, 1998-2007

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 US Employment by Industry         
         
   1998   2007   Change   Pct 
 Extraction/Utilities       2.3      2.5          0.2 9%
 Construction       6.2      7.6          1.4 23%
 Manufacturing      17.2    13.7         (3.5) -20%
 Wholesale/Retail Trade      18.1    19.8          1.7 9%
 Transport/Warehouse       3.9      4.3          0.4 10%
 Information       3.1      2.9         (0.2) -6%
 Finance/Insurance       5.4      6.0          0.6 11%
 Real Estate       1.7      2.0          0.3 18%
 Profl, Bus, Adm Services      21.2    25.0          3.8 18%
 Education       2.0      2.7          0.7 35%
 Health Care      11.2    14.3          3.1 28%
 Arts, Entertainment, Recreation       1.4      1.7          0.3 21%
 Accommodations/Food       8.1      9.4          1.3 16%
 Other Services       5.3      6.0          0.7 13%
 Government      18.7    20.2          1.5 8%
    125.8   138.1        12.3 10%

Indiana Redistricting Proposal Adds Value

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“For the want of a nail, the shoe was lost; for the want of a shoe the horse was lost; and for the want of a horse the rider was lost, being overtaken and slain by the enemy, all for the want of care about a horseshoe nail.”  —  Benjamin Franklin

 Now, more than ever, society must rely on real economic growth to make the pie larger and allow us to choose how to divide the pie.  In the hot policy areas – global warming, health care, unemployment, alternate energy, retirement security, national security, adequate food – all solutions depend upon our ability to grow the economy.

 The private sector, especially in the last 30 years, has demonstrated its nearly unlimited ability to create value.  The contrast between productivity growth in the competitive sectors (ag, manufacturing, distribution, communications, mining, transportation, media, banking, IT, services) and the others (government, social services, utilities, education, health care) is instructive.  About 60% of the economy delivers 3-5% annual productivity improvements, while the other 40% is stuck at 0-1%.

 The slow growth sectors are all in areas where market failure is the rule – sometimes because services are natural public goods and sometimes due to natural monopolies, externalities, or unequal information.  In each case, there is a key role to be played by the government in shaping these industries to pursue continuous improvement as happens naturally in other sectors.

 Unfortunately, our political system does not produce “philosopher kings” who cooperate to find optimal solutions.  In a two-party democratic system, the best that can be hoped for is that the two parties will define contrasting, yet centrist policies and employ politicians who can seek re-election by solving some problems rather than merely demonizing the other side.

 The gerrymandering of Indiana congressional, senate and representative districts every 10 years encourages a polarized political environment.  The party in power draws districts to maximize their representation by creating as many 55-60% safe districts as possible, while consolidating their opponents into as few 80-90% majority districts as possible.

 This process results in extreme left and extreme right candidates winning nearly all races.  Centrist candidates have no chance in stacked districts.  Centrist voters have no influence in stacked districts.  The political parties attract extremist candidates.  They attract extremist supporters.  Only in a small minority of districts do voters have a choice between two qualified centrist candidates who mainly differ by a modest degree on the political spectrum. 

 The Indiana Senate’s Republican Caucus, Secretary of State Todd Rokita and Carmel representative Mike Delph have floated various proposals to turn redistricting over to some form of non-partisan commission, required to take advantage of the computer software which can define boundaries to maximize the compactness of each district, without considering socio-economic, religious, racial or political factors. 

 A visual example of the current skewed districts versus neutral districts is shown at http://bolson.org/dist/IN/.

 Members of both political parties should be able to see that the skillful use of gerrymandering today is a recipe for failure.  Even California voters are now seeing that structures that lead to polarization can bankrupt a state.  Indiana voters who care about the future should pursue this “good government” initiative.

Indiana Metro Growth Trends Continue

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Since 1900, a majority of Indiana counties have grown by less than 0.4% per year.  These 47 rural counties have been trapped in a time machine, slowly evolving from 20,000 to 24,000 people per county.  In 1900, they accounted for 38% of the population.  This dropped to 23% in 1950 and 17% in 2010.  These counties account for half of the counties and land, but only one-sixth of the population.  The urbanization of Indiana continues slowly, decade after decade.  The 47 rural counties had a population of 960,000 in 1900 when William McKinley of Ohio was elected president and only 1,120,000 in 2010.

 On the other hand, the urban counties have more than tripled in population (+241%), increasing from 1.6 to 5.3 million.  Indiana has grown by 155%, from 2.5 to 6.4M people.  Fully 96% of this growth has taken place in the 45 urban counties.

 The ten medium-sized cities and their immediate counties increased by two-thirds between 1900 and 1950 and then by one-sixth through 2010.  They accounted for 460,000 people in 1900, increased to 760,000 in 1950 and maintained minor growth to 870,000 in 2010.  Evansville, Anderson, Muncie, Terre Haute, Kokomo, Marion, Richmond, Bedford, New Castle, and Huntington grew from counties with 30-70,000 residents in 1900 to counties with 40-170,000 citizens across the century.

 The five largest cities – Indianapolis, Fort Wayne, Gary and South Bend/Elkhart – grew significantly faster.  They increased from about 0.4 million in 1910 to 1.4 million in 1950 to 2.2 million in 2010.  The rapid growth from 1900 to 1950 has since tapered off.  These 5 areas have grown from one-sixth of the state’s population to slightly more than one-third.  

 The greatest changes have taken place in the suburbs.  Fully 28 counties plus Lafayette and Bloomington have benefited from the growth of metropolitan areas.  These 30 counties have grown from a 1900 average population of 23,000 (abut the same as the rural counties) and total of 680,000 to 860,000 in 1950 (up 26%) to 1,950,000 (up a stunning 186%) in 2000 and an even higher level of 2,250,000 in 2010.  The suburban counties have increased from 27% to 35% of the Indiana population.

 Indiana’s population growth is expected to drop back to 6% for the 2010 decade after a 10% increase in 2000, 1% in 1990 and 6% in 1980.  This follows a post-war period where 15% growth per decade was the norm.  This decade continues to show very unequal growth.  The 30 suburban counties show a 14% growth of 305,000 people.  The other 62 counties increased by only 1%, from 4.1 to 4.2 million people.  The 30 suburban counties have 88% of the population growth. 

 Indiana has been blessed to have 6 urban areas that drive significant population growth: Chicago/Gary, South Bend/Elkhart, Ft. Wayne, Indianapolis, Cincinnati and Louisville.  The state legislature would be wise to adopt policies that reinforce this century long trend.