Monetarists to the rescue--update

According to BBC, the Fed rate cut has perked up markets around the globe. Traders are smiling for the first time in weeks.

"In Europe, London's FTSE 100 was 2.3% ahead by 0940BST while France and Germany's key markets were up about 2%.

Japan's Nikkei index closed up 3.7% while Hong Kong's Hang Seng index climbed 4.2%.

The Fed cut its benchmark federal funds rate from 5.25% to 4.75%, sending US shares up sharply."

British bank run update

The Guardian Unlimited reports ("Fears grow for British economy as panic over Northern Rock spreads") in tomorrow's edition that:

"US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain's buy-now-pay-later economy."

What is Mr. Paulson going to advise? He represents the world's leading buy-now-pay-later economy. Our economic growth has been predicated on debt for years. It's how we sustain the illusion of middle-class expectations and upward mobility. You get to pretend you own stuff and that you have earned stuff, in exchange for accepting all sorts of systemic injustices and thwarted opportunities. It's our national devil's bargain.

What can the British possibly learn from us? Perhaps Mr. Paulson will advise how to calm the sensibly alarmed Brits with some rhetorical strategies tying economic stability to consumer spending and attitude.

Even now, credit card companies are ramping up sales pitches to subprime borrowers, while cutting back on offers to good credit risks.(source) They can make so much more on people who carry a balance and accumulate late payment fees. In this financially twisted environment, it's good business to lend to people who have little to no hope of paying back their debts. It's 21st-century servitude to a monstrous and invisible master.

Welcome aboard good people of Britain. Teach us that panic may be a reasonable response to fiscal irresponsibility.

Brits have a bank run

What is the a logical outcome of unscrupulous mortgage lending practices in Michigan? More foreclosures? Yes. Sagging house values? Yes. Tightening global credit market? Yes.

A good old fashioned bank run in Britain? Well, by extension, yes. The bank's problems are blamed on the ongoing global credit crunch that has its roots in subprime lending in the U.S.

BBC reports today that over the last two days, Northern Rock customers have queued up and waited for hours to withdraw funds from bank locations across the country.

"Banking sources suggest that on Friday alone clients pulled out £1bn - or 4-5% of retail deposits."

That's $2 billion in one day.

My car, my self--buying American in a global economy

cross-posted at Michigan Messenger

In Michigan, identifying with a car company can be like claiming an ethnicity. People boast, "we're a GM family" or "I'm from a Ford family." These loyalties have ripened over generations of auto industry employment and are rooted in the days of American auto manufacturing dominance.

There really was a time you could be sure a car was American-made (in the U.S.A.) from bumper to bumper.

In today's global production environment, cars are evaluated for "domestic," not American, content. The October Chicago Fed Letter titled "Whose part is it?-Measuring domestic content of vehicles" (by Thomas H. Klier and James M. Rubenstein) examines how the federal government determines domestic content of vehicles sold in the U.S. and the factors influencing the ultimate mix of materials.

There are actually three methods in place to determine whether a car can be called "domestic."

EPA calls a vehicle "domestic" if at least 75% of its content is produced in North America, including Canada and Mexico. The Department of Treasury, Customs Service uses the benchmark of 50% U.S. or Canadian content. The American Automobile Labeling Act (AALA) of 1992 calls a vehicle domestic if 85% of its parts originate in the U.S. or Canada. In addition, those parts must have 70% of their content from the U.S. or Canada.

The domestic/foreign distinction has become very, very blurry.

"You can't just look at the badge on a hood and think that gives you an accurate representation" of the car's origin. "You have to look at it on a model by model basis," said Bernard Swiecki, senior project manager with the non-profit Center for Automotive Research.

"The Chrysler 300C has been held up as the return of the traditional American sedan, with rear-wheel drive, V8 engine, aggressive styling, and muscle. But the car itself is built in Canada. It has a Mercedes designed transmission and the hemi engine is actually built in Mexico," he said.

"The Honda Accord is a Japanese automaker's vehicle. But certain configurations have an American transmission and engine and are built in Ohio."

The Fed Letter reports that the 2006 Honda Accord was 70% domestic, while the 2006 Ford Mustang came in at 65% domestic.

Like a nutrition label, the AALA label is there to help you decide what to buy based on your values, not just your appetite.

The AALA requires manufacturers to disclose where vehicles are assembled, where engine and transmission originate, and--in cases of less than 85% domestic content--the two foreign countries contributing the highest amount of content. This is on the same label that lists emissions and gas mileage data.

If you don't want to read the label, but still want a statistic to buttress your loyalty consider this: in 2006, 96% of vehicles sold in the U.S. by the Detroit three were assembled in North America.

Most vehicles sold in the U.S. by the Detroit three are still American-made--North American-made, that is.

Real Economy versus Banking Sector

On any day, you can find contradictory predictions for the U.S. economy as the subprime debacle expands. Yesterday, the Fed seemed to be saying,"Don't panic. The difficulty is limited to housing." Today, Federal Reserve Governor Randall Kroszner remarked that "Turmoil stemming from subprime mortgage delinquencies could dampen demand for homes and ultimately slow U.S. economic growth."(source)

Now here's the best part from the Reuters article:
"Kroszner, cautioning that his remarks were intended to be a survey of academic research rather than a commentary on the current financial situation, said crises in the banking sector can lead to disruptions in the real economy."

The banking sector versus the real economy? I suppose the real economy is where human beings do things like live and eat and work. You don't actually need currency to do those things. You could barter, raise your own food and use passive solar power. That would obviate the need for a banking sector. The fact is we have developed to a point where most aspects of what we do are financialized.

If you thought your house was primarily the place you live, you were wrong. When you "bought" your house (if you have a mortgage), the transaction created a debt instrument, which was turned into an investment vehicle, which became someone else's gamble. You happen to live there, but it was never merely your home. It was a poker chip among millions of tiny little poker chips on an earth-sized virtual game table.

No matter how much money central banks give troubled lenders, real people are in real pain in the real economy. The real economy is where human beings are hungry and homeless and sick. It is where people feel ashamed at being laid off or falling behind on the bills. It is where parents feel devastated at not being able to buy kids a new outfit for the first day of school. And they may even blame themselves for not earning enough at a poverty-wage-paying, real-economy job.

Will the subprime crisis reach beyond the housing sector? It already has. GM is cutting back fourth quarter production 10 percent in anticipation of lower demand. (source)

And ponder this, the financial sector is a huge part of the much vaunted "knowledge economy." Any room for fairness or compassion as we move forward?

Michigan Ranks 19th Nationally for Annual Agricultural Exports

The upside of global economy?

Michigan's Department of Agriculture announced this good news today (press release).
According to the USDA Michigan’s agricultural exports generated more than $1 billion and supported nearly 13,000 jobs.

Michigan's top five agricultural exports in 2006 were:

* Soybeans & Products - $233 million
* Feed & Grains - $216.6 million
* Vegetables - $114.3 million
* Fruit - $97.6 million
* Dairy - $70.9 million

“Through MDA’s International Marketing program, the state not only has been able to maintain its top three export markets, but is looking to grow and expand to other areas,” said MDA Director Mitch Irwin. “We are currently exploring emerging markets in Central America, Africa, India, China and elsewhere to increase Michigan’s visibility in the international arena.”

Well, just don't send all the tart cherries abroad. Okay?

Garage Sale as Economic Indicator

I threw an impromptu garage sale today piggybacking on my neighbor's sale. Our signs boasted "2 Sales" suggesting bountiful synergy.

But the bottom line is that even in Michigan's dismal economy, I cannot compete with China. I cannot compete with the dollar store (also China). I cannot compete with Walmart (China). And Ann Arbor's Salvation Army Store is in a wholly other league.

My neighbor and I had assorted goods--furniture, toys, electronics, guy-oriented gadgets, sporting goods, bizarre kitsch, flower vases, small appliances, clothing, a few books. We were not skewed toward any typical garage sale demographic (single mothers, young mothers, new mothers, marginally employed immigrants, retired couples, college students, laid-off workers, professional resale "cherry pickers," mothers with small children looking for a cheap Saturday activity, elderly survivors of the Great Depression, the nattily dressed luxury car drivers). We were not overpriced.

What can you learn from a garage sale? Is it in any way an informative economic indicator? On a microeconomic level, yes. Things are only worth what someone will pay for them. And expectations in the United States have been conditioned by abundant, cheap things made in China. Shoppers wanted to pay 25 cents for things that would command $25 in a discounted retail environment. And when asked if they could go to 50 cents they balked. Was 50 cents really too much for them? After all, Michigan's economy is in dire straights. Were they hoping that I needed to sell these things, so they could get a mean bargain? Did they need me to be more desperate to sell than they were to purchase?

Monday, I will take all that remains to the Salvation Army where I will be compensated with a receipt for tax purposes. Next time, I will skip the nickel and diming and just go for the tax receipt.

Consumer Confidence in the Global Village

The University of Michigan Institute for Social Research has been conducting consumer surveys since 1946. Earlier this year, UM entered a partnership with Reuters to disseminate the results of their consumer surveys. The gold standard of such surveys, the Index of Consumer Expectations portion is an official component of the U.S. Index of Leading Economic Indicators.

The final numbers for July are due out tomorrow morning. Drum roll please. The preliminary numbers for July were unexpectedly high--92.4 up from 85.3 in June. But domestic economic news has been mixed in the meantime.

On Tuesday Countrywide Financial Corp., the nation's largest mortgage lender, reported a 33% drop in second quarter net income. It also reported that prime borrowers are showing payment difficulties on home equity credit lines.

At 3:30 today, the Dow was down by 350 points, with analysts citing concerns about credit as catalyst for the meltdown. And this had a global impact, as the SanDiego Tribune online site reports:"The declines triggered a global sell-off in stocks, causing minor losses in Europe to accelerate rapidly along with the Dow's drop. In Europe, Britain's FTSE 100 closed down 3.15 percent, Germany's DAX index dropped 2.39 percent, and France's CAC-40 fell 2.78 percent."

To prepare for Friday's release, have a look consumer and business confidence assessments from the global village:

South Africa--Consumer Confidence Still Positive-MasterIndex survey commissioned by Mastercard.
India--India Tops Consumer Confidence Index--AC Nielsen survey for the first half of 2007.
Turkey--Consumer Confidence Drops by .82%--survey by Turkstat and the Central Bank of Turkey.
China--Consumer Confidence Rebounds in July--survey by Xinhua Finance and eziData.
Germany--Business Confidence Falls Slightly in July--survey by Ifo, Munich.
France--Business Confidence Near Six Year High--from Insee, Paris-based national statistics office.

The official release of the Reuters/UM Consumer Confidence Index is around 10a.m. Brace yourself.

Baseball in Motown--Tigers Win in Extra Innings!

Last night, Detroit squeaked by Kansas City in the bottom of the tenth when Inge nailed a two-run homer for the 10-8 win. It wasn't a pretty game (Verlander threw three wild pitches early on), but in the end our guys won.

I'm not a baseball expert, just a fan. I know just enough to enjoy a game from start to finish. The huge scoreboard showing player stats, rosters, and a running tally of plays helps.

At Comerica Park you can't miss Detroit's car culture. You are steeped in it from the General Motors Fountain that erupts for home runs and strikeouts to the incidental music -- Car Wash, Glory Days, Rock the Casbah (unofficial anthem of U.S. forces during the first Gulf War), Love Shack ("...I got me a Chrysler as big as a whale and it's about to set sail!"). The park is situated so that Detroit's skyline--with the GM Renaissance Center directly to the right of the scoreboard--completes it.

Baseball, hot dogs, apple pie--all American. But there is more to that litany--oil, nearly a century of European and American meddling in the Middle East, giant gas-sucking cars, suppression of alternative energy technology. Michigan finds itself in an identity crisis. As does Motown; The Big Three, displaced by Toyota's ascent to number one in 2006, became The Detroit Three. These rankings matter more than baseball team stats because as our guys lose market dominance, Wall Street loses confidence and workers lose jobs.

But this week there was some encouraging news from General Motors. According to GM and Toyota (source), GM sold more cars in the first quarter of this year than Toyota. It would appear that we are in extra innings.

From the Wall Street Journal online:
"Through the first six months of the year, GM's global sales were up 1.7% to 4.67 million, and the auto maker said it's on pace to have its second-best annual sales performance world-wide in its history."

That is, emerging markets (Asia, Latin America, Africa and the Middle East) are hot for GM's cars.

Good news for investors. Good news for Motown. For American workers, not so much.

Detroit Three and UAW Prepare to Talk

The Globe and Mail reports that the UAW and GM, Chrysler and Ford will square off in talks that could result in massive off shoring of North American jobs.

According to the article, pressures on the Detroit Three include health care obligations to retirees and current employees, high hourly labor costs, and reduced demand for pickups and SUVs. Unions can expect to be asked to take large cuts in wages and to assume greater responsibility for funding health care and retirement.

Sounds grim, but it really isn't news. In the context of global competition and production, well-paid American workers have much to lose and have been losing for years. The former Big Three, now the Detroit Three, will ask workers to make greater concessions than ever before in order to remain viable.

Did it have to be this way? We have known since the early 1970s that our excessive use of oil would create economic vulnerability. Yet, here we are in 2007 producing gas guzzling cars, trucks and SUVs. And why? Because, say the auto makers, "consumers wanted them." Who are these consumers and how could they have been so short sighted? Are these consumers also workers?

What happened to Henry Ford's idea that workers who produced cars should be able to afford them? It seems today's auto manufacturers have a different vision for their workers. Workers are workers; consumers are consumers. And producers are producers.These days, it is a lucky worker who can also be consumer.

The World is Not Flat

Gas prices in Michigan are the highest in the nation. According to a brief Detroit News article, the reason is our unique geography. Michigan is a peninsula at the "northern end of the country," placing the state at the end of pipelines. I'm sorry. I don't buy that. Why doesn't everything in Michigan cost more then?

Lots of products are shipped to every stinking inch of the US and the prices are fixed at "suggested retail" amounts. They may be priced higher or lower at the discretion of a store, but could all be sold for the same price. And think of all the cheap products from China. In addition to being shipped to our peninsula at the northern end of the country, they first travel thousands of miles from China.

Take a look at the USA National Gas Temperature Map at GasBuddy.com and see if you can discern a pricing pattern based on geographic remoteness. I just don't see it. As for remote northern peninsulas, what about northernmost Maine?

Gas prices are the highest in Michigan, because they can be. Flatworld technology can't save you, where gas is concerned. Go ahead try to network or blog your way to cheaper gas. You can't because you live in Michigan--a peninsula in space and time and your car's wheels roll on the terra firma portion of the sphere we call home.

UM Study: Organic Farming Can Feed the World

Lookout Monsanto, ADM, Cargill, ConAgra...a new UM study reports that "organic farming can yield up to three times as much food as conventional farming on the same amount of land—according to new findings which refute the long-standing assumption that organic farming methods cannot produce enough food to feed the global population."

From the press release:

According to lead researcher Ivetta Perfecto,"Corporate interest in agriculture and the way agriculture research has been conducted in land grant institutions, with a lot of influence by the chemical companies and pesticide companies as well as fertilizer companies—all have been playing an important role in convincing the public that you need to have these inputs to produce food."

"Organic farming is important because conventional agriculture—which involves high-yielding plants, mechanized tillage, synthetic fertilizers and biocides—is so detrimental to the environment, Perfecto said. For instance, fertilizer runoff from conventional agriculture is the chief culprit in creating dead zones—low oxygen areas where marine life cannot survive. Proponents of organic farming argue that conventional farming also causes soil erosion, greenhouse gas emission, increased pest resistance and loss of biodiversity."

20 State Forest Campgrounds Closing

At the peak of the summer season, Michigan is closing 20 state forest campgrounds in the eastern U.P. and the northern lower peninsula. The closures will take effect Monday and last at least through the end of the fiscal year in September, the Traverse City Record Eagle reports.

The closures are a response to a $75,000 cut in this year's appropriation from the general fund.

The DNR press release contains the complete list.

Seventy percent of Michigan's tourism is from Michigan residents. The general fund is state revenue. There is only so much money to circulate. Think of it like the hydrologic cycle and lake levels. Water evaporates, clouds form, rain falls, rivers flow into lakes. Repeat. Business thrives, workers get paid, taxes are collected, the general fund is distributed, campers take holidays and buy stuff in small towns. When the system is in balance and stable, times are good.

But climate change can affect lake levels. Higher water temperatures mean less ice cover in winter and more evaporation year round. Lake levels get lower. And drought does its part. Human activity, decisions, priorities and choices influence the climate.

Now we have climate change, economically speaking. Large businesses leave for cheaper labor, Michigan workers get paid less or lose jobs altogether, local economies struggle, revenues are lower than expected, the general fund shrinks, camp grounds close, mom and pop supply stores up north get less of the green at the very moment they were expecting a seasonal financial boost.

Our economic system is a web of interdependencies and symbiosis. The little guy matters. The candy bar you buy in Marquette could be the dollar that helps a shopkeeper make payroll.

Your smoked fish dinner feeds more than you.

Summer Means Tourism

Pure Michigan is upon us. That's the campaign promoted by Travel Michigan featuring broadcast media spots with Tim Allen at a cost of $8.7 million on out-of-state ads and $1.5 million in the state. (source)

So, how are we doing?

In March, the Michigan Travel Commission released the Michigan Tourism Strategic Plan, the product of a vast collaborative effort initiated in September of 2005.

From the Executive Summary:
"Michigan is primarily a regional tourism destination drawing about 70% of its business from Michigan residents and 20% from residents of adjacent states and Ontario. Its reliance on this regional tourism market is problematic both in the near term and the long run. The Michigan economy has been weak for several years and is projected to remain so for some time. Population growth in this region of the US is projected by the US Census Bureau to lag the rest of the country, which poses a long term threat to Michigan’s tourism industry."

So we have some challenges.

I spoke with George Zimmermann, Vice President of Travel Michigan. "We have traditionally marketed the state regionally for budget reasons. The current Travel Michigan budget is $15.6 million, and the promotion part of that is $13.2 million." About 80% of that is spent out of state and 20% in state. The main regional markets include: Chicago, Cleveland, Cincinnati, Indianapolis, Milwaukee and Ontario.

Good news for the immediate future: passport rules have been eased and the Canadian dollar is strong. Michigan saw improvement in May's unemployment figures in part due to 19,000 new hires in leisure and hospitality services mainly in northern counties.

But like the arts, tourism promotion endured a steady funding decline from 1990 to 2005. Zimmermann said,"In 1990 we had the seventh largest state tourism promotion budget and by 2005 we had dropped to 31st. We did get a reprieve when the 21st Century Jobs fund was created. That provided a one-time funding boost that brought us up to the $15.6 million level. So this year we're back up to 17th. But with the 2007 budget we're at the end of that money."

In addition to maintaining regional promotion efforts, the next big challenge is transforming Michigan from a regional tourism destination to a national destination and ultimately, a global one. Consensus among tourism professionals holds that Michigan can become a national and global destination.

But, given the likely shrinkage of the 70% stay-at-home tourism market, what is being done to grow the other 30%--in particular, the 10% coming from somewhere other than our region?

The May 2007 Travel Michigan Newsletter reports a recent initiative to reach German travelers:
"Travel writers from the North Rhine-Westphalia area of Germany recently toured Michigan to help promote a new KLM/Northwest Airlines direct-flight from Düsseldorf to Detroit. ...The writers represented publications with a combined circulation of over 2.8 million readers. The new direct flight, which begins service in early June, is expected to encourage more visitations through the Michigan gateway by German travelers, seeking a combination of exciting city experiences, active outdoor soft adventure and a more relaxed, freshwater Great Lakes holiday."

This program was part of regional promotion by Great Lakes of North America. Zimmermann said,"The one international effort we are involved in is a consortium of the Great Lakes States, called Great Lakes of North America. It’s been around for almost 20 years. The state tourism offices in Pennsylvania, Michigan, Ohio, Indiana, Illinois, Wisconsin, Minnesota, jointly fund regional promotion in Europe. It’s a way to have influence in the market. We are able to do promotions to get travel writers to come in and we work with tour operators to make sure they feature the Great Lakes in their catalogs and programs."

Zimmermann was very enthusiastic about recent performance of the Travel Michigan website. Michigan's tourism industry web site, www.michigan.org, is being tauted as busiest state tourism web site in the nation. "Our marketing strategy is to get consumers to go to the website, get more information there and then travel. So this is very encouraging," Zimmermann said.

What about 2008? "With 'Pure Michigan' we feel like we have a compelling campaign at this point, but what markets we can be active in next year will be 100% dependent on budget. That will determine if can we even maintain the six primary out-of-state regional markets. That will be strictly a financial decision. Once we know what our budget is we can figure out what to do with it,"he said.

But here's the bottom line--“Visitors spend about $17.5 billion annually, which employs 193,000 people statewide and contributes $971 million in state taxes.”

Tourism, it's Pure Michigan.

Back to the Future: Local Resilience in a Global Economy

Hanging Mountain Farm in Westhampton, Massachusetts presents a case study in clashing global and local economic forces and sensibilities. It is a story of outsourcing, enterprise, niche-making, community, state support for family farms, innovative "green" architecture and landing on your feet. We in Michigan can learn from the experience and perseverance of the Aloisi family in western Massachusetts.

Owned and operated by Nita and Leo Aloisi, Hanging Mountain Farm specializes in maple products and features the Strawbale Cafe, a unique straw bale structure, designed by their daughter, architect Missa Aloisi, and built by friends and family over a three year period.

The Aloisi family's connection to the farm goes back to 1930 when Leo's father began work there. He purchased it in 1947 and Leo acquired it in 1983. According to Leo, the sugaring operation dates back at least to 1917.

In 2002, the family began construction of the cafe while Leo was still employed fulltime in IT with Dow Jones. But late last year, after 16 years with Dow Jones, Leo was "downsized." His job was sent to New Jersey. Other colleagues were "outsourced," their positions being sent to India.

Fortunately, Leo and Nita had been working to diversify their sugaring business to include a cafe. Although they had planned to develop it at a slower pace in retirement, downsizing compressed their timeline. They originally planned to serve pancake breakfasts during sugaring season, but neighbors urged them to remain open year round. Now they serve breakfast and lunch Wednesday through Sunday. This has proven a boon to the farm and created a community gathering place.

The Aloisis were able to obtain state start-up funding for the building and most recently, Leo attended a business course geared toward small farms and sponsored by the Massachusetts Department of Agricultural Resources Farm Viability Program. Leo said, "It allowed me and others to develop a business plan for where we wanted to go with our individual farms. There were 15 in that class and there were 15 different plans."

A big issue for farmers in Massachusetts is determining a niche product or market in order to sustain viability. Leo described the situation of dairy farmers as a case in point: "Farmers need to become competitve with products from across the country and are doing so with products that are specialized, locally grown or unique to an area. In order to remain competitive, milk producers are selling raw milk and organic raw milk. Organic raw milk is one of the cornerstones of the new dairy market in Massachusetts. It is sold locally on the farm or delivered to customers' homes." Instead of trying to beat Big Ag at its game, small producers are creating something that Big Ag cannot produce--a specialized locally-based product with the added service of home delivery.

I told Leo about the economic difficulties in Michigan and asked him what advice he might have for workers who have been downsized or outsourced. His words were encouraging and action- oriented: "Small business is the backbone of the U.S. economy. The innovations that small businesses create are necessary to the country's economy. Find a niche. Small businesses can find and develop a unique niche more cost-effectively than large businesses can."

As for the challenges of starting a new small business, Leo emphasized the importance of a positive attitude,"The one thing that has always helped us is trying to keep a positive attitude about what is going on. It really helps you keep moving forward. Lots of things happen that can definitely throw a monkey-wrench into what you are doing. And all you can do is just smile at it and keep going forward and try not to let it overwhelm you."

Chin up, Michigan. Get local. Be positive.

And wipe that darn frown off your face. . . .

A New Attitude

Last week, I read an opinion piece that was simultaneously realistic and optimistic about the role of attitude in Michigan's economic turnaround. For a few minutes, I had hope for our state.

"Nonetheless, the tie between prosperity and attitude seems to be strong, even symbiotic. As we remained walled in our rust-belt prison, we might remember that we have the will, the brains, the drive and the money to turn our state around and reclaim our position of global pre-eminence. We might expedite the process of recovery by talking loudly about our dreams, our prospects and our new love for risk taking."

The author, Jim Hettinger, is a Michigan native and has been CEO with Battle Creek Unlimited , a private, non-profit economic development organization since 1978. We spoke today about Michigan's economic prospects in context of its past and present conditions.

Regarding the pervasive negative press about Michigan, Hettinger said this is quite harmful and just adds fuel to the fire where attitude is concerned. I asked if he had suggestions for creating a new vision for Michigan. He responded that such a vision needs to come from Lansing, but that we aren't well served by "getting swept up in big trends. Communities need to find their strategic local competencies; to find a niche--what nobody else is doing." Cultivating local identity is a part of this. He added, "Finding the niche needs to happen at all levels."

But as Michigan transitions away from primary dependence on manufacturing, former factory workers will need to find their way to personal empowerment, independence and responsibility for their futures. "We have been in a giant paternalistic environment for the last 50 to 60 years," Hettinger said. This was cultivated by corporations, big unions and now, in part by large foundations. The antidote, he added is to, "get people on the edge where creativity and survival instincts come into play."

He believes Lansing needs to play a role in this, as well: "We need to create arranged spontaneity by bringing together different people and groups with similar interests and then let nature take its course."

BCU KnowledgeNow!, a business information portal created by Battle Creek Unlimited, endeavors to do that by gathering and making available information resources to facilitate economic development.

Hettinger works and lives in Michigan by choice. I asked him what gives him hope for Michigan's future. He listed three key elements. He said that with strategic deployment of new technology, a fast turn around is possible. Although our education system needs updating, he estimates that it is still globally competitive. And last, the Great Lakes are an asset beyond tourism, that he believes need protection.

Don't lose hope, Michiganders. Reach out, help each other, take some risks, and believe in your ability to create sustainable communities. And stop being so partisan.

Third World Michigan?

Among the many trying to understand the state of the state, Prof. Bryan K. Ritchie, associate professor of international relations at James Madison College at Michigan State University, blogged yesterday about the parallels between Michigan today and Singapore in 1972.

"...Last week I presented a paper on how Singapore simultaneously created highly skilled people and attracted high-tech companies. After my presentation, a well-known colleague inquired if I had ever applied my research to Michigan. To be honest, I had never considered it. But as he talked I saw the potential application: globalization and an increasingly complex and technical international economic system is driving the primary location of competition to the state level. Michigan is not competing only with other states. Michigan is competing directly with Singapore and every other developing country. If true, why not act like these other countries?"

He goes on to offer a vision for business and government leaders:
"...Singapore’s success in the world economy has come from a mixture of technocratic and bureaucratic professionalism, strong political leadership, and active private sector participation. And by participation I don’t mean simply consultation. Heads of companies, leaders of unions, and leading academics have all taken turns directing the entire public policy process in key economic areas including forming, implementing, monitoring compliance, and ensuring enforcement of policy. The key to making this work is tight coordination between the private sector and government—not government as a regulating force, but as a facilitating one."

Still, in order to forge these alliances a lot of people will have to forswear an adversarial model of relating. United we stand (a chance of getting out of this downward cycle), divided we fall (farther and farther behind Singapore).

Made in China: Small Business Idea

Looking for a small, I mean really small, business idea?

This weekend, I had the pleasure of staying at a Marriott in another Great Lakes state. Our accommodation included VIP status and special perks, access to a concierge lounge with food and beverages throughout the day, etc. Our room rate, with tax was $144. So why were the cotton balls and ear swabs imported from China? Would little packs of domestic cotton balls and swabs really put such a huge dent in Marriott's profit margin at the end of a day?

This little pack of hygiene supplies struck me as absurd, insulting and alarming. You can be sure there are low-skilled workers in the U.S. who could produce little packs like this and would be grateful for the work. But their labor is too expensive. Think about that. Paying someone in the U.S. minimum wage to make little packs of hygiene supplies is too costly. Or perhaps the actual phrase is "not sufficiently profitable to be competitive in a global economy." I wonder what how the Chinese cotton ball packers live. I wonder what they eat and where they sleep.