Sunday, June 14, 2009

Indiana: A hobbled march forward

From The Economist print edition

Finding new things to do in the depths of the rustbelt

STEVEN CHU, the energy secretary, who specialises in atomic physics, travelled on June 2nd to Fort Wayne, Indiana, which specialises in pickup trucks. General Motors (GM) had declared bankruptcy the day before, and Mr Chu was one of many cabinet members sent to cheer up the rustbelt. He toured a local firm that makes geothermal heat pumps, then announced $50m to promote such technology. On the far side of town Orval Plumlee, the president of the local United Auto Workers, was too busy to leave the union hall. Panicked workers had been calling him non-stop.

As a manufacturing giant topples, Indiana finds itself in an odd position. GM’s bankruptcy will devastate Michigan, the rustbelt’s feebly beating heart, and Indiana will suffer too. The state had about 80,000 workers in the car and parts manufacturing industry in 2007, the most recent numbers from the Bureau of Labour Statistics. But Indiana is not typical of the region. Before the recession the state was bustling, its unemployment rate was below the national average.

Mitch Daniels, the governor, may have to tap state reserves to pass a budget, but on June 1st he insisted that “Indiana remains in vastly better shape than most states and any of our neighbours.” Its economy has made progress, with one foot stuck in the past and a toe dipped in the future. It is a promising stance, though a wobbly one.

Indiana is still a laggard in many areas. Only 21% of those aged 25 and older have a college degree, compared with 28% across the country. Hoosiers’ average income has failed to keep up with America’s, sliding from 32nd place among the states in 1997 to 40th a decade later.

Indiana’s economy is more dependent on manufacturing than any other state. But as the Big Three’s clout has waned, Indiana has evolved accordingly. Less powerful unions and ample foreign investment make the state what Morton Marcus, a prominent local economist, calls “the middle finger of the South thrust into the North.” Indiana’s output of car and parts manufacturing grew by 31% from 1997 to 2007. Michigan’s shrank by 20%. The day before GM’s chief executive first asked Congress for a bail-out, Indiana celebrated the dedication of a Honda factory. More here.

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