Manufacturing & Technology

EYE ON THE PIE: Indiana's future not looking so good

June 18, 2007

"Aye," Fergus affirmed.

"They'll have tornado alerts and heavy-rain warnings," I said. "They'll flood us with high-water forecasts, beat upon us with hail reports, and show us maps that make us abandon all outdoor activity while we glue ourselves to the TV."

"'Tis so," nodded Fergus.

"Those weather people are worse than economists when it comes to urging data on us," I insisted.

"Could be," Fergus said.

"No doubt about it," I replied. "It wasn't in the papers or on TV, but the U.S. Bureau of Economic Analysis just issued figures on gross domestic product by state. These used to be called 'gross state product.' They deserve attention, just as we need to know both the temperature and the humidity." "And how be that?" Fergus asked. "Indiana's GDP," I explained, "is the value of all goods and services produced within our borders. It's the value added in Indiana by Hoosiers or anyone else working here or owning capital here. If it happens here, it's credited to us."

"Tis a simple enough idea," Fergus said. "Just record the price of a shipment at the loadin' dock, and subtract what you had paid at the receivin' dock for what you needed to make whatever you been a makin'."

"Quite right," I agreed. "And these new data show that Indiana's GDP grew on average 4.5 percent from 1997 to 2006, while the nation advanced 5.3 percent. In 2006, the difference was greater: 5.3 percent for Indiana and 6.3 percent for the country."

"And if it would not be unseemly to ask, what does that mean to me?" Fergus asked.

"Why, it's so clear," I replied, stifling my frustration. "It explains why we have low wages and outmigration concerns. Let me put it another way. In 2006, Indiana ranked 33rd in GDP per capita among the 50 states. That says 64 percent of the states (after adjusting for population size) put goods and services into the market that are more highly valued than are those sold by Indiana firms.

"In 2003, we ranked 29th in per-capita GDP. During just the past four years, we have been passed by Vermont, North Dakota, Tennessee and Kansas. Farming pushed North Dakota ahead, but it was durable-goods manufacturing that worked for Vermont, Tennessee and Kansas.

"In six of the last nine years, including each of the last three, Indiana has failed to grow as rapidly as the nation in total GDP. We are becoming less significant as a part of the United States in both economic and political terms. We had 2.04 percent of U.S. GDP in 1997, and our share was down to 1.89 percent in 2006."

"And that means to me?" Fergus asked again.

"That means we'll see fewer retail initiatives in Indiana. We'll see fewer firms and households interested in locating where 'nothing is happening'. It means we'll have less clout in national councils and eventually suffer the loss of still another member of Congress."

"Couldn't be all that bad," Fergus said. "Reminds me of global warming; it's been happenin' a long time and it ain't got me yet."

I gritted my teeth and walked away.



Marcus taught economics for more than 30 years at Indiana University and is the former director of IU's Business Research Center. His column appears weekly. To comment on this column send e-mail to mortonjmarcus@yahoo.com.
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