ECONOMIC ANALYSIS: We need to push harder to foster a tech economy

November 14, 2005

You have to give the folks at Techpoint, the advocacy group for technology-oriented business in Indiana, plenty of credit for stamina. For eight years, these f o r wa r d - l o o k i n g folks have been carefully measuring the state's progress in what was once called the high-tech economy. And for each of those eight years, the message has been depressingly consistent: We remain at the back of the pack.

That's not for lack of accomplishment. Across the state are examples of worldclass, technology-rich facilities, from the nanotechnology labs at Purdue, to the fuel cell research in Kokomo, to the high-tech weaponry development at Crane Labs.

Yet the unpleasant truth revealed in the Techpoint Metrics report-now jointly produced with the Indiana Chamber of Commerce-is that other states have just as many, if not more, accomplishments to brag about.

That brings up the thorny question of what, if anything, should be done about the situation. If this were simply an issue of a small number of tech entrepreneurs wishing that the solidly Midwestern, production-oriented economy outside their windows looked more like Massachusetts or California, perhaps it could be easily dismissed.

But it's not tech for tech's sake-the same states that enjoy first-tier technology status also have higher-paying, faster-growing economies. And as once-backwater states like Idaho and Utah move up the rankings while we remain stationary, one can only ask, "Why can't it happen here?"

Anything is possible, yet the gap between Indiana and the leaders on many of the technology metrics used is cavernous. In education, for instance, Indiana's rising rate of bachelor's degree attainment, up to 21.5 percent, still ranks us no better than 44 out of 51 states, including the District of Columbia. The leader, Massachusetts, has an astounding 36 percent of its 25-and-older population with college degrees.

That's a 14.5-percentage-point difference, which could be eliminated if, say, that same percentage of the adult population in Indiana went to school and got degrees. Except for one thing: Because the adult population in our state is roughly 3.9 million, we'd have to find spaces for an extra 565,000 college students across the state!

That's a silly calculation, of course. Retention of those already graduating across the state, plus attraction of new residents and those who may have left in years past, is a much more sensible strategy to boost attainment. And no one expects a state that is the most manufacturing-intensive in the nation to suddenly look like a Boston or a Silicon Valley.

But on score after score, the gaps identified in the Techpoint report are just as daunting. The technical orientation of our work force is low, our technical infrastructure is weak, and-possibly most damaging of all-our access to venture capital for startups and new business development is almost non-existent in comparison to first-tier states.

You have to have an iron jaw to keep taking punches like these. Yet it helps to keep these kinds of findings in perspective. The Indiana economy, like most of its Midwest neighbors, is only recently beginning to experience the pain of economic transformation that hit states like Virginia and Massachusetts decades ago.

Whether it was a conscious strategy or not, our positioning as a production-oriented economy, emphasizing geography and low cost over education and training, served us well for many years.

Yet when the textiles left the Northeast states, they had the educational resources to adapt and transform their economies to be driven by a new base. Can Indiana do the same? The Techpoint report suggests we should be trying much, much harder.

Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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