Profiting on misfortune

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As I watch the economy in S.E Mich. bottom out, the running joke is the only businesses which patronize the area are the banking institutions. It was a bit curious that Quicken Loans decided to expand its operations in Detroit-Metro area. Can you say sub-prime haven? Anyway, the politicians are also taking the opportunity to cash in the economic plight of the area.

The blitzkrieg of political sound bites and campaign advertisments are quite amusing. For instance, Mitt Romney whose family has a dubious history in this region, uttered some rheotoric about 'leveling the economic playing field' in the state of Michigan. I thought this was a bit odd, as he suggested that the developing nations have some unfair advantage over American manufacturing efforts. For the life of me, I do not understand why this sort of conversation is so popular in this region.

Perhaps it is because I am a native New Yorker, and growing up in a factory is so very foreign to me? Nonetheless, all of the major rust belt cities have been forced to develop another value proposition. For instance, Indianapolis has two diverse industries in their city. Pharmaceuticals and Aerospace. Of course, Rolls Royce (formerly Allison Engine) is largely a manufacturing operation, but it is not the primary employer for the city. Eli-Lilly is the 2nd largest employer in the city. Indy also has the distinction of being the amateur sports capital of the world.

What will be Detroit's new value proposition? For that matter what will be Michigan's legacy going forward? Your guess is as good as mine. Clearly, radical change is necessary and I disagree that developing nations are to blame for the demise of this region.

If you believe the viewpoint of Thomas Friedman, it is clear that Michigan is experiencing a simple regression to the mean. More specifically, the living wages of factory workers in this region have been much higher than their counterparts in developing nations. In fact, I assert that the wage structure repetitive factory jobs are not sustainable over the long-term. The only leveling that is to take place will occur when workers of developing nations begin to enjoy similar living wages as their American counterparts. This will not happen anytime soon.

So the rhetoric spewed by Romney rings hollow with me. Sure it is good TV. President of Michigan stuff, that sells papers. If you are a native Michigander (which I am not), the days of this region being a manufacturing powerhouse are over. The graduates of the local universities typically go elsewhere for employment. The dream of getting that factory job does not seem to be an allure.

What will be the next value proposition? Methinks that politicians would be best served by finding the answer to this question, rather than spewing empty rhetoric.

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    This page contains a single entry by AG published on January 16, 2008 7:48 AM.

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