Thoughts on Prosperity

I heard a joke the other day that the reason Michigan housing wasn't as badly affected by the recent economic downturn as, say, Arizona's, was that we never experienced the preceding upturn! With no real rise in prices, the fall was less precipitous.

While such a view might be looking at the glass half full, few of us would argue that we aren't mired in an economic malaise.

It's only natural that many think the answer is to focus on creating jobs. With real unemployment rates exceeding 20 percent in some counties of Michigan, the financial pain is real and finding a job seems like the best solution.

But focusing on jobs might not be the best approach to a prosperous future. Although many politicians believe differently, large companies arriving with thousands of jobs to save the unemployed is much like winning the lottery: It doesn't happen often and the benefits frequently don't endure.

The difficult truth is that Michigan's economic foundation has shifted beneath us. The large manufacturing companies are relocating, taking more than 2 million factory-floor jobs with them. Sure, a few will return, maybe as many as 30 percent. But this will never be enough to re-employ ourselves, our children, or our grandchildren.

But the news may not be all bad. In fact, it's often only when things get really bad that people are willing to take steps to implement changes that bring new prosperity. What many Michiganders have realized is that no one will be saving us. If there is saving to be done, we'll have to do it.

The way we'll have to do it is through innovation and entrepreneurship.

It's important that these two things go together. We don't need more small businesses for the sake of small business. What we need are new enterprises that do or produce something in new and innovative ways. We need to get our surfboard back on the wealth-creation wave before it either crushes us or just leaves us behind.

So how do we do this?

Fortunately, people are by nature entrepreneurial and innovative. They just need an environment that encourages such behavior. Taxes and regulations are simply costs to the bottom line. They need to be brought in line with the value they provide.

Laws regulating bankruptcy and foreclosure need to be modified so that penalties aren't so harsh that no one will "bet the farm" on progress (Did anyone know, for instance, it's impossible in Florida for a person to lose his main residence due to economic failure of any kind?).

Social institutions, such as labor unions, must adjust to a new reality where collective bargaining is less important than efforts to improve skills, foster "skunk works," and maximize productivity.

Innovation and entrepreneurship are the answers to our question of what will save Michigan's economy. But the more important question is whether we can modify our current institutions in such a way that will provide necessary incentives for people to give it a try.