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Posted on Thu, Nov 25, 2010 : 5:35 a.m.

Reinventing Michigan's economy must involve less dependence on auto industry

By Rick Haglund

We have a new governor, a renewed auto industry and, just maybe, a new optimism.

But can we grow a new economy, one that’s far less dependent on the roller-coaster auto business?

University of Michigan economists George Fulton, Joan Crary and Don Grimes attempted to answer the question in their latest state economic forecast, noting Governor-elect Rick Snyder’s vow to “reinvent” Michigan.

The oh-so-politically cautious economists were careful not to take a partisan-sounding stand. They noted in a bit of dry economist wit that “the reinvention topic falls outside our normal boundaries of inquiry.”

Nevertheless, their analysis shows that if Michigan wants to reinvent itself, there’s a lot of work to be done.

The U-M economists looked at patent activity in the state over the past 35 years to see how Michigan has been fairing compared to the nation as a whole. Two words: not well.

Patents are important in protecting intellectual property, such as computer software, drug discoveries and manufacturing processes. But they’re also an indicator of the level of innovation and entrepreneurial activity in a state’s economy.

And patent awards offer insight into the amount of research and development work being done in a state.

Lots of R &D will “promote the cultivation and sharing of scientific ideas, putting Michigan on the road to becoming the kind of state that it aspires to be,” Fulton said.

But Michigan’s share of total patents awarded in the United States has declined over the past three decades, from a 5.7 percent share in 1980 to 3.9 percent in 2008, according to data the U-M economists examined from the U.S. Patent and Trademark Office.

As you might expect, Michigan researchers and companies dominate patent activity in the auto sector, with 35.7 percent of all U.S. auto and parts patents awarded in the state in 2008.

But the state’s share of nonautomotive U.S. patents has fallen from about 5 percent in the late 1970s to 3 percent in 2008.

“We’re doing well on autos, but pretty lousy on chemical and IT (information technology) patents,” Grimes told me. “We need to upscale that.”

Why? Because Michigan is getting rapidly poorer, even though manufacturing wages remain relatively strong.

Manufacturing wages are likely to decline, though, as automakers and others replace retiring workers with new ones earning half as much.

Per capita personal income in the state has fallen from 95.3 percent of U.S. per capita income in 2000 to 81.4 percent last year.

“Apparently, the state has lost ground in other, nonmanufacturing parts of the higher-compensated economy,” Fulton said. “We need to turn that around if we are to have a more robust Michigan economy in the years to come.”

Today Michigan is climbing out of the Great Recession the same way it has always bounced back from economic downturns — on the back of a recovering auto industry.

General Motors Co. and Ford Motor Co. are cranking out huge profits again after a disastrous decade. Chrysler Group LLC is still alive, which is saying a lot.

But U-M’s forecast predicts Michigan’s the auto recovery won’t be enough to pull the state’s unemployment rate down to the single digit range in the next two years.

They’re forecasting the jobless rate will drop from the current 12.8 percent to average 11.7 percent in 2012.

“With high rates of unemployment and home foreclosures persisting, for many among us the economic distress will continue,” Fulton said.

If there were ever a time to reinvent Michigan’s economy, this would seem to be it.

E-mail Rick Haglund at



Thu, Nov 25, 2010 : 2:58 p.m.

Michigan moved from fur harvesting, to mining, lumbering, farming, to light manufacturing, then to mass production. Detroit at one time was known as a tobacco center. How much more "diversity" do you want? The auto industry is doing very well.... in places like Indiana and Ontario... and Texas. What should that say to us? Why is their grass greener? A tree that keeps being transplanted, however, will bear no fruit. Perhaps the problem lies outside of industry? Perhaps the bigger problem has another root cause? "We trained hard. But it seemed that every time we were beginning to form into teams, we would be reorganised. I was to learn later in life that that we tend to meet any new situation by reorganising. And what a wonderful way to create the illusion of progress, while producing confusion, inefficiency and demoralization." Gaius Petronius Arbiter, 1stCentury AD