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Structural changes needed if state wants to compete successfully in global economy

Katrina-related spending complicates assessments

Long-range planning has never been one of the state’s strengths. Mississippians have been slow to sense and respond to the forces of globalization. And now efforts to respond to the changing world economy have been put on the back burner while the state struggles to recover from Hurricane Katrina.

“The nature of man is to put out the fires that are burning the closest and hottest,” said Pete Walley, director of long-range planning, Center for Policy Research and Planning, Institutions of Higher Learning (IHL). “In my opinion, the state’s long-range planning has been put on hold to deal with the response to the hurricane. I am not speaking of any one group or effort, but the combined response of many institutions and organizations.”

While he doesn’t want to sound too negative on the uptake of long-range planning, in Walley’s opinion, most businesses, agencies and economic development professionals stay in the reactionary mode.

“A wise observer of the economic scene once commented that ‘What can be left to later, usually is — and then, alas, it’s too late,’” Walley said. “Crisis is no time to be reacting, yet that tends to be the process.”

The economic activity resulting from billions of federal dollars being injected into the economy in Mississippi could well be masking the long-term trend of the state’s economy.

“We are getting a much needed shot of spending by consumers, but the underlying structural problems are still there statewide,” Walley said. “If we are smart, we will use the seven- to 10-year rebuilding time as a result of the hurricane to work on adjusting to the future economic forces.”

Long-term thinking

Even without Katrina, it can be difficult to get a proactive response by multitudes of state and local government entities and private businesses to long-range planning. Most of the issues related to the state’s long-term planning are generational in nature.

“It is very difficult to get people to think in 15- to 25-year time frames,” Walley said. “The national and the Mississippi economy are well into a structural change. In plain language, structural means that the way the Mississippi economy will function over the next 40-50 years will be fundamentally different than the last four to 50 years. That is not to say that we will not have agriculture or manufacturing employment as a contribution to the gross state product. It does mean that they will not be the ‘drivers’ of our economy. In my opinion, both these sectors will decline in employment further.”

There are some bright spots, including a positive trend by key agency leaders recognizing that Mississippi must adapt and revamp program efforts to match the changing needs of the economy. Walley sees the most recent positive sign is that of the Mississippi superintendent of education’s acknowledgement that too many of high school students in the state do not complete a traditional high school education.

The superintendent has proposed a redesign of high school coursework linking academics more closely to career information.

Greatest resource, short supply

The most disturbing negative trend is the increasing rate of change in the global economy.

“Unfortunately, the resource we need the most for response — human capital — is our weakest,” Walley said. “Our citizens’ demand for education is weak compared to other states and to what is needed to keep our economy competitive. There are large groups, maybe in excess of half of the 2.9 million citizens, that do not connect educational attainment, skills development and lifelong learning with personal and economic well-being.”

Most people agree that lack of education is at the root of poor health, higher crime, poverty, teen-pregnancy, increased welfare needs and a whole host of other issues. Walley is a proponent that the state copy what the private business community does when it develops a new product or service, and “grow the demand” for education.

“If significant numbers of people don’t know the benefits of education, simply spending more money in the way of new programs, equipment and buildings will not ensure that people avail themselves of those programs and benefits,” Walley said. “Proper funding of education is a necessary, but insufficient response. A long-term comprehensive marketing program must be undertaken by all sectors of our state — public, private and non-profit.”

Doing the math

Poverty is still a major issue in Mississippi. Approximately one-fifth of residents, 600,000 people, live at or below the poverty level.

In 2005, for a family with two adults and one child, that means living on approximately $15,700 annually.

“It does take much math to realize that those three people are basically at survival level,” Walley said.

While wages have been improving recently, they are only back to where they were at the start of 2002 after adjustment for inflation. There is a growing gap in income between the rich and the poor in the U.S. From 1979 to 2000 the growth rate of real income for the bottom quintile of households was 6%, the middle quintile 12%, the top quintile 70% and the top 1% increased by 184%, according to Census data.

“Long term there hasn’t been much improvement in wages,” said Marianne T. Hill, senior economist and editor of the Mississippi Economic Review and Outlook for the Center for Policy Research and Planning, IHL. “And I think that the growing income inequality in the country is adversely affecting our political system. We hear talk about the need for campaign reform, but it is a larger issue than that. There is a need to make our democracy a more effective one. That would include instituting ways to elicit more public participation in policy debates and public decision making.

“The increasing domination of the media and politics by those with the most wealth is a trend that we need to address. Another part of the solution is building up local capacity, the capacity of states and communities to address the issues. In fact, the federal government can no longer effectively take on all the issues it took on in the past. It is just administratively impossible. The needs are too complex. Our population is too large and growing too rapidly.”

The outsourcing of jobs to other countries continues to be a concern. Hill said she is amazed at the jobs that can be outsourced to foreign countries these days.

“The security guard watching a warehouse may be somewhere in Asia watching a video monitor,” Hill said. “If the guard notices anything, he can push a button and contact someone near the site.”

Job globalization can have a negative impact if jobs that could be done by Mississippians go to people outside of the U.S. But the improvements in communication and information technology could also have a positive impact.

“The Delta doesn’t have to be an outlying region so much anymore as long as you have educated people familiar with the new technologies,” Hill said. “You can create jobs in the Delta at greater numbers than you could have previously.”

Global trends also include the increasing industrialization of China and other countries. That trend helps explain a lot of the increased cost of oil. Increased population will increase demand for all kinds of natural resources. The world’s population is expected to increase by approximately 50% between 2000 and 2050, which will drive up world demand for goods and services.

Another trend Hill points to is the impact of industrialization on the environment. Several countries are committed to cutting back on greenhouse gas emissions.

“This will help with the rising cost of oil and boost interest in alternative energy technology,” Hill said. “Also, some of the most rapidly growing firms in the future will be those offering more resource-efficient production techniques, or firms whose technologies have a less adverse impact on the environment.”

Adequate workforce issuesv

A national trend is the nation’s slowing population growth. While there has been much discussion in recent months of the need for immigration reform, immigration could also have a positive impact.

“In some research I did not too long ago, manufacturers in particular were concerned about having an adequate workforce in the future,” Hill said. “The growth of the market is outpacing the growth of the workforce, and the gap will increase. One third of the increase in the workforce in the past few years was due to immigration. Immigration will continue to be a major factor affecting the workforce in the country, and the changing demographics will affect our economy.”

Another important trend is the growth of women in the workforce. Most women work outside the home now, and so there is more need for programs to help care for children and the elderly who were previously cared for by women.

“We haven’t worked out the implications of having more women in the workforce, leaving a gap in care for the children and elderly,” Hill said. “We have not changed our policies regarding care of dependents. Certainly there is an unmet need for high-quality child care. There is a need for more after-school programs, more community programs, and home care for the elderly — services women used to provide through unpaid labor. Now we have to devote more of our resources towards those kinds of jobs. We need to consider the fact that we have more women in the workforce, and adjust our social policies accordingly.”

Healthcare, of course, is another major issue — a growing problem.

“We need to provide more healthcare coverage for the population,” Hill said.

How are business, industry and economic development professionals using long-term economic planning? Hill said that when economic development is discussed, there is still a focus on incentives to attract new businesses. She believes instead of looking at bringing in new industry, more needs to be done to develop local capacity by growing local industries and businesses. “A recent survey asked businesses in the state about their longer term plans,” Hill said. “They didn’t seem to have much to say about what would happen in their markets, what changes they saw coming. This points out the need to develop our businesses in terms of doing research and development, and analyzing and expanding their markets.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

About Becky Gillette

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