INDIANA
Like Gaul, Indiana is divided into three parts: the part in which New England Yankees settled (very North and the smallest), central Indiana including Indianapolis settled by Mid Lands folk from Pennsylvania, and most of Indiana, the south settled by Scotch-Irish Appalachians (Virginia, Kentucky, North Carolina, Tennessee and Maryland). Meaningful European settlement, late by East Coast standards, began after the Black Hawk war; pre-1880 ethnic immigrants were mostly German (which was a smush category including Scandinavian). Scotch-Irish got there “firstest with the mostest”) and probably exerted the greatest impact on early city-building—there wasn’t much although Indianapolis was first settled in 1821 (as an unincorporated part of Marion County). It incorporated as a town in 1832 and a city in 1847. The National Road went through the town in 1827 and in 1839 a segment of the soon-to-fail Indiana Central Canal opened. Indianapolis’s first railroad opened in 1847, but the city (and Indiana) was opened up to rail after 1850.
Caught up in early anti-slave politics and the “free-state” Northwest Ordinance stipulation, the state’s post-1800 southern majority was outmaneuvered by Woodard’s (Pennsylvania Quaker-Germans) Midlander in-migration into a narrow belt in eastern and central Indiana. Pluralists, tolerant, locally-focused and family-centered, they distrusted government—especially those further away (state) they served as a buffer to northern, but sparsely-settled Indiana, and individualist, rural slash-burn-move farmers “Greater Appalachian” Scotch-Irish coming from mostly Virginia and Kentucky backwaters who called themselves “Hoosiers”. The Scotch-Irish were not intensely anti-slavery, but were in no way beacons of abolitionism. Indiana captured much Quaker in-migration. To this day, Richmond Indiana is second in the nation (Philadelphia) in Quaker adherents[i].
Indiana’s initial city-building was pre-railroad. INSERT Towns established by the 1775 Northwest Terrirtory Ordinance of 1787 (Articles of Confederation)
Indiana State Constitution and its First Policy System
Indiana was admitted to the Union in 1816 as the 19th state despite a highly contentious political/policy context. Her first governor (Jonathan Jennings) played a remarkably critical role in her admittance as a state and in the development of her first state constitution. His influence to a great degree injected a non-southern (Quaker-Pennsylvania) impact on the constitution. Jennings was born either in New Jersey or Virginia, but was raised in Pennsylvania by his English Presbyterian family. President of the constitutional convention he supported the ban on slavery, issue number one, in the statehood campaign (in opposition to the pro-slavery territorial governor William Henry Harrison). Reflecting views of his Quaker eastern Indiana constituency (he was a Democrat-Republican), he hated in true Quaker style affluent aristocrats like Harrison and preferred a weak state and governor to a strong legislature and a vigorous county and local government. Much of the first state constitution was lifted from Kentucky (long ballot, separately elected lieutenant governor, weak governor, pro-slavery) and Ohio’s (weak governor, free-state, bicameral legislature), after all only nine of forty-two delegates were born outside the South (Wikipedia Indiana State Constitution).
As governor he built roads and canals through use of state-issued bonds, promoted schools, and opened up central Indiana for settlement. In his administration, Indianapolis (1821) became the third territory/state capital. After his election to Congress in 1822 he supported Clay’s internal improvements and American system. While Indiana voters, supported Andrew Jackson in 1825, Jennings supported Adams and later Clay—but, in the famous “contested” final vote supported Jackson (see entry in Wikipedia for support). Jennings did not alter the fundamentally Scotch-Irish approach to state and local government included in the state constitution, but he won the free-state vote and he departed from Scotch-Irish anti-city-building, anti-transportation infrastructure, anti-bank/corporate contract, and pro-school construction in his gubernatorial capacity. Subsequent governors first flirted with “internal improvements” such as railroads (which flopped badly causing bankruptcies and scandals, the Michigan Road and a number of canals (an intense rivalry between canals and railroads resulted in an unsuccessful impeachment attempt against Governor Ray (1825-31).
His successor, Noah Noble (1831-1837), an anti-Jackson Whig who ran on the basis of his leadership on the Indiana commission responsible for constructing the Michigan Road, leaped on internal improvements as his signature initiative. which shortly after its partial implementation ran smack dab into the Panic of 1837. (In the land of “it’s a small world after all”, Noble allegedly hired an emancipated former slave who was the role model for Stowe’s Uncle Tom.).Noble advocated canals and fought the railroad advocates; the Greater Appalachian-dominated legislature were not disposed to either and they fought Noble tooth and nail holding up implementation through Noble’s first administration. Legislative redistricting (1834) brought new central and northern representatives into the legislature (Whigs controlled the House) and permitted Noble to achieve a second term. He achieved passage of his controversial (1836) $10 million “Mammoth Internal Improvements Act”—supposedly to be paid for by 50% increase in state taxes (which was never approved). Noble’s “follies” and his heavily ED-oriented policy emphasis, ran in deep trouble when these projects failed and defaulted on state bonds, which piled on top of already high annual interest on previous state debt for internal improvements. Attempts to increase taxes also failed and Noble left office in disgrace, a disgrace that carried over to the Indiana Whig party.
In 1841 the public official most opposed to the Mammoth Internal Improvements Act, James Whitcomb, was elected governor. By then the amount of internal improvements-based annual payments exceeded Indiana total taxes paid since its 1816 state admittance (Wikipedia Indiana Mammoth Internal Improvements Act). Such debt was initially expected to pay itself back on the basis of projects of future tax revenues—Early Republic cost/benefit projections seem little different than those in our Contemporary Era. Public opinion was exceedingly supportive, viewed as a critical element of the state’s modernization that would inevitably result in prosperity. Celebrations were reported along communities affected by potential projects. Several Boards/Commissions were establish to implement the Act. By 1839 there was no funds left to expend and the projects stopped.
In 1840 the state stopped payments on the debt/interest, and the projects (mostly financed by British investors) eventually were negotiated at $.50 on the dollar. Of the eight Mammoth Internal Improvement Projects, none were ever completed by default and only two were ever completed. One the Wabash and Erie Canal proved to be America’s longest canal and it operated until 1880. (Wikipedia, Indiana Mammoth Internal Improvement Act”). A state policy system realignment occurred after Noble—a realignment codified in a new state constitution in 1851.
The 1851 state constitution included Jacksonian administrative principles and curtailed “overspending by the state” (an aggressive ED state role) exposed in the extended Panic of 1837 that caused canal company bankruptcies and state deficits. The state’s two banks collapsed. It terminated the state bank that issued debt, limited indebtedness by municipal corporations, and adopted the long ballot. The 1851 constitution, as amended, continues in effect today. Indiana State from that point on was a “passive, reactive, noninterventionist economic bystander”[ii]. With rare exceptions, that did not change until 1981.
Rise of Indiana-style state-level Activism
By that point Indiana was perceived as a state “wary of government” with a decided preference for low taxes and minimal public services—43rd ranking in 1980 for state/local taxes per capita, and one of the very lowest per capita state-level public employment[iii]. Indiana’s state-level approach to ED consisted of very few moving parts: low taxes, and an MED-style approach which provided tax credits to firms. That cornerstone approach was put on steroids by Governor Otis Bowen (1973-81) who enacted a huge series of statewide property tax relief during his administration. A blighted area property tax abatement law was enacted in 1977, and Indiana was one of the first states to provide tax credits for energy conservation, extended for housing and commercial/industrial property rehabilitation. Tax increment financing was approved in 1977 to specifically assist the native Eli Lily pharmaceutical firm (one of the state’s largest employers—and Indianapolis’s largest) to remain in the state. Between 1962 and 1980 state/local property taxes dropped from 56% of all state/local taxes to 33%.[iv]
At the time Governor Robert Orr[v] came into power (1981) the chair of Indiana’s Ways and Means Committee described Indiana’s state-level ED focus as “nonexistent” with “little or no government intervention in business decisions”. The Indiana Dept. of Commerce’s director of Business Expansion confirmed this observation: “we were more reactive than proactive. The philosophy was that we were not going to compete for industry. The state’s leaders did not believe in industry incentives. Their attitude was someone has to pay for them”[vi]. The Dept. modestly funded promotion and advertising, and encouraged local ED by providing technical assistance; “The only significant program [outside of tourism and agriculture] was industrial development loans to communities for infrastructure”[vii].
With the election of Republican Governor Orr Indiana State took a seriously different tack from Republican Governor Bowen. Within a five year period (1981 to 1986) his administration enacted over seventy ED-relevant bills, culminating in 1985 with the founding of a unique public-private state-level EDO, the Indiana Economic Development Council (IEDC), with a sixty-eight member, diverse, heavy-hitter business and nonprofit board of directors. Its mandate was to plan, develop a strategy and assist in coordination/evaluation of the state’s ED efforts. Before discussing the content of these initiatives, an observation and answer a key question seems appropriate.
The observation relates to our thesis regarding structurally embedded political culture. It was observed that Indiana historically did not empower a strong governor, and that the legislature was the prime mover in state government. Accordingly, when first established, the lead state EDO, the Dept. of Commerce, was lodged not under the governor’s administration, but the Lieutenant Governor—who in the style of Indiana politics could have been the opposite party, or when elected as a team a semi-autonomous member of the governor’s administration—with its own links to the legislature. Gov. Orr’s economic development activism was primarily led and coordinated by his Lieutenant Governor, John Mutz. Mutz ran the day-to-day affairs of the Dept. (and Dept. of Agriculture as well).
The primacy of the Lieutenant Governor in state-level ED persisted until fundamentally altered by Governor Mitch Daniels in 2005. At that time the Dept. of Commerce was terminated and replaced with the IEDC described above, but now lodged under the Governor (Chair of the IEDC) and directed by his new Secretary of Commerce. The Board of Directors remained private/nonprofit heavy hitters. In any case, the pertinent question to be answered is “Why?” Why did Orr-Mutz launch the state into an aggressive ED activism, dramatically reversing nearly 150 years of a custodian and facilitator of county/municipal led ED?
Charles Warren asserts the activism resulted from the pullback of the federal government (Nixonian Thermidor/Reagan devolution and the “cumulative impact of the 1974-5, 1978-80, and 1981-2 economic downturns” which hit Great Lakes states especially hard and triggered Orr-Mutz ED aggressiveness[viii]. If so, manufacturing deindustrialization seems to be the primary reason. Indiana’s economic base, despite its agricultural image to outsiders, is principally manufacturing—with auto manufacturing but also a heavy dose of truck/recreation vehicles and farm/food processing-related implements. Long associated with cars,(the first Indy/Nascar Race was 1911), unlike Detroit and Michigan’s auto alley, Indiana, less pressured by foreign competition, manufacturing sectors, while stressed, had held up fairly well until the 1970’s.
While, in 1985, GM was the state’s largest employer (exceeding 50,000 workers) and over 500 Tier 1, 2, and 3 auto supply firms in 2013, the second highest auto-related state in the nation (by GNP), major truck-related producers (Navistar, Cummins and Allison Transmission), plus a vigorous (until 2016) agri-business manufacturer (Caterpillar) meant that during the 1960’s Indiana manufacturing firms increased jobs (327,000) at the national average. That changed in the 1970’s when Indiana grew manufacturing jobs at half (13%) the 25% national rate[ix]. Through this period and continuing to the present, about one of five Indiana works were/are employed in manufacturing—and only 1% in agriculture.
Despite high levels of manufacturing employment, Indiana’s economic base was more diversified—in fact Joel Garreau’s the Nine Nations of North America (1981) observed Indiana intersected with three “nations” the Foundry, Breadbasket and Dixie with a political culture that embraces each as “the [state] is neither Foundry nor Dixie. It’s the start of the Breadbasket”[x].
Statistics being what they are, however, at the depth of the 1982 recession, Indiana lost more than 122,000 manufacturing jobs most of which it subsequently recovered when good times rolled (1985-6). Still in a period when deindustrialization was a national ED frenzy, the job losses were traumatic, and demanded attention by state policy-makers and business leaders. A bipartisan coalition on this need jelled in the early 1980’s, with strong support from the legislature, to inject the state more meaningfully into economic development. The question remained, however, would the state follow the “entrepreneurial” demand-side model of Massachusetts, Connecticut, or the hybrid model devised by Michigan. The answer was neither.
Indiana did not embrace new demand-side ED strategies, nor did it develop a state-CD approach to address people problems caused by deindustrialization and mobile capital. Rather, it doubled-down on manufacturing using fairly tradition MEP strategies (concern for its low-cost business climate, retention, workforce, and aggressive attraction with incentives). The new-found strategy/plan, developed jointly by Orr-Mutz administration and the Indiana state Chamber during 1983 and published in 1984: “In Step with the Future”.
For all practical purposes “In Step with the Future” served as Indiana’s ED strategic plan. The process by which it was developed fused both public and private and Democrat-Republican (the president of the Chamber was John Hillenbrand, the 1981 Democratic gubernatorial opponent to Orr-Mutz). While university-based researchers were involved, all sorts of private reports and analyses were consulted, public hearings held, and state bureaucrats and the general business community were meaningfully involved. This was not the usual consultant-driven statistical compendium.
As characterized by Warren, the strategy was based on the following beliefs or assumptions: (1) further economic growth will be generated by the state’s existing industrial base; (2) manufacturing durable goods will continue to be the mainstay of the state’s economic activity; (3) Technology sector firms and new product development [the core of Eisinger’s entrepreneurial state] are keys to continued growth, but narrowly-defined strategies to bring in ‘high-tech’ industries are unrealistic; and (4) while a shift to the service sector is inevitable, the state and its ED initiatives in these sectors are not needed and are politically divisive.[xi] To implement the strategies and programs a network of private and public EDOs, more a laundry list of what was “out there” was devised.
The “manager” of this was to be the IEDC, at that time essentially a private EDO in partnership with the state..
The IEDC serves as the umbrella, coordinative body that provides private sector input into public policy formulation and a structured interaction between state government officials and the leaders of those key associations and institutions with an interest in economic issues[xii].
In addition, the state chamber’s Growth and Opportunity Council “managed” the Indiana Small Business Council, with an SBA grant, directly set up and operated sixteen local centers. The same Chamber Council also provided technical assistance to local chambers and public EDOs and was closely linked to the state Labor-Management Council—a key EDO given the state’s negative union-management/low productivity history. In 1985 the legislature funded a half-million dollar productivity improvement program. Indiana’s state-ED activism was as much private as public. It also set the tone for much of local ED. During these years, for example, William Hudnut was Mayor of Indianapolis. Under his leadership Teaford asserts Indianapolis represented itself “immune from the corroding ills of the rust belt”, becoming the “amateur sports capital of the world”. Elkhart collateral materials asserted “the Rebirth [of industry] Continues”[xiii].
Indiana’s Public-Private State-Level Approach: Orr-Mutz’s Entrepreneurial State
Orr-Mutz with strong legislative support broke with past traditions from the onset of the first administration (1981). Three path-breaking EDOs were created: the Corporation for Innovation Development (CID) and Corporation for Science and Technology (CST) and the Institute for New Business Venture. These entities were certainly congruent with Eisinger’s “entrepreneurial state” if one looks at their function, the missing element, however, is they were privately-governed EDOs dependent chiefly on private funds. CID was an equity-based venture capital fund which brokered a state 30% tax credit for those companies investing in CID. Its goal was to provide seed capital for Indiana startups, and technical assistance. By 1986 coupled with SBIC and out of state investors it accumulated nearly $60 million risk capital pool and equity startup investments of nearly $4mm[xiv]. Compared to Massachusetts Technology Council, however, ten times Indiana’s $10mm commitment, it is not a big belly-flop into the venture/mezzanine capital pool.
CST was a state-wide nonprofit EDO, funded by a $20 million legislative monies. Focused on increasing awareness of technology and process adoption by Indiana industries, as well as technical assistance in its application. It also funded new technologies/processes. In return it received royalties from new productions. By 1986 it had invested $20 million in thirty projects. The 1983 New Business Ventures was a private nonprofit jumpstarted with a $850,000 state appropriation. Workshops, training and expertise to potential entrepreneurs was its prime mission—New Business Ventures served as a model for local EDOs, and several local versions (Venture Fort Wayne for example).
The 1984 Strategic Plan triggered formation of several additional EDOs, including the Indiana Infrastructure Inc.(essentially a research institute), funded chiefly by Purdue, State Dept. of Commerce and private investors, Indiana Institute for Agriculture, Food and Nutrition intended to promote and market Indiana farm products in the USA and abroad, and the Community Business Credit Corporation, a for-profit EDO that raised funds for banks to induce more risk-taking lending to small business. The universal thread for each of these efforts was a strong presence of private companies and governance. To the extent, Indiana participated in Eisinger’s entrepreneurial state it was through non-profit privately governed EDOs, using a few state tax credits and limited state appropriations, and relying chiefly on private sources. The state consciously chose not to use public, governmental EDOs[xv].
The Dept. of Commerce reorganized by Lieutenant Governor Mutz in 1985 to include a Division of Business Expansion focused on Indiana business retention. Intentionally working with existing firms, account executives involved themselves with mostly auto, durable industry, and steel industries. In line with the Strategic Plan, the Dept. of Commerce aggressively pitched Indiana to external manufacturing opportunities. While it lost out in the General Motors Saturn plant, it did incentivize (highways, water/sewers) a $1.7 billion GM investment in its new truck assembly plant in Fort Wayne. In 1985 GM invested $575 million in its existing plant in Marion. Chrysler invested $350 million in its Kokomo facility and garnered tax credits for industrial research. Japanese auto firm (Enkei) started a new facility in Columbus with retraining incentives from the state and city. In the two year period (1985-7) the Dept. of Commerce claimed 200 firms moved into the state—hardly earth-shattering, but a promising start to an aggressive attraction strategy that would continue over the next thirty years.
Having observed a more activist Indiana State the reader might keep in mind arguably the locals remained the primary force in a mostly decentralized ED policy system. By way of example, consider Columbus Indiana (population today 60,000) and its EDO. Home to Cummins’ HQ, an early leader in advanced manufacturing, Cummins lent the services of a loaned executive to the Columbus Economic Development Board. With American auto manufacturing in turmoil, the Board in 1984 made the first of what became annual trips to Japan—a private-sector dominated recruitment trade mission that continues to this day. By 2017 that sustained effort bore fruit: twenty-six Japanese firms (and thirty-six foreign companies) are resident in this third tier manufacturing center located; they employ over 9,000 workers, and a January 2017 Brookings study found over 50% of the city’s GNP is derived from exports—the highest rate in the nation. Its unemployment rate is the 36th lowest in the United States (2017). The principal tools used to attract these firms, besides working hard to facilitate their projects, were tax abatements and training grants[xvi].
Evan Bayh and the Democratic Party Interlude
Evan Bayh first elected in 1989 was the first of three consecutive Democratic governors: Bayh, 1989-97; Frank O’Bannon, 1997-2003, and Joe Kernan (2003-5). Bayh, the more prominent and well-known of the trio. The son of Senator Birch Bayh, Evan Bayh defeated John Mutz in 1989. Subsequently, he served several terms as U.S. Senator, presidential contender, and private industry. Bayh was (and is) well-regarded and popular governor and political leader. The key to understanding Bayh as governor is that his style and policy thrust was vastly more centrist than, say Ted Kennedy, he was not an Ahab-like Progressivist but more the Quaker first mate Starbuck: moderate and conformist to the past dominant themes of Indiana economic development. His Lieutenant Governor (Frank O’Bannon), of course, was responsible for the chief state EDO, the Dept. of Commerce. As Governor, Bayh achieved passage of the state’s largest ($1.6 billion) tax cut in history (exceeded only by Pence’s 2013 tax cut). Elected to the Senate citing his balanced budget and managing the state through a recession, Bayh was a cautious governor who did not assert leadership in state-level ED (or CD). His record as Senator, however, did reflect some interest in ED. Part of the reason for both Bayh and later O’Bannon’s ED conservatism was, of course, the dominant culture and tradition of the state, but also the fragmented nature of the Indiana Democratic Party—split between an aggressive anti-U.S. Steel labor-driven northern Indiana governed by Gary’s black leaderships, and a more moderate Indianapolis constituency.
Frank O’Bannon served for eight years as Bayh’s Lieutenant Governor and six years as governor (he died in office, 2003, succeeded by his Lieutenant Governor, Joe Kernan). Neither as Lieutenant Governor nor Governor did O’Bannon pursue an independent or aggressive ED/CD agenda. As Governor, he also cut taxes (about $1.5 billion) and conducted an ED program similar to that carved out by Orr—attraction, business climate and deep private sector leadership/delegation. His agenda was dominated by non-ED program areas such as education, Amber Alert, and coping with the fiscal effects of the post 9/11 recession. A notable exception was a 1999 state legislative initiative, 21st Century Research and Technology Fund, intended to stimulate research and innovation and complimented the earlier approved State Small Business Credit Initiative. During the Democratic interlude, the traditional county/municipal-level leadership in ED was continued—the story of Indiana ED continued to be driven by local/county initiatives and programs, supplemented by state-level attraction, tourism promotion, and low-tax business climate. An excellent example of this decentralization is the Indiana State Enterprise Zone (IEZ) program.
The IEZ Program was created in the Orr-Mutz administration (1983), an early wave of EDZ state approvals, and was administered formally by the state Dept. of Commerce which approved local applications to establish a locally-operated EDZ. Such approvals were to sunset after ten years but permitted two five-year renewals at which time a new ten-year authorization could be issued, and the state principally monitored local use of incentives. Two applications could be approved each year. As of 2005, twenty-five local EDZs had been approved (seven during the Orr administration and the remainder during the Democratic interlude), plus three military bases. In 2017, twenty-two zones were in operation. The EDZ was used primarily as an attraction/manufacturing investment-strategy for depressed older manufacturing or heavily minority-resident areas and were dominated by various incentives, tax credits[xvii]. Historically, state involvement has been limited to data collection, incentive monitoring and renewal of zones based on legislation and performance reviews. The program was transferred to the IEDC (see below) in 2005.
Mitch Daniels and Mike Pence: the Republican Golden Years?
Hindsight is a wonderful asset, and in 2017 it seems easy to assert the two Republican governors who followed the Democratic Party interlude produced Indiana’s “golden age” in our Contemporary Era. In that the three Democratic governors neither broke with Indiana’s long-standing priorities and approach to ED nor deviated significantly with the Orr-Mutz intensified state-level involvement in MED, both Daniels and Pence vigorously reapplied Indiana’s traditional reliance on state business climate and continued the state’s public-private (and still fundamentally decentralized) approach to economic development. Daniels, first elected in 2005 and reelected in 2009, was succeeded by Pence who ran the state from 2013 until his election as Vice-President. Pence’s Lieutenant Governor, Eric Holcomb took over in 2017 after Pence withdrew from the 2016 gubernatorial election.
Daniels, an intern on Mayor Richard Luger’s office (1974), rose to become Luger’s chief of staff (and campaign manager), following Luger to the Senate in 1977. Climbing from position to position in Washington D.C., Daniels in 1987 assumed the Presidency of the conservative think tank, Hudson Institute, declining in 1989 Senate appointment to replace newly-elected Vice-President Quayle. In 1990 he returned to Indiana to work for Eli Lilly, a pharmaceutical corporation. Over the next decade rose up the corporate ladder to become its Senior VP for Corporate Strategy. In 2001 he became George Bush’s OMB Director where he served until his 2004 run for Indiana governor.
Daniels beat the incumbent Democratic governor (Kernan) with 53% of the vote. On his proverbial first day in office, the new governor created Indiana’s OMB to uncover cost savings and budget reductions; on the same day he decertified by executive order the requirement that state employees pay union dues, reversing a 1989 Evan Bayh executive order. Unionized state employees dropped by over 90% in the following years. Daniels first administration stressed fiscal responsibility and capacity, making a series of cuts, renegotiating state contracts, increasing fees and some taxes, and returning substantial sums to local governments borrowed by past administrations to pay for state deficits.
Over his two terms Daniels accumulated a $2 billion state reserve fund. He successfully signed legislation capping local business and residential property taxes in 2008, reducing local property taxes on average by 30%, paid for by increasing the state income tax by 1%. The result of all this chicanery was national recognition of Indiana’s strong fiscal position, well-run state government and attractive, relatively low-cost state business climate. Lost in all these initiatives was the external reality the nation had entered into the Great Recession, the worst since the Depression with the collapse of much of America’s financial and housing sectors, the stock market, and a national unemployment rate exceeding 10%. Nationally, 10% of the manufacturing workforce lost employment.
But Daniels also took pure ED seriously. In 2005 he terminated the Dept. of Commerce by merging it with the Orr-created private IEDC. The new Indiana Economic Development Corporation (instead of Council) was chaired by the governor (ending the Lieutenant Governor’s role in running the state ED programs). The new IEDC consisting of a large corporate-dominated heavy-hitter board of directors, closely linked to the Indiana Chamber of Commerce, was described as a private-public EDO. In accordance with his campaign promise to create new jobs, that task became the IEDC’s primary mission.
Embracing Indiana’s now time-honored MED strategy of using incentives to attract and retain corporate facilities Daniels’s first administration IEDC claimed 485 closed deals resulting in over 60,000 jobs. Over his two administrations, IEDC claimed over 1,500 closed deals, with a projected 169,000 jobs. Not unsurprisingly, those numbers were seriously questioned. Later the IEDC revised the numbers downward. Still, there were unquestioned successes, particularly in attracting Honda, Toyota and Cummins to invest in their Indiana facilities. These were supplemented with a BP investment in a $3.2 billion tar-fracking refinery. In his first administration Daniels also personally led a trade mission to Korea/Asia. Somewhere in all this (2006) Daniels got involved with a major city of Indianapolis project—the tearing down of the Colts domed stadium (PCA Dome)—the one Hudnut had built controversially to “steal” the Colts from Baltimore (and Mayor Schaefer) in 1984). Predictably controversial the new stadium proposal lacked sufficient funds, and Daniels injected the state to provide such funds through new liquor taxes and linking it to a tax on rental cars to fund the expansion of nearby Indiana State Convention Center. From there the politics (internal Republican) between city and state degenerated over the construction period. The state eventually assumed ownership, with bragging rights of the Indiana Convention Center, but also the new Colts’ stadium, the Lukas Oil Stadium (opening in 2012).
Daniels also “privatized” the state’s welfare administration (to IBM), but that was later retracted and returned to public management. That was not the case with the privatization of a major Indiana Toll Road to foreign investors/corporations for 75 years (in exchange for $3.85 billion). Extremely unpopular with Indiana citizens his voter approval hovered around 40%. Democrats took over the House for the next two terms. Divided government led to policy and budget stalemates—which were resolved principally by drawing up the reserve Daniels had created.
That too passed and he was reelected in 2008 with nearly 58% of the vote. The Democrats retained control of the House, again resulting in a divided and conflicted state policy process. In 2010, however, Republicans elected super-majorities in both the House and Senate. Flush with victory, many new Republican legislators embraced an aggressive conservative agenda, which for the most part Daniels accepted. Quickly in February 2011, the House Republicans, following Wisconsin’s Scott Walker’s lead, almost passed a state right-to-work bill that made it illegal to require Indiana workers to join a union. Democrats in the House literally left the state (walked out), denying a quorum for final approval by the House. Predictably demonstrations followed, and legislative paralysis ensued.
Daniels supported right-to-work, but argued passage was premature and should be presented to the voters in the next legislative election. The measure was dropped and the crisis abated. In 2012, a newly-elected House and Senate sent the right-to-work legislation to Daniels—which he signed. Wisconsin, after a torturous process, did not approve its right-to-work until 2015, making Indiana the first to approve this controversial business climate legislation since Oklahoma in 2001. Michigan also adopted it in 2012, and after Wisconsin, West Virginia (2016) and Missouri in 2017. At time of writing twenty-eight states have adopted right-to-work—making it a cornerstone of what has become the Contemporary Era’s “red state” economic development. In any case, “termed out”, Mitch Daniels left the governorship that year, replaced by Republican Congressman (since 2001) Mike Pence.
Pence, after leaving the presidency of the Indiana Policy Review Foundation, became a radio talk host from 1995 to 2000 (he ran for Congress twice before in 1988, 1990—and lost). He climbed the House leadership ladder in the years that followed, elected in 2009 (during the Great Recession). To head the House Republican Conference Chair, after losing an attempt at the Speakership to Ohio’s John Boehner. In a close three candidate election Pence garnered just under 50% of the vote.
In office, Pence predictably followed the customary policy direction Indiana: fiscal conservatism, strong business culture, and budget and tax cuts. In 2013, he introduced a 10% income tax cut, touted as the largest in state history (the honor probably goes to Bayh, however) which was reduced to 5%. It did lower the business income tax to 4.9% from 6.5%–the second lowest in the nation. The law also allowed Indiana counties to lower further their business-relevant personal property taxes. In that year he also repealed an Indiana state prevailing wage law on publically-funded projects. Pence unsuccessfully argued for a balanced budget amendment and also saw the legislature overturn his veto of legislation that raised local county taxes for jail construction. In 2016 he secured legislative approval for his signature ED initiative: the $1 billion Innovation and Entrepreneurial Initiative. The initiative was Indiana’s first major venture into innovation, knowledge-based economics, entrepreneurial, university-driven MED. The initiative transferred important small business and entrepreneurial agencies and programs, still under the Lieutenant Governors management, to the IEDC. It also allowed $30 billion from the Indiana state pension fund to be used to invest in Indiana firms. Indiana had finally become an Eisinger-accredited “entrepreneurial state”. Still, there are several elements in the Pence initiative that reinforce Indiana’s traditional tilt toward attraction through extending benefits to external firms, startups and investors. It is not a pure domestic startup or entrepreneurial focus. The $100mm allocation to encourage university involvement in innovation and entrepreneur (Purdue takes that seriously) is a first step, but phased over a decade, hardly a revolution.
Job losses in Indiana’s large and critical manufacturing sectors (from the Great Recession) once again injected deindustrialization into Indiana’s policy agenda. Job recovery after leaving the Recession was slow, and Indiana, while roughly matching the national unemployment rate, lagged the national GNP growth. By 2014 Indiana’s GNP grew by a miserly .4% (compared to a nation 2.2%), one of slowest in the nation. Pence spent a good deal of his ED time “clawing back” many of the incentive packages awarded to firms in past years. In 2014, he advanced the Indiana Gateway railyard project to be funded from the Obama Administration American Recovery and Investment Act of 2009. He also struggled against Obama Administration EPA coal mining regulations. In 2016 Carrier Corporation and United Technologies proposed moved 2,100 jobs to Mexico, opening up the now-famous jaw-boning job creation program of Donald Trump.
[i] Colin Woodard, American Nations, pp. 183-6. Richmond Indiana, p. 186
[ii] Charles Warren, “New Institutions for Economic Strategy” in R. Scott Fosler the New Economic Role of American States, p. 271.
[iii] Charles Warren in Fosler, p. 272
[iv] Charles Warren in Fosler, p. 276-7
[v] Orr held an interesting ED background previous to assuming the governorship. A postwar entrepreneur he made his fortune purchasing defunct or severely troubled industrial plants under pressure from war’s end downsizing and federal industrial decentralization. He fabricated what could be considered a local “private equity” firm, whose profit came from restoring these plants to profit-making status and reselling them. While doing so, he also served on his home city (Evansville). As Lieutenant Governor he “ran” the state Departments of Commerce and Agriculture, as part of the Bowen business climate and attraction program. He formed to port authorities along the Ohio River and launched a successful tourism campaign.
[vi] Charles Warren in Fosler, p. 277.
[vii] Charles Warren in Fosler, p. 277.
[viii] Charles Warren in Fosler, p. 272.
[ix] Charles Warren in Fosler, p. 273. 2013 statistics drawn from http://www.iedc.in.gov/industries/advanced-manufacturingfile:/Downloads/Advanced%20Manufacturing%20in%20Indiana..pdf
[x] Joel Garreau, the Nine Nations of North America (Boston, Houghton Mifflin, 1982), p.71. Garreau’s conception of culture, resembling more than of Patchwork Nation, infuses a good deal of economic base and our competitive hierarchies into the nine cultural fabrics. It also is more attitudinal where mine is structural and philosophical..
[xi] Charles Warren in Fosler, p. 280.
[xii] Charles Warren in Fosler, p. 282.
[xiii] Jon Teaford, Cities of the Heartland, p. 226.
[xiv] Charles Warren in Fosler, p. 283.
[xv] Charles Warren in Fosler, p. 283-5.
[xvi] Will Connors, Town’s Bet on Global Business Pays Off”, Wall Street Journal, April 11, 2017, p. A3.
[xvii] Jim Landers and Dagney Faulk, In the Zone: a Look at Indiana’s Enterprise Zones, Indiana Business Review, Summer 2005, Vol. 80, Number 2
Ron W. Coan 