Minnesota

Minnesota

 

Minnesota’s White & Blue State Constitution: Settlement, Political Culture and Statehood

 

Most present-day observers would characterize Minnesota as a progressive state settled chiefly by Yankee stock and infused with progressive-prone German and Scandinavian immigrants. I would not quarrel with that description, but would counter that my research summarized in this section reveals interesting subtleties between the different groups which creates distinctive regional variation in policy systems/economic bases and seriously understated an intense Privatism that dominated both state and many municipal policy systems well into the 1960’s.

 

This chapter demonstrated Minnesota State did play a serious role regarding its settlement and aggressively promoted railroad development and rail, canal and road infrastructure. Transportation infrastructure seems to have been a continuous concern of the State. Nevertheless, the State was content to delegate the program design, financing, and implementation to private EDOs, such as railroads and private companies. Driven by Populist Movement politics (Granger politics) the  state did pursue railroad regulation aggressively, but by the 1900’s it did little to support urban unionism—leaving that to local governments who developed inconsistent responses to the rising influence of that movement. World War I brought out some of Minnesota’s evil angels, but even then the State entity that conducted anti-German discriminatory programs did so because of the state’s lack of oversight than because of policy preferences derived from state legislation.

 

Accordingly, Kolderie and Blazar (R. Scott Fosler) assert “Throughout most of the state’s history economic development programs were sponsored and operated by private industry, primarily by the state’s railroads, utilities, and larger banks. These companies had economic or industrial development departments”. While this chapter will explore the role of railroads in 19^th century ED, as an example of the banks role in ED, they observe the First National Bank of St Paul’s initiative to bring in an oil refinery to diversity and fill a missing element in the city’s economic base[i].

 

During the 20^th Century Classical Era, Minnesota, its cities and agriculture, certainly was impact by federal WWII war production and industrial decentralization, but compared to Detroit, Cleveland, Philadelphia, and even Chicago or  Western cities was not “ground zero” and the transformative impact of these forces were less disruptive. Minnesota (and its local governments) did not aggressively embrace the early public housing and neighborhood phases of urban renewal. The Minnesota urban renewal pace did not pick up until the 1950’s. The state did not stand in the local’s way, local empowerment by the state was not a factor, although judicial review of the public purpose redefinition of state gift and loan clauses was not without its hiccups.

 

Urban renewal in Minnesota offered a different context than say, Pennsylvania or Chicago. Great Migration/Southern Diaspora migration had minimal impact on either Minneapolis and St Paul, or Duluth for that matter. Also, Minnesota large cities were significantly younger, their initial growth post-1880, and their housing stock, whatever its inadequacies, compared favorably with older urban areas. Accordingly, one sees Minnesota’s Age of UR later of a different character.

 

The shift away from Private EDOs began in serious during the 1950’s and was initially characterized by the closing of private company ED departments and the increasing role played by chambers of commerce, and indirect private leadership channeled through urban renewal era quasi-public EDOs.

The private sector did not abandon its long-standing ED concern. In 1981 the Minnesota Business Partnership was founded; it almost immediately funded a Minnesota Seed Capital Fund, a Minnesota Cooperation Office, and was impactful in the establishment of Minnesota’s High Technology Council—another private EDO which continues to this day.

 

The State ED effort into the 1960’s was limited to tourism, publishing various collateral material/data useful to attraction, an occasional trade mission. That began to change in the late 1960’s when the state, in response to local leadership, played an aggressive role in reshaping the ED intergovernmental context between the Twin Cities and their suburban communities. In response to deindustrialization in the Iron Range region during the 1970’s, the State created several EDOs and programs to counter its disruption and increasingly became involved in more direct traditional business assistance.

 

During the 1980’s the state also became active in technology (cluster) development by providing tax abatements for R&D, started a technology transfer initiative (1983), and a SBIC program. The state also adopted sale tax abatements for manufacturing and farm machinery (1983), and in 1987 strengthen its Iron Range counter-deindustrialization efforts by adopting tax abatements for the taconite industry. The State assumed a leadership role, particularly in defining the powers, programs and tools available to regional and local entities and governments in the late 1960’s and during the 1970’s the State became ever more active in the development of a state-level ED function and policy area. By the 1980’s the State under two ED-friendly governors incrementally defined the State’s niche in state and local ED—a niche that was in flux through the entire Transition Era.

 

In this manner, without the hostility and tension that characterized Massachusetts private EDO-driven technology EDO, one can see a hybrid private-public state-level bifurcation in ED.

 

Population Settlement and Constitutional History

Minnesota was among the last of the Midwest states to be settled in volume. While the southeast third of the state was included in the Northwest Ordinance (which prohibited slavery), the area was until the 1840’s lumped into the Wisconsin Territory. In the process to admit Wisconsin as a state (1848) inhabitants of the southwest Wisconsin Territory(which includes Minneapolis and St Paul) resisted and detached themselves from Wisconsin to form a newly-constituted Minnesota Territory (1849) that also included that portion of contemporary Minnesota acquired in the 1803 Louisiana Purchase. Early settlers were mostly Democrats, and the chair of the Senate’s Committee on Territories, Stephen Douglas, paved the way for the Democrat-dominant territorial request adopted at the Stillwater Convention. It was Douglas that saved the Minnesota lands from incorporation into Wisconsin. In 1848 Minnesota was approved by Congress as a Territory and the basics of Minnesota government structures began operations.

 

The area at that time was sparsely settled, and still contested by two Native American tribes (Dakota Sioux and Ojibwa); most of the state was described as “Indian country” with only a few sizeable “white” settlements (Mendota, Stillwater, St Anthony (Minneapolis), and St Paul). An 1851 treaty with Native American tribes “opened up” the state for settlement. Still in 1850, Minnesota held fewer than 10,000 “white” citizens and somewhat fewer Indian citizens. In 1848, the capital, St Paul was occupied by about 400 residents.

 

Minnesota emerged on the eve of the Civil War—when the nation was polarized and a party realignment was brewing—and the sparseness of settlement threatened Minnesota’s legality in applying for statehood. Minnesota’s first task as a territory was to attract migrants and create an image, a brand if you would, for the outside world. In 1853, the Territorial Government sent a representative to New York City to display Minnesota products (crops and vegetables)—the Fair denied him permission to bring in a buffalo, however, at Crystal Palace World’s Fair.

 

Following up with this awesome success, the Governor and Legislature passed an act establishing a Commissioner of Emigration (1855), and a multi-lingual commissioner, Eugene Burnand—Minnesota’s first official economic developer—located himself in NYC, set up an office, met immigrants at the docks, distributed advertisements, and publicized Minnesota in the NYC newspapers. As skill would have it, he found particular success in attracting Germans. When a new state government took office in 1858, however, funds dried up—but somewhere in the back of Minnesota’s collective mind, the people attraction success hung on. It would be restarted in 1867.

 

Attracting migrants in large numbers in a competitive Midwest required railroads to break its off-the-beaten path isolation. That would take a while; the first railroad opened for service only in 1862. The key to Minnesota settlement always was railroads. The Territorial government advocated hard for Congress to facilitate railroad construction and in 1856 Congress passed a railroad land grant bill which transferred federal land to the state for schools, a state university, and railroad construction. By that time, deeply-contested politics in Washington were slugging it out over prospects of a transcontinental rail to the Pacific Coast. Minnesota politicians didn’t want to miss that opportunity, and in that year pressed hard (for the first time) for statehood. In another heavily disputed legislation, Congress in February 1857 approved legislation authorizing a constitutional convention.

 

That convention was held in July 1857. So deeply divided were Minnesota’s political elite that the convention split into two factors, Democrats[ii] from urban centers of St Paul, St Anthony (Minneapolis) and Stillwater duked it out with newly formed Republicans who settled in the new prairie farm lands of southern Minnesota. Each side wrote their own version of the constitution, and negotiated literally at night to reach agreement. Democrats won on most issues (supposedly because most Republicans were new-comers and politically inexperienced), and the negotiated final versions of each were substantially identical, but each faction prepared its own copy of the final version, one on blue paper, the other white, and each faction signed only its copy. To this very day, the Minnesota state constitution is composed of both copies, as periodically adjudicated by Minnesota courts.

 

Barbara Allen contrasts the backgrounds and perspective of each party at the convention(s).

In the Republican convention ideas and institutions reflecting the colonial and early state-formation of New England covenanters joined the more pluralist commercialist culture of the Middle Atlantic … Pennsylvania, New York and New Jersey. The preponderance of the Republicans came directly to the territory from New England (26) while the second-largest group (18) emigrated from Middle Atlantic States; most of the Republican delegation arrived in the territory between 1855 and 1857 … [Republicans] confronted the frontier political experience of Democratic delegates, almost a quarter of whom had been born in the Northwest Territory and many of whom had served in high Territorial offices[iii]

Economic development per se, gift and loan clauses in particular, did not figure prominently in the constitutional discussion. The closest they came was the Republican-adopted provision outlawing public funds for religious purposes. The Minnesota Constitution (Art 10, 11, 12) did allow “taxation for furthering a public purpose, but generally prohibits enacting local or special ordinances, or laws to tax for a private purpose …. [it also] prohibits cities from donating money or loaning the credit of the state for the specific purpose to aid an individual, an association or a corporation … [unless] the expenditure must further a public purpose and must be authorized by a statute or charter”[iv]. In this instance, constitutional restrictions apply most severely to sub-state entities, but “public purpose” applies to the state as well. What constituted a public purpose, however, is “evolving” and obviously, did not interfere with a state tax-exempt bond issuance to four railroads in 1854.

 

In many ways, the Republican and Democrat groupings focused on their own concerns, adopted different organizational and approval styles, and when they negotiated the tendency was to adopt the sections of one faction that were never dealt with by the other. Since the two parties were concerned with different issues that meant large sections of the constitution represented the views of one party. The best example was the inclusion of New England “covenant” based local government: townships also congruent with the Northwest Ordinance legacy. The use of towns, which historically has conveyed a lesser role for local economic development, and a greater role for the state, however, profoundly affected Minnesota’s ED history.

 

The two parties disagreed profoundly on government structure. The Democrats preferred a weak governor and a strong legislature. Republicans in the Winthrop tradition favored a strong governor able to control key functions such as auditor, treasurer, attorney general. Democrats argued for a plural executive, similar to the Jacksonian long ballot with multiple independently elected state officers each responsible for defined executive functions. Democrats were victorious and the Minnesota governor as approved was far from all-powerful, especially in the historical period under present discussion. The constitution above all excluded slavery, an issue that consumed much attention and one which the Democrats lost.

 

The constitution(s) were approved by voters and sent to Congress which, after considerable discussion, approved statehood. On the eve of the Civil War, amid a tempest unleashed by both Kansas-Nebraska Act of 1854 and the Dred Scott Decision, the latter complicated by the fact the slave Dred Scott himself had been a resident of Fort Snelling Minnesota where he had been “leased out” to perform service which was held to be an “illegal” introduction of slavery into a free territory (as defined in the Missouri Compromise). In any case, Minnesota became the thirty-second state in May 1858.

 

The bulk of the Civil War years were consumed not with just fighting Confederates, but conducting a large scale war and treaty-making effort to open up Native American areas.

 

Homesteading as Economic Development:

 

It is therefore no accident that in its 1856 effort to acquire statehood (successful in 1858), the Territorial Government established a Department of Emigration which conducted advertisements and sent speakers to immigrants in New York. Minnesota city-building was for the most part after 1850 through the 1880’s, after eastern Big Cities had established strong agglomerations and industrial economic bases. Illinois had already commenced its Illinois Central Railroad-led city-building/settlement campaign[v]. Moreover regional leadership by an aggressively expanding Chicago (400 miles away) was already established. In essence Minnesota faced a highly competitive urban hierarchy as it began its settlement period, but the key goals for state economic development were clear and evident in Minnesota’s 19^th century history: railroad development and population in-migration. City-building in this atmosphere stressed a number of small urban logistical centers incrementally penetrating into Minnesota’s interior.

 

This, and the diversity of Minnesota’s geology, would set the stage for a large state with one massive metropolitan complex (Minneapolis-St Paul) and a host of small third tier cities[vi]. Initially, the economic base was predominately agricultural to take advantage of the most accessible open space during the 1860-188- period. That in effect tilted both primary goals toward homesteading as its primary ED strategy for the first decade or two. Eventually by the Gilded Age (1880-1900) Twin Cities growth, the discovery of ore in the Mesabi Iron Range (Duluth), and the rise of lumber industry all conspired to add greater complexity and geographic diversity into Minnesota’s regional economic bases.

 

Post 1850 settlement drew upon a number of sources including German immigrants (New Ulm in 1854), French-Canadian, Alexander Faribault (Faribault, 1852) and several other city-building entrepreneurs (Captain William Dodd, St Peter (1853) and George Head, Rochester (1854)). St Paul grew by leaps and bounds from 1848 400 to 2500 in 1852 and 10,000 by 1860. Most of the migrants were New Englanders, or transplanted New Englanders from up-state New York who came during the 1850’s. By the Civil War (1860) Minnesota migrants were 80% New England-derivative stock.

 

The land settled in this period was chiefly fertile treeless plains suitable to farming and sod-house farms.  The land was owned by the federal government (U.S. General Land Office) which sold land for $1.25 an acre under the 1841 Pre-Emption Act—which, BTW, gave squatters’ right of first purchase after land had been surveyed. The trouble was Minnesota land was not yet surveyed and squatters came in droves, only to be threatened by subsequent post-survey buyers. That prompted the territorial legislature to ask Congress to amend the Pre-Emption Act (1854) so to accommodate its squatters. Amendment was not easy because in the pre-Civil War Congress a powerful southern bloc was opposed to squatters and homesteading in general. Homesteading became a major plank of the new Republican Party, and was opposed by mainstream Democrats such as Stephen Douglas. This was the time homesteading overlapped with Kansas-Nebraska and John Brown violence.

 

With southern opposition to federal homesteading removed during the Civil War Congress, the 1862 Homestead Act was approved. In that most of Minnesota was federally-owned, that was a revolutionary development with considerable economic development potential. In the first decade however, the agricultural realities of a treeless prairie (sod-houses may have been attractive to Willa Cather, but they weren’t to the average homesteader—there was little heating fuel for a harsh winter). “Despite Minnesota’s bountiful land, the region was regarded as an American Siberia. Through steamboats plied the Mississippi to St Paul, they were slow and unreliable, and when the river froze, Minnesota was virtually isolated.”[vii]

 

So at war’s end (1867) the state legislature restarted its old German immigrant attraction program. It created a Board of Immigration and appointed Hans Mattson, a Swedish immigrant and Civil War Minnesota officer as its commissioner. Colonel Mattson wrote himself several collateral materials, had them translated into Scandinavian languages, and then followed up with personal trips to northern Europe and Scandinavia. He wrote a book on those trips and lo and behold he got tons of leads—“besieged by people who wished to accompany me back to America in the spring”[viii]. From that point on, Germans and Scandinavians “poured” into Minnesota.

 

A decade after the Homestead Act (1873) Congress amended that act by adding the Timber Culture Act to address the need for massive tree planting in those treeless frontier areas like Minnesota’s prairie areas. That last act, and the more extensive development of Minnesota railroads, finally made Minnesota land attractive to homesteaders—by 1880 more than a million acres had been claimed (along with 8 million trees planted). The state augmented federal tree/homestead subsidies by providing an additional bounty of $2 per acre per year for each acre of tree planted[ix]. Who would have ever thunk that ED required tree planting for its success.

 

William Lass asserts “most newcomers to Minnesota sought farmland”[x]. Southeastern Minnesota’s natural economic base was farming. While much will shortly be made of a German and Scandinavian horde descending on Minnesota rural areas, 1850’s and post-Civil War saw New Englanders, upstate New Yorkers and rural Pennsylvanians moving in droves—because of soil exhaustion, creeping expansion of Big Cities/higher property tax/dirty industrialization and an urban lifestyle not to their liking. They were the consumers of homesteading. An feature of a region in which newcomers cleared empty areas and set up to farm was that relative isolation of the family unit fostered retention of old lifestyles and values[xi].

 

While Minnesota produced many grain crops during the 19^th century, wheat became the king of Minnesota agriculture—and its first economic base. In 1878 about 70% of Minnesota’s tilled land produced wheat and between 1890 and 1910 Minnesota was America’s leading producer of wheat. From that point, on, however, for a variety of reasons, agriculture became much more diversified and the late-19^th century wheat belt is no more.  The processing of wheat, however, fostered by initial industrial agglomerations of Minneapolis and St Paul. It is no accident that “Wheaties” came from Minneapolis, and beer-brewing from St Paul.

 

The Railroad as Lead EDO: For those with thoughts of robber barons, the Populist Movement, extortions imposed by railroads on communities desiring railroad access, muckrakers, and an 1887 Interstate Commerce Commission empowered to end/regulate abuses the like of which America had never-before encountered, an age in which private railroad corporations were arguably the most important EDO for a state and locality not only seems strange, but outright repulsive. Such is the complexity of history, however, that from 1870 (or so) through the 1880’s (or longer) the private railroad corporation opened up Minnesota, enabled a spectacular population growth—and moving beyond financing/installing/ operating transportation infrastructure employed multiple ED attraction strategies and programs to attract residents primarily, but firms as well, and then devising and employing a formal city-building strategy to house these folk and earmark industrial districts for the later to enjoy rail access for their inputs and outputs.

 

Nasty extortionists they may have been, railroad corporations were also essential EDOs. Their programs were copied by newly-founded chambers of commerce who then practiced the infamous “boosterism” decried and laughed at by Three Wave historians of ED. The basic attraction tool set of modern economic developers were first developed by railroad corporations in the period immediately before and after the Civil War (see Coan, the Illinois Central Railroad, p. 75ff). Minnesota railroad corporations almost certainly stole 1850’s next-door Illinois Central innovations, as well as the 1860’s programs and strategies employed by transcontinental railroads.

 

As to pre-1870 Minnesota railroad development, a rail connection from St Paul to newly-constituted Minneapolis (town in 1856 and incorporated as a city 1867) opened only in 1862. The breakthrough was a rail line opened in 1854 to Rock Island IL in central Illinois—350 miles from St Paul. The trip to St Paul from Rock Island was by steamboat and consumed thirty hours of unpleasant travel. Yet, within a year, over 30,000 migrants traveled on it to St Paul. Railroad advocates, seeing opportunity where others see overused toilets, organized “the Great Excursion” to draw attention to St Paul and develop support to railroad access to it. No less a personage than President Millard Fillmore participated.

 

The nasty Panic of 1857 bankrupted four railroad chartered companies that mimicked the Rock Island venture—even a state $5 million dollar loan could not save these charters and stimulate track laying. The outstanding 7% bonds remained an irritant to Minnesota fiscal authorities, and in 1866 a state Railroad Bonds Commission was created by the Legislature to find a solution to the four railroad’s bond default debt. A Sinking Bond Commission and Sinking Bond Fund was established to sell state land, the proceeds of which would accrue to the state Land Improvement Fund (322 bonds). This did not resolve the default, however, and a highly controversial solution was finally found by Governor Pillsbury in 1881 when the bonds were recalled and new state bonds issued. The issue had been further compounded by debt issued in 1841 by the Territorial Government for railroad and land improvement infrastructure, by governmental entities such as school systems and municipalities[xii]. The take away from this confusing tale is in Minnesota state issuance of tax exempt financing did occur through 1857, but after that time, direct state loans from bond proceeds did not occur because of the 1857 default of $5 million of such bonds. By the time the matter was resolved in the early 1880’s, both the politics and the financial status of railroads had dramatically changed, rendering further direct loans mute.

 

It was only in 1867, that St Paul was finally connected to Chicago. Although the Panic of 1873 slowed railroad development noticeably, by 1880, three thousand miles of track had been laid in Minnesota and its main lines (for southern Minnesota) were open. This was now the age of Minnesota railroad development, an age in which Minnesota’s most important EDO was the publically empowered and subsidized private railroad corporation.

 

Why did struggling railroad startups pursue “colonialization” (that’s what it was called in 1860’s) so aggressively? To pay off the debt they needed to lay track, build stations and bridges, purchase rolling stock, and pay salaries. The banks and investors (often foreign) that lent this money were not only advocates for colonialization, but they demanded it. Why? Somebody had to use the lines and become passengers and generate freight. A railroad made sense only if people followed and used the line. It is a mistake to assume attraction marketing, aka boosterism”, by railroads was an interesting sideline. It was just the opposite a vital and necessary element of their business model, and a pillar of their financing and financial vitality.

 

There’s more. States (and local governments) needed people if they were to grow; growth was an absolute value. Either your state or city grew or somebody else would. Transportation infrastructure was a very first step in a growth strategy, and transportation infrastructure into empty lands, meant controlling the property on which the track was laid, and being able to generate income from land adjoining the track. States such as Minnesota acquired land (usually transferred from the federal government), transferred it to a railroad startup, along with tax abatement on land and property, along with additional powers of eminent domain, and state-tax exempt bond issuance so banks/investors would participate. In many cases the state and local governments and their citizens and residents as well purchased these bonds. Railroad development required a close and complex public private partnership, and support and monetary investment from its citizenry.

 

Not fully appreciated, however, was all this partnership created a virtual monopoly for the railroad if successful. That monopolies occurred within a generation or so, while probably not totally surprising, was a risk that could be dealt with later, in order to achieve in a cost-effective and ideologically-congruent manner development that was an absolute imperative at the time. Frankly, given that government owned the land and the public powers necessary to develop that land, and railroad infrastructure and population attraction was far beyond existing governmental capacity/legitimacy one wonders what other effective alternative was available. Russia, confronting essentially the same dilemma at the same time, used its variant of state capitalism to accomplish its objectives.

 

Among the very first railroad startup to pioneer Minnesota’s public private railroad EDO partnership was St Paul’s James H. Hill’s Northern Pacific Railroad Company (incorporated in 1864) who in 1866 (four years before he laid his first track) called for the re-establishment of the State’s Bureau of Emigration “for the purpose of settlement of the lands of the company”. He expressed a willingness to send his own agent (William Rowland) to Germany and “other parts of northern Europe” if the state would designate the agent as its agent. So In September, the Governor provided an official letter as “Special Commissioner of the State of Minnesota to the Paris Universal Exposition of 1867”.

 

As mentioned earlier, the Legislature jumped on in 1867 creating a Commission of Immigration—making it permanent in 1869, approving the State’s first formal attraction advertising program, appointing Albert Wolff as Commissioner a hiring a network of agents to work with/assist immigrants in St Paul, Chicago, Milwaukee, New York City and Sweden and Norway. Alongside these agents were an aggressive advertisement program to promote the state and its regions[xiii]. As early as 1871, Board of Immigration annual report, commented the work of the Board and its agents was rendered effective by the by the assistance of “experienced railroad men who served without expense to the state board”[xiv]. Subsequent reports documented that large portions of the Board’s expenses were paid by funds from railroads. Minnesota and its railroads were now engaged in a partnership to populate the state, build cities, and set up regional economic bases.

 

The plight of the eastern Big Cities captured the attention of early community developers like Jane Adams and Jacob Riis during the early 1890’s, but the decades before may well have been even more desperate for Big City newcomers. This proved to be an important factor in generating internal migration not only from Big City rural areas, but for rapidly escalating immigration. Specifically, public health issues in Gilded Age Big Cities were huge—and devastating. Smallpox, malaria and a host of influenzas came from undeveloped water infrastructure, only then in the process of installation, a total lack of sewers and water access. With each epidemic people fled Big Cities.

 

Accordingly, one of the first themes that railroads embraced to promote colonialization was health. Preposterous to today’s reader, post-1860 collateral material stressed health benefits associated with new virgin land. Minnesota’s Siberian climate killed mosquitos, and mosquitos bred malaria. Fleeing a Lafayette Indiana malaria epidemic brought Dr. William W. Mayo to St Paul, and eventually to Rochester Minnesota in 1863. Tuberculosis was a horrible and slow killer, and no one in these years really understood what caused it. Extremes of heat and cold were felt by many at the time to alleviate its symptoms and prevent its spread. Minnesota would benefit from this belief.

 

Accordingly, railroads, in a spirit usually thought of describing the later American West in California, Arizona, Colorado, marketed Minnesota as a sanctuary from disease. As Carey McWilliams described how 1880’s Southern California railroads and speculators turned health and climate into a marketable commodity by “selling them the climate, and throwing in the land”[xv] so did its Siberian cousin, Minnesota. The beauty about health marketing was that it drew in middle and professional classes who could afford to move, and whose skills were desperately needed.

 

The railroad/State EDO partnership set up a base overseas office in London, from which it operated a number of sub-agents who operated in the various nations of northern Europe. Native speakers were relied upon and collateral material was in the native language. Subsidized travel agreements were signed with steamship corporations, port administrations, and railroads to in effect act as the immigrant’s travel agent. The costs were subsidized (and sometimes financed through a railroad loan), and the quality of accommodations reflected that, but interim housing was available for free, and agents were waiting at the docks when the immigrants arrived. In the U.S. agents were waiting at each major transportation node where a layover was required. Like today’s airlines (HA!) reasonable baggage was free and arrangements were made to clear it through Customs.

 

The advertising program was sophisticated for its time, although it lacked web sites and apps. Pamphlet, how-to and travel books, newspapers articles and advertisement, circulars, and an intensive lecture series in targeted communities and populations. Most European cities operated “bureaus of information” and all these forms of collateral material were available. Attendance at the various Expositions was commonplace. Obviously, the key to the transaction was the job or farm waiting in Minnesota. This was without doubt, the most sophisticated aspect of the partnership.

 

Rural immigration with the end-point being a farm meant the railroads provided to the prospect detailed, sometimes exaggerated, but often fairly reliable information, often secured through survey results from the destination area. Soil analysis, the mechanics of crops and soil cultivation were provided. Land was cheap, and was usually paid for in the form of a railroad loan—i.e. a mortgage in an era when there was no mortgage. Many railroads developed an “inspection” of the farm free of cost to the European immigrant—this was not atypical, but neither was it typical. More often was a discount in cost (or a credit for the fare) if the customer actually bought the land. Usual terms were 10% down, and seven annual payments at &% interest.

 

Also, land deals could include a reduced freight rate for future production for a period of time.  All this was often financed through railroad issuance of bonds and each railroad assembled its own “package” and in effect competed with packages offered by other railroads. The railroads offered technical assistance to apply for any relevant public programs—i.e. homesteading deals offered by state and locals. All this sounds too good to be true—and one wonders if it reads better than it was experienced—but it is reasonable to believe this was no paradigm of deception, and for its day, was a fair deal, if one had low expectations. This was not the “coffin ship” experienced by the early Irish and German immigrants. Some level of customer satisfaction was needed for the program to continue to attract new customers—and outstanding bonds needed to be repaid.

 

The final destination was not left to chance either. City-building became an element of the railroad EDOs strategy during the 1870’s. Again the self-interest of the railroad prompted a larger and more community-minded role. It also helped that unlike upstate New York where railroad routes and community relations bordered on incentive extortion, such was not the case in Minnesota—for the simple reason that towns and cities did not yet exist. New York was mature, Minnesota was a “babe in the woods” (to play with a Paul Bunyan metaphor) and accordingly the responsibility to plat towns along a prospective route could fall to a railroad.

 

Pure railroad-city-building was not especially common to Minnesota. Examples can easily be found in the Central and Southwestern states, but several towns (Litchfield, Willmar, De Graff, Groton, and Campbell[xvi]) were Minnesota examples of a phenomena labeled “railroad towns”. The essential element in the definition of a railroad town, at least for me, is the settlement must be owned by the railroad, and that the town was an essential element “of a railway’s strategy to populate and control the territory along its line”.

 

Probably the most successful early Minnesota railroad town was Duluth. Duluth got an abortive start after 1854 when treaties with local Indian tribes, a rumor of iron ore, the 1855 opening of a canal at Sault Ste. Marie in 1855, and a road to St Paul prompted a flurry of loggers into the area, and the formation of eleven small settlements. The Panic of 1857 put an end to that—and in 1859 a local history relates that only a handful of residents remained. The 1860 census caught only 71 residents.

 

Duluth’s savior came in the form of Philadelphia’s Jay Cooke (a robber baron par excellence) convinced/partially financed a small St Paul railroad to extend to Duluth—an extension that opened in 1870. He did so because he recognized, before anyone else, that in combination with the Sault Ste. Marie canal and the new transcontinental railroad, Duluth’s unbuilt port opened up a modern logistics link from the Pacific to the Atlantic. This awakened St Paul’s James Hill to that reality and he first built his own extension (1871), then acquired the startup in the Panic of 1873. Still, his Northern Pacific facilitated the Duluth’s first agglomeration, a lumber milling complex to produce ties and wood for bridges as he pushed his railroad into Wyoming and Bismarck Montana. By 1870 Duluth was home to over 3,100 residents. That agglomeration, however, was not Duluth’s last—more to follow below.

 

Make no bones about it, the railroad town definition makes it clear, if not inevitable, the settlement serve the corporate interests of the railroad primarily. That corporate interest, however, to some degree could be tempered by the needs to promote further growth and economic sustainability. It is also true the monopolistic rail access, particularly if served exclusively by one railroad, led to a serf-like relationship between Railroad Corporation and the town/city. Dynamics associated with a railroad town could apply to jurisdictions other than railroad towns. Accordingly, the following discussion applies to some degree to many Minnesota jurisdictions of this period.

 

Hundreds of independent towns appeared along the tracks, but they were not instruments of corporate strategy. Countless other towns already existed before the railroad arrived, and sometimes they were successful in directing the rails their way, but in neither of those cases could a railroad company fully develop the potential of the townsite for its own advantage. The railroad’s clear goal was to promote and control business along the line … There was little disagreement over how the system should work … farmers expected that trade-center towns would be created, and merchants expected that there would be a surrounding population to support the trade….. Many railroads made deals with private parties [effectively subsidiaries] who platted and sold the townsites. Railroad survey engineers determined town locations, and then handed over their information to townsite agents who hired surveyors[xvii].

While the grid was usually the starting point for platting, there was considerable variety in its application given the topography and economic base contemplated. A common plat featured the railroad running down the center of the town (effectively the Main Street) and then constructing buildings on either side of the 300’ right of way—the businesses on one side were 300’ apart from the business on the opposite side. This is where the expression “the wrong side of the tracks” came from; typically one of the two sides were composed of “proper and prosperous” businesses, and the other housed the saloons and cheap hotels, and “workforce housing”. Anticipating zoning and industrial districts (parks) by thirty years or so, businesses that required rail sidings or a close relationship with the line were located in a defined area which the railroad could service in a cost-effective manner[xviii]. In any case, railroad towns usually leased, not sold, the location to a business.

 

In Minnesota, the long term consequences of this platting can be observed by the current plight of Albany Minnesota. The city was incorporated in 1890 by 33 male residents, but the prospective city was bounded completely by the Great Northern and Soo Line Railroads. Present-day Railroad Avenue (the city’s main street) commercial business in almost totally on one side of the street. Because railroads would only lease that side which was on railroad property for thirty days—attractive only to those businesses that needed rail access (livestock, grain mills, later car dealerships), normal commercial/retail businesses located/bought on the other side, off railroad right-of-way. That is the side that serves as Albany’s present-day CBD. Albany is part of the St Cloud metro area and today has a population of almost 2,700—the highest ever in its over 125 year history..

 

As developed in As Two Ships[xix] the relationship of a town, railroad or otherwise, while not totally one-sided, developed tensions over time. The evolution of a community business elite, including the use of its chamber/board of trade usually tried to establish independence from the railroad, often by adopting its own refined business and people attraction strategy that was targeted to those businesses and groups that the chamber policy makers thought appropriate to local conditions and needs. From this developed the infamous, simplistic, and ideologically-laden “boosterism” that characterizes Third Wave historians.

 

On another front, railroads, with its natural monopoly, wasted little time in developing enemies, and sliding into abuses, chiefly excessive freight rates. Oversight, focusing on public safety, commenced in 1871 with the state creation of the Commission on Railroads—an independent agency. In 1874 the Commission was required to be elected. In 1885, however, the legislature reorganized the Commission, renaming it to Railroad and Warehouse Commission, and returning it to a multi-member appointed commission. Its expanded powers included rate discrimination, and could promulgate rules to remove “unjust discrimination in rates, or unequal rate treatment of persons, towns, villages, or locations”. The Commission was given powers to subpoena. Reformed and expanded several times in the 20^th century, it was merged in 1967 into the state Department of Public Service.

 

As railroads settled the upper Midwest, Central and Western states, it took very little time for farmers and community business to push for rate regulation in particular. The most prominent farmer-based organization, the Grange, was founded in 1867.Interestingly, an early years schism, in which farmers in areas without railroads opposed the Grange (and vice versa), was evident in Minnesota. As areas were both settled and provided rail access, farmer opposition intensified. Intensely involved in politics, indeed a core element in the Populist Movement of that era, the Grange acquired increased strength in Minnesota in the 1870’s and 1880’s.

 

Rate cases went to the Courts, both federal and state (early on the federal Supreme Court deferred decision-making to the state on railroad regulation, but that changed in 1886 Wabash Case, and later in 1890 with Minnesota Rate Case). Rail regulation became the hot button of American politics, a struggle in which the 1887 establishment of the federal Interstate Commerce Commission was only the first inning. In any case, Minnesota began regulating railroads in the late 1870’s by adopting its version of what today are called “Granger Laws”. It is quite apparent the days of the railroad corporation EDO were numbered, and this phase of American state and local ED short-lived.

 

 

Population Growth

While we often think of southern California as the “explosive growth capital of America” 19^th century Minnesota growth was shockingly similar. From a 1850 population of less than 6,100 to 1860’s 172,000 that pre-Civil War decade was Minnesota’s most incredible population boom—over 2000%.. The next decade was a more modest 155% to about 440,000. By 1880, the population exceeded 780,000 (almost 78%), and another 68% growth between 1880 and 1890 found over 1.3 million living in Minnesota. By 1910, Minnesota’s population exceeded 2 million.

 

The earliest emigrants were Yankee/New York State migrants. Many arrived previous to railroad development, and they settled in the rapidly growing urban areas at the end of the steamboat route: St Paul, and the emerging Minneapolis areas. Yankee migrants were supplemented by pre-1870 German immigrants (mostly Catholic from southern Germany) who also included a vital entrepreneurial spirit. Germans were not the only early immigrant population, the Irish also arrived in large numbers. To a considerable degree this resulted from a formal Irish colonialization organization created and fostered by the Catholic Church, dominated by St Paul’s first archbishop, John Ireland. Ireland, whose closest friend may well have been Protestant railroader James Hill, was instrument in founding the Catholic Colonialization Association. The Association working with the railroads brought Irish immigrants to St Paul and Minnesota rural areas. Their success in settling St Paul lent a very distinctive Irish lilt to St Paul’s (machine) politics.

 

These early settlers disproportionately became the entrepreneurs whose firms formed the foundation for distinctive agglomerations that drove urban economic growth: flour processing, beer brewing, finance and trade—and railroad-related corporations. Minnesota became an ethnic-immigrant “stew pot”. By 1920, more than 70% of her population was foreign-born. Their story will be told in our discussion of Minneapolis and St Paul’s economic base. Some Yankee entrepreneurs laid the foundation for the timber/lumbering agglomeration as well. In this section, we are more focused on the settlement of Minnesota’s post-1870 immigrant population.

 

Today, the progressive values attributed to German/ Scandinavian immigrants is fully appreciated, but in past periods of Minnesota history the effects of non-immigrant ethnic populations were equally important. “Agriculture” as Elazar admits, “provided two very divergent elements: …  [Yankee and German/Scandinavian immigrant] farmers of relatively prosperous southeastern and central counties, and the populist types from the more marginal farm areas in the rest of the state”[xx]. The latter moved into a deep forest/rock geography in the northeast and gravitated into a timber-related economic base. They would provide the workforce and auxiliary-business support for a lumber-dominated economic base. After the 1880’s Minnesota’s immigrant recruitment also included Italians who arrived after most of Minnesota agricultural areas were settled, and effectively closed. Most Italians settled in the Duluth, Iron Range area, working as miners in a newly emerging iron-ore mining economic base. This chicken and egg relationship between population migration and economic base development underlie both the expansion of railroads throughout the state and the subsequent settlement of a workforce.

 

While the public/private railroad EDO partnership certainly facilitated internal domestic migration into Minnesota, the more complex and interesting aspect was its robust recruitment of targeted immigrant populations. The Minnesota image associates immigration with Scandinavians, , it was Germans who constituted the largest number, and arguably exerted the greatest impact on Minnesota political and economic history. Germans settled in both urban and rural areas, numerically most became farmers. They tended to be more prosperous, believed in a number of religions and tended to settle in religiously-homogenous communities. New Ulm with its hilltop statute of “Hermann the German” (and St Cloud) is the poster child for Minnesota’s Germans—who as of this writing are still the largest ethnic grouping in Minnesota. Germans as it is evident in our political and policy discourse faced a rather trouble 20^th century experience and Lass suggests they developed a reluctance to participate in Minnesota’s politics—although they may well have changed in our Transition Era (post-1975).

 

Scandinavians mostly came after 1870 and 1880’s. Collectively, the Norwegians, Swedes, and Danes outnumber Germans. Each ethnic grouping tended to settle in communities populated by their particular nationality—an early Big Sort if you will. Minnesota municipal and even regional policy systems have been influenced less by “Scandinavian” than by the national ethnic populations that settled in their policy system. Scandinavians were more active in politics, initially Republicans, they terminated the string of Yankee Governors in 1893 when Knute Nelson was elected. After that until about 1943 (Harold Stassen) Scandinavian governors were exclusively elected.

 

As the preceding section stated, the period of the railroad corporation EDO was short-lived. In 1886 the Bureau of Immigration was terminated. Minnesota was actively regulating railroads, and was one of the more prominent states associated with the Grange Movement and Granger Laws during the 1880’s. That tension would remain constant, but twenty years later, under the urging of Senator Knute Nelsen it would be reauthorized (1907) and its Scandinavian people attraction program restarted. Railroads were a key part of that state program. In 1925 the Minnesota Department of Conservation took over the immigration initiative As the U.S. was drawn into isolationism and WWII, not to mention anti-German sentiment and legislation, the program was out of step with the times, but the killer was certainly the approval in 1924 of federal legislation dramatically redefining American immigration policy. Minnesota’s use of a “Bureau of Immigration” was not unique. All railroad corporations would set up a “Land Corporation”, most of any size would conduct an immigration and attraction program, and many western and central states set up their version of a Bureau of Immigration.

 

Minnesota First Agglomeration: Saw mills and Lumber pp169-74, 180-4

 

Much of Minnesota was prime “white pine” forest, and hence was hard to miss once fur-traders and farmers entered into the Territory. White pine was the Cadillac of trees, yielding the most board-feet, its lightness meant buoyancy, easily cut up into planks, without odor, and long-lasting. Unfortunately, white pine grew in strands within other strands of trees. So when early lumbermen from New England (Maine especially) emigrated into Minnesota as early as mid-1830’s, they sought white pine exclusively and either denuded entire areas to get to the white pine, or skipped less intensive white pine areas and moved deeper into Minnesota’s interior (St Croix River/Snake River) to cut move intensive white pine forests—in effect that mean skipping over much of Michigan and Wisconsin forests. Two saw-milling towns were established (Marine and Stillwater) about twenty-five miles from Minneapolis-St Paul. Logging in this pre-railroad era, relied on floating cut trees down a river.

 

Stillwater, St. Anthony, and Winona—the last being the last—were the earliest Minnesota lumbering and saw mill centers. Winona’s first saw mill was established in 1855. The state sold large amounts of land to loggers, and also invested in canals and river improvements to facilitate its logistics. As mentioned, later in the 1860’s Duluth accessible to railroads, developed a sizeable logging agglomeration. Until about 1860, lumbering, even more than agriculture, was Minnesota’s most productive agglomeration—although by anybody’s standards it was quite small. That changed during the Civil War and in the two decades that followed. Minnesota pine served the Midwest housing market, the treeless plains were its largest market. Railroad ties were its second. Minneapolis (St Anthony) saw mills grew the most and became the state’s largest milling center. In 1857 Minnesota produced about 100 million board feet, and by 1869 double that amount, but by 1889 more than 1 billion board feet were harvested—Minnesota had risen from fourteenth to fourth state in lumber production [xxi].

 

The time agglomeration proved rather brief as agglomerations go. The peak came about 1900, with a third-place 2 billion feet of production—and then plummeted rapidly. White pine was exhausted, fires took as much lumber as was cut, and saw mills soon closed. Lumbering, an extractive industry gets little priority today, but it provided the resources for bridges and railroads, housed the treeless Midwest, allowed and attracted population to the area, capitalized early banks, and in Pillsbury, Dorilus Morrison, and Cadwallader Washburn prove, accumulated investment capital to establish a high-quality agricultural-manufacturing agglomeration, engendered philanthropic funds for Carleton and University of Minnesota—and created a true long-term high-growth Minnesota firm: Weyerhaeuser, that contributed to forestry schools such as Yale and St Paul’s  Macalester College.

 

Lumber/Timber-cutting’s last gift to Minnesota was a legacy that provided a theme, logo, and an enduring personality to backwoods Minnesota: Paul Bunyan. Bunyan is a 20^th century tourism innovation that possibly began with an article published in the Detroit News-Tribune (July 24, 1910) written by James McGillivray. Babe and ten thousand lakes created by his footsteps followed after.  Today, the Paul Bunyan Center at Brainerd serves as an amusement park of some distinction[xxii].

 

Agglomerations rise and fall. An extensive literature tries to explain why. In recent years, ED has built upon agglomeration and ventured into clusters. Economic developers are now engaged in cluster-building and development as a normal part of their daily business. Part of this is pick and choosing which clusters offer the most bang for the buck, however, bang or buck is defined. Saw mills and timber cutting offer some observations on picking and choosing. Today lumbering and forest depletion go hand in hand and it is not likely current economic developers would ever “choose” that agglomeration. Yet the benefits that flowed from that woe-be-tied cluster suggest there can be much to gain from less-productive clusters. One wonders, for example, if today’s fracking can perform the same John the Baptist forerunner role for future agglomerations as the saw mill/lumbering did for Minnesota?

 

The Mesabi Iron Range: development of a regional economic base

 

Minnesota had the misfortune of befalling into yet another extractive agglomeration: iron ore mining. It began in earnest in mid-1880 and lasted for quite some time. The Vermilion and then the Mesabi and Cuyana mountain ranges were in two decades besieged by lots of miners, and tons of supportive businesses. Cities such as Tower, Ely, Hibbing, and Duluth which blossomed into the regional and logistics center. If for no other reason than Bob Dylan (aka Zimmerman) was born in Duluth and raised in Hibbing, these cities are important. Others might site the establishment of a U.S. Steel (steel and cement) plant, initially in 1907, and a brand new spanking modern integrated steel plant in 1915 (the result of a supposed behind the scenes deal with the State of Minnesota not to levy a tax on iron ore export). The plant closed in 1987—which is another story entirely. In any case by 2010 the Duluth metro region held 280,000 people and was Minnesota’s second largest MSA.

 

The early Indian tribes knew about the copper in them-there-hills so for as long as there was a dream of a place called Minnesota, people and government surveyors were prospecting to locate exactly where it was. Indeed, the possibility that minerals existed was responsible for Daniel Webster to ensure it was part of the U.S. when he negotiated the Webster-Ashburton Treaty (1842) with Great Britain. Officially, a U.S. Geological Survey Team discovered iron ore in 1850 and state government, being what it was, quickly scurried to the scene in 1865 and appropriated funds to send yet a state geologist (Henry Eames) to hunt rocks. He found them and set off a reasonable sized gold, quartz, and assorted minerals “rush” and accompanying economic boomlet. A road opened connecting the area to Duluth. Boom turned to bust in short order when no one could even confirm where Eames had found his minerals.

 

Still, the road opened up the range and visionaries or crackpots envisioned that whatever was in them hills could put northeast Minnesota on the map. Two of them, George Stuntz and George Stone believed they could copy the mining/shipping model pioneered in the Marquette Range in Upper Michigan. They needed money, however, and venture capital for such a venture was no easy task. Carrying iron ore specimens they convinced an experienced steel investor with connections, Charlemagne Tower (of Massachusetts Puritan origins) to finance two more geological expeditions to nail down where the deposits lie.

 

After the second expedition they incorporated the imaginatively-named Minnesota Iron Company and since Stone was a state legislator passed legislation that specified any ore found/shipped by the Company would be taxed only a cent a ton. Armed with the tax abatement, the Company sent in (Swedish/Cornish) miners stolen from Michigan and opened up the Soudan Mine. They also founded a port city, Two Harbors, and installed a seventy mile railroad to connect the mine with Two Harbors. By July 1884 ore was being shipped. Management was left to Tower’s son, conveniently named Charlemagne as well, and it was his genius and sound management that led to the agglomeration’s subsequent success. Some 300,000 tons of high-quality ore shipped in 1886[xxiii].

 

Shockingly, the Minnesota Iron Company’s success started another iron ore “rush”, and prospectors looking for the right kind of dirt (like today’s media) found some in the next range over, Mesabi. Another visionary from Duluth, Lewis Merritt, a former timber worker, and his sons and friends, were the first to find it in the Mesabi (1891)—and so they gave the range a lame name, “Mountain Iron”. That’s why it is still called the Mesabi today.  Other prospects like Frank Hibbing also struck it rich—he founded a town as well. The Minneapolis Pillsbury family invested, and Pittsburgh steel magnates (Henry Oliver) wandered in after voting in the 1892 National Republican Convention in Minneapolis. In short the Mesabi Range became the iron ore equivalent of Silicon Valley luring in all sorts of big-money magnates in search of more big-money.

 

The Merritts doggedly were determined to make their claim work. Knowingly little to nothing about mining, they built a railroad and shipped iron ore to Wisconsin by 1892, only to be bankrupted by the ever-pervasive Panic of 1893. Capitalist vultures took note and John D. Rockefeller offered funds and set up a “newco” joint venture with the Merritts. The venture included their mine and assets along with some Caribbean mines. As might be expected, allegations of fraud were followed by law suits, court decisions, and even in 1911 a Congressional investigation, but guess who wound up owing the mine (he did negotiate a settlement for pennies on the dollar). The Merritts became Minnesota heroes and appropriately died poor.

 

Oglebay, Norton & Company operated Rockefeller’s Mesabi interests until 2008, expanding along the way into Great Lakes shipping (owner of the Edmund Fitzgerald). Our Pittsburg steel magnate Oliver brought in two characters named Carnegie and his friend Henry Frick, who in 1901 brought in J.P. Morgan in a grand venture they named U.S. Steel. Despite its small “d” democratic origins, the Mesabi Range became controlled mostly by absentee corporations—James Hill being the conspicuous exception (he at least lived in St Paul). He found iron ore on land granted to him by the state legislature for railroad development. His corporation, however, leased its lands to U.S. Steel to operate. BTW, U.S. Steel also picked up ownership of the Minnesota Iron Company in the Vermillion Range. The Soudan Mine stayed open until 1962. It is presently a tourist site. Stuntz and Stone would be proud.

 

In any case, the Mesabi Range propelled Minnesota by the early 1900’s into the nation’s number one producer of iron ore—the equivalent of silicon in the industrial age.

 

 

Transition Era State Economic Development

 

Minnesota is not known for its particularly strong governor. During the 19^th century, the legislature was the stronger in nearly all states, excluding the occasional charismatic governor at a fortuitous time. Early state EDOs were often commissions whose boards were appointed by both legislature and governors, and who often had independent access to the legislature for budgets and legislation. Department revenues were often linked to particular taxes, fees, or revenues. Independent agencies chiefs were appointed to terms of office non congruent with the governor’s. The governor lacked his/her own budget-making capacity and that key tool was often a touch nut to crack. It was also a time of limited government, but that changed incrementally in the 20^th century.

 

The governor’s pace picked up, often with federal support and grants in the first half of the 20^th Century. Elazar asserts “before 1938 governors were part of… the Whig tradition in executive leadership”[xxiv]. The governor that changed that was Howard Stassen (1939-43). He created the Department of Administration, entrusted with the budgeting function. But it is the post-1960 period we see the rise of today’s powerful gubernatorial administration. Minnesota’s weak governor was so in large measure because of the “long ballot”, the host of independently elected, and beyond his/her control of offices such as the auditor, attorney-general, secretary of state, treasurer, even superintendent of schools. It was only in 1972 that Minnesota’s lieutenant governor was made a teammate of the governor.

 

The governor, however, in Minnesota did possess a line-item veto. In the early 1970’s the governor was afforded more control over the expanding state bureaucracy. Commissioner’s terms were made congruent with the governor’s in 1971, and served at his/her pleasure in 1975. It was as late as the 1990’s, however, that the department’s lost the right to send the legislature its “agency request” to be placed alongside the governor’s budget.

 

One might argue Contemporary Era-relevant Minnesota politics started as early as 1938, with the election of Republican Harold Stassen. Because he would later run for President so many times one is hesitant to county, he today is a bit of an electoral eccentric. In the Minnesota context, however, he exerted a significant impact. First, he upset the DFL applecart in the tail end of the Depression, and Stassen became the first of sixteen years of Republican governors—until DFL Orville Freeman in 1954. During these years, the DFL stumbled into the deepest of nadirs, characterized by intense internal division. That division would not be healed until the arrival and victory of Hubert Horatio Humphrey in 1948..

 

Secondly, Stassen was the first of what became the arguably dominant strand of Minnesota Republicanism, a moderate economic reformist that was surprisingly congruent with the New Deal use of government activism and economic liberalism (“enlightened capitalism”) including welfare. He introduced the civil service system into Minnesota state government, and administratively reorganized it along the way. Stassen, only 31 when first elected governor, resigned in 1943 to join the wartime Navy, but his Republican successors followed in his Progressive Republican footsteps all the way into the mid-1950’s.Three-term Republican governor Luther Youngdahl “stressed welfare services, expanded public housing [Minnesota’s cities had not thus far been particularly aggressive in the early public housing phases of the urban renewal Age], and public health enhancements and increased support for education and care of the mentally ill and physically disabled  …  best remembered [however] for his antigambling and anti-liquor stances”[xxv].

 

There was much less a stark contrast between the two Minnesota political parties during the waning years of the Classical Era. Minnesota in these Republican years constructed a serious and expensive social welfare system, and bureaucracy. Nevertheless, Orville Freeman, three term governor and JFK’s Secretary of Agriculture, reestablished the leading position of the DFL in state politics (Lass asserts a parity between the two parties). Under Freeman’s three administrations, Minnesota embraced the New Deal so intensely it shown out in the Republican Eisenhower years. Education, welfare, workman’s compensation, minority employment and even more state government reorganization.

 

He came to grief in his fourth attempt when a national recession, a controversial steel strike, a mishandling of a meatpackers’ strike in which he called in the National Guard allowed Republican Elmer Andersen to be elected governor in 1960. Andersen, however, in the Stassen tradition was also “a strong advocate of public education and expanded social programs”, he struggled with the legislature, and a DFL lieutenant governor (Karl Rolvaag—the next governor of Minnesota) who divided his administration’s coherence badly. The struggle between the two prompted a 1972 constitutional amendment to require the two to run jointly in future elections. In the 1962 election each ran against the other. Andersen won a slight popular vote, but a recount followed by a three-judge recount panel produced a 91 vote majority for Rolvaag.

 

Rolvaag proved to be an effective and unpopular governor—so bad the DFL attempted a “coup” of sorts to prevent his renomination. A horrible and divisive primary ensued, ensuring the victory of Republican (from St Paul) Harold LeVander. Although a Republican, in an era when his national party was rapidly moving to the Right. LeVander continued the Progressive Republicanism that had become an established tradition in Minnesota politics. The legislature was Republican, however, and far more conservative than the governor in fiscal—but not social or education—policy.

 

The legislature wanted to pay for the expenditures of its programs and bureaucracy by raising taxes—in a state with high income and property tax rates. They pressed for a sales tax. LeVander was opposed and also called for property tax relief and rate cuts with no increases in income tax. It turned out to be a three way struggle between the DFL, LeVander and the state Republicans (in control of the Senate).  It was this conflict and political environment that provided the context for one of Minnesota’s most famous, and certainly most innovative reorganization of metropolitan government to be discussed below and for a future “Minnesota Miracle”. It all came to a head in 1967—amid the tumult of the Great Society, war in Vietnam, civil rights, urban riots and assassinations, and the soon-to-be political demise of LBJ. Perhaps it was no accident that Governor LeVander declined to run in 1968.

 

State Leadership in Restructuring Local and Regional Relationships/Functions: the Metropolitan Council

 

Several persistent strands of Yankee Progressivism are quite evident in post-Stassen Minnesota ED-related state-level policy-making. Indeed, in this section one may see a reliving, fifty years after, of the Boston Noble Experiment, in the Minnesota 1967 intergovernmental restructuring and the implementing initiatives that followed over the next several decades. The first strand in the influence and impact of a Progressive business and professional class, and the second is a greater willingness of the state government to involve itself, more or less directly (or through administrative proxies) in the operation, but especially the planning of sub-state jurisdictions. A constant hope, if not outright goal, is to ensure efficiency and an equitable distribution of political power and economic benefits.

 

Amid the considerable noise and policy disruption engendered during the 1960’s, the problems association with the collapse and fall of my Classical Era of Economic Development affected Minnesota, Minneapolis and St Paul, Duluth also, were affected, arguably not to the degree of East Coast, New York City or the Great Lakes and Pennsylvania-Ohio urban areas, but enough to roust the denizens of Minnesota. Suburbanization in this period knew no regional boundaries, although its pace and character varied across each major region. In Minnesota, the central cities of St Paul (to a lesser degree), but chiefly Minneapolis were stagnant or actually losing population—to their suburban county and its component jurisdictions[xxvi]. This was sprawl, administrative inefficiency, and inequitable distribution of the benefits and costs of prosperity and governance. By 1967, the 3000 sq. mile seven county Twin City metro contained 132 incorporated cities and villages and 68 townships[xxvii], For Progressives, the antidote to this sprawled mess is first and foremost planning.

 

Interesting, in an age in which neighborhoods and civil disturbance, outright protest, and demands for redistribution of power and economic opportunity, the Twin Cities revolt centered around “policies” and administrative inefficiencies in policy areas such as sewage and solid waste disposals, unplanned sprawl, transportation systems, open space preservations and parks, and environmental quality.  In the midst of all this good government stuff was a sports stadium(s). The festivities were led by a middle-class business and professional group, the Citizens League. Activists and concerned groups turned not to their municipal governments, but wasted little time to approach the governor and state legislature. Why?

 

Certainly there were practical political and fiscal reasons why all this was beyond the capacity and will of municipal level governments—and they were important. But the tradition had been established over the previous decades to go to the state for structural reorganization, administrative reform, and fiscal disparity reasons. The legislature in 1933 had established the first metropolitan district (the Minneapolis-St Paul Sanitary Sewer District) and in 1943 it also approved the Metropolitan Airports Commission.

 

In 1956 Governor Freeman and the legislature established a Metropolitan Area Sports Commission to construct and manage a stadium in Bloomington—and incidentally attract major league baseball and football teams to Minnesota which BTW they were successful: Minnesota Twins and Vikings. The capstone, also in 1957, was the approval and establishment of the Twin Cities Metropolitan Planning Commission, structurally similar to a Council of Government (COG) in large measure because they were looking over their shoulder to Detroit which in 1957 established the nation’s first Council of Government.

 

Also, the state had commenced its innovative and path-breaking “local relationships” restructuring strategy as early as 1949 when the legislature modernized local governments and compel augmentation of their fiscal, administrative and governance capacity. In 1959, the state asserted its responsibility to approve/reject local annexation and incorporations, an action which noticeably reduced the growth of new municipal jurisdictions. In the early 1960’s, the legislature reformed and modernized county governments. (Kolderie and Blazar, p. 297).

 

In the mid-Sixties the worm had turned, however, and the 1964, Baker v. Carr federal Supreme Court decision required one-person, one-vote upon all jurisdictions not the least of which was the rurally-unbalanced Minnesota state legislature. The governor (Rolvaag) and the state legislature fought redistricting tooth and nail for several years, until under court-order in 1967 they complied. The legislative balance of power in the same year shifted from a majority of rural legislators to urban. The Twin Cities acquired 11 House and 5 Senate new seats and combined the Twin Cities amassed a majority in the Legislature.[xxviii]

 

So when the Citizens League approached the state for positive action, the Legislature and Governor were predisposed to a favorable bipartisan response. If this were not sufficient, the federal government had imposed an A-95 Review process on all urban areas (1966) and the Metropolitan Planning Commission was not an eligible entity. Despite its being such a revolutionary departure from the conventional urban policy-making paradigm, a Twin Cities metropolitan administrative system was itself little at issue in the legislature. What mattered more was the structure of the initiative, and in this the Yankee Progressive tendency to run local matters from the State rather than let the locals control affairs came quickly to the surface. What also matter was the Legislature wanted to pave its own path, not simply copy what others were doing. Accordingly, the Detroit Council of Government model, the innovation of 1957[xxix]) was less attractive because membership in a COG was voluntary. Having an option to join was not what the legislature had in mind. At the same time, the state legislature did not fancy creating a behemoth Twin Cities Metro Government which would the day it was created take over a voting majority in the state legislature and effectively determine who would be governor.

 

The focus was on regional comprehensive planning and program/policy coordination in order to achieve not only cost and programmatic efficiencies, but to ameliorate imbalances created by suburbanization, and perhaps in the back of their mind to protect central city hegemonies. The immediate policy issue, the crisis du jour, was sewage disposal and the 1967 response could be fashioned around that—and expanded (as indeed it was) in the years to follow. The structure to accommodate these demands was forged by the legislature as described by Lass:

With the intention of developing comprehensive planning and coordination for the seven county metropolitan area, the legislators carefully delineated the nature of the Metropolitan Council. The resultant agency, whose members were to be appointed by the governor, was not a general purpose metropolitan government, a COG, or a local government. Rather it was an agency that reported to the state. Yet its creators bestowed it with considerable power because it was authorized to review local government plans and ultimately to approve or reject them. Within its first two decades, the Metropolitan Council’s authority was defined by about a dozen laws, which had the overall effect of increasing its power in such areas as park and open space planning, housing, mass transit, solid and hazardous waste disposal, and airport and sports-facilities planning[xxx].

That legislation, applying to the Twin Cities, “laid the foundation for … the strongest, most innovative system of metropolitan government organization and finance in the country. The Metropolitan Council was made the central manager [as distinct from program operator] for the region’s critical infrastructure: airports, transit, and highways, parks and open space. Municipal income taxes were prohibited and local sales taxes tightly controlled. [Between 1971 and 1987] 40% of the net growth of the commercial-industrial property tax base has been pooled and shared among all municipalities, increasingly standardizing the [Twin Cities local] business property tax rate”. To supplement this initiative, the state authorized local governments to use Tax Increment Financing, a “self-financing initiative” in 1971.

 

The Metropolitan Council enjoyed early success. It quickly created a Metropolitan Water Control Commission to finance and operate water treatment plants, and build sewer lines. In this manner, it was able to provide infrastructure to unincorporated areas and to delink bond payments from the local tax structure. The Council then moved on to impart its wonders in metropolitan transportation, suburban low and moderate income housing, and even redevelopment (i.e. urban renewal—and later UDAG). It became a fiscal powerhouse with its own tax base and taxing capacity, and through a large capital budget was able to forge a supportive constituency. It played a major role in creating a few large malls instead of the more usual mall in every jurisdiction found elsewhere. Interestingly, its most controversial aspects was its involvement in sports stadia and related facilities. It played little role in the approval of the Mall of America.

 

The independence of the Council came only through the permission of the Governor and Legislature, however. When they were not involved or were supportive, there was little controversy. The opposite, not uncommon, was also true. Since it is not directly accountable to its constituents, it is a state agency, it is easy to generate a level of remoteness which translates into a lack of a political constituency. The long term results of the Council have been questioned as well. It certainly did not eliminate Twin City sprawl, and some argue it had little effect on it. The tax base sharing (derived from the Minnesota Miracle, see below, because its formula for allocation  turns out to favor growing and prosperous area which can lower its tax rates, and disadvantage the more stressed jurisdictions. In an age when community development neighborhood revitalization is a major policy element, the Council is notably absent and largely powerless[xxxi].

 

Evolution of Minnesota’s Lead State-EDO through Transition Era Governors

Minnesota’s current lead EDO, the Department of Employment and Economic Development (DEED) has operated since 2003. By today’s sense of what defines ED, Minnesota’s first modern state-EDO was the 1947 Department of Business Research and Development—it was a derivative from the Icles-FDR state planning boards created during WWII. In the same year, the Minnesota Municipal Housing and Redevelopment Act empowered the creation of a housing and redevelopment agency in each county/municipality throughout the state, to be formally established only upon action by the local jurisdiction. Minneapolis Mayor Hubert H. Humphrey did just that creating the state’s first housing and redevelopment agency. Returning to the state-EDO, the legislature during the 1950’s changed its name and reorganized it as the Department of Business Development (1953) and again in 1967 (Republican Harold LeVander) as the Department of Economic Development.

 

Observing that in 1939 the state revised tax laws so that business firms would be [favorably] taxed only on those activities conducted within the state). Further in 1967 (Republican Harold LeVander), computers were exempt from taxes, of considerable benefit to IBM, the state’s largest corporate taxpayer. Minnesota is not Indiana at this juncture.  I might add that up to this point, university-driven technology, innovation, and knowledge-based ED was taking second place to global recruitment (FDI) and small business export—Minnesota also was moving into foreign trade zones.  In 1967, the Department of Business Development was renamed Department of Economic Development. During LeVander’s administration the Twin Cities Metropolitan Council was approved and its path-breaking regional tax sharing agreement put in place.

 

Accelerated growth in the State’s ED role, and its entrance into direct ED strategies and programs invited politicization of state ED policy. ED related demands became an element of gubernatorial and legislative elective platforms. Regional, municipal and demographic ED deficiencies generated persistent action to redress and resolve the issue du jour. Of particular note was the reliance on job creation as a particularly important goal for its various programs/strategies. Job creation numbers inevitably invited partisan point/counterpoint controversy. Were the numbers real or inflated? Were clawbacks required?

 

This partisanship increased after 1968 when the young, 37 year old DFL governor Wendell Anderson was elected with a significant ED agenda/platform. Today, Anderson’s first administration has been tabbed as the “Minnesota Miracle”. The Minnesota Miracle was a truly innovative Progressive property tax innovation which fundamentally reset sub-state intergovernmental finance for decades to follow. It propelled Anderson, and Minnesota, into the national media and policy-wonk limelight. It encountered considerable resistance from the Republican-controlled Senate, and considerable favorable publicity from outside groups/institutions like the ACIR which issued a report entitled the “Minnesota Miracle”. As part of this Miracle, TIF was approved, (and school property tax reform also).

 

The most direct economic development element of the Miracle legislation was it provided for a 40% sharing of commercial-industrial property tax base across all communities in the Twin Cities metro areas. The proceeds were redistributed according to a formula which took into account population size and tax capacity. This had the effect of reallocating resources from fast growing suburbs to stressed and slow growth jurisdictions. In many ways tis tax base sharing added a two-sided complexity to jurisdictional business tax abatements. It also removed business inventories from taxable status, providing a serious cost reduction to local firms. It also prohibited cities and counties from imposing an income tax, or increasing sales taxes, without concurrence from the state legislature. This also represented a significant injection of the state into what in most states was a fundamental local power—and an important ED tool

 

The 1971 legislation which collectively constituted the “Minnesota Miracle” effectively increased state fiscal (and hence budgetary) power over its municipal governments and school districts—it was a model soon to be followed in California. Increasing a number of “sin taxes” generated newfound state revenues ($558 million) so that Anderson was able to create a huge pot to use to finance an annual state education package in support of local school districts, having the effect of lowering local taxes by about 10%. The state school aid formula was designed to reduce disparities between affluence and low income school districts which obvious favor distressed areas, assist stressed central cities—and rural communities, a big constituency in Minnesota. In that school taxes, and taxes in general had spiraled during the 1960’s

 

Its effect on the business climate of Minnesota depends on which definition of business climate one advocates. That Minnesota has pursued a consistent policy-making that is congruent with the more Progressive definition of business climate is further supported by the Minnesota Miracle. In any event, the state once again had meaningfully injected itself into local policy-making. The publicity associated with the Miracle portrayed Minnesota as the “government that works”, an excellent place to locate one’s business.

 

When the DFL seized control of the Senate in 1972, for the first time in Minnesota history, the DFL controlled all three branches and his program was passed. They wasted no time in ending Minnesota’s long-time constitutionally nonpartisan legislature, and making it partisan and conveying a steroid reality to the politicization to ED policy-making. Overlapping the subsequent Watergate/Nixonian Great Society Thermidor years, Anderson and the DFL enjoyed almost undisputed mastery over the state’s policy-making. The Anderson-DFR agenda was quite broad, education financing, assisting the disabled, a prohibition on corporate farming, an anti-strikebreaking law, the Public Employees Bargaining Act, the Equal Rights Amendment, a state zoo, campaign reform, no-fault insurance, elimination of income tax for the working poor, and the creation of a Housing Finance Agency.

 

In 1976 Anderson, enjoying incredible popularity and success (today many consider him Minnesota’s finest governor), appointed himself as replacement to Senator Walter Mondale (elected as Carter’s Vice President), and he was replaced by his DFL Lieutenant Governor, a maverick, working class Catholic (all firsts In Minnesota politics) iconoclastic, a second generation Croatian, Rudy Perpich from Duluth. In 1977, the State established the Northeast Minnesota Protection Trust Fund (administered by the Iron Range Resources and Rehabilitation Board—a state EDO) which was empowered to provide direct assistance to eligible industries and firms to diversify its economy and “rehabilitate” distressed firms.. In 1977 the (workforce) Department of Economic Security was created.

 

In 1977 (DFL Rudy Perpich) the Minnesota Department of Economic Security was created to administer income and employment programs, job training and placement, veterans, worker compensation, vocational and post-secondary training, federal income insurance programs with some ED programs tossed in. To accomplish this feat the Departments of Employment Services and Vocational Rehabilitation, the Governor’s Manpower Office, and the Economic Opportunity Office which administered the Great Society anti-poverty programs.

 

The Minnesota Massacre and the Formation of the Minnesota Business Partnership

 

It is alleged Anderson’s self-appointment generated the “Minnesota Massacre” in which DFL Perpich, was ousted by Republican (in the Progressive Stassen mode) Al Quie (and the two DFL Senators replaced by Republicans as well—helped along by the appointment of Muriel Humphrey to replace her deceased husband).

 

That the Minnesota Massacre was not triggered by the national property tax cut movement (Massachusetts 2 ½ and California’s Prop 13), in a state with high taxes, but by the moralistic outrage against a governor appointing himself to the Senate, is the best argument to be made in defense of Minnesota’s moralist political culture. That Minnesota and its Progressive, as well as moralist tinge, was conveyed to the national level during the Sixties and Seventies was an unappreciated reality. During these years, Minnesotans occupied the two Vice-Presidencies, provided several (Humphrey, Mondale, McCarthy) presidential candidates, and less notices were Warren Berger, chief justice of the Supreme Court, and the Mayo Clinic’s former counsel, Harry Blackmun, the justice who wrote the Roe v. Wade Court Opinion.

 

A final thought is the 1978 Minnesota Massacre offers the first traces of Minnesota Republicans move to the right—away from their long-standing Stassen-Progressivist tilt[xxxii]. The new wing in these years, however, wore their social agenda on their sleeve—railing against women’s rights, the excesses of the Sixties, and Blackmun’s Roe v. Wade (1973) decision. The shift especially when combined with Reagan’s 1980 victory sharply changed the tone of Minnesota politics, and hinted that a remarkably stable and impactful Progressively-inclined political culture had its limits. This shift undercut the DFL as it evolved in the 1980’s and would come into play in the 1982 election.

 

The 1970’s DFL policy blitz effectively shut out much of the corporate and business community from policy-making. Their cries for tax relief and initiatives to lower business costs went unheeded. In frustration CEO began to rethink their approach to Minnesota state policy-making. They formed the Minnesota Business Partnership during Quie’s administration. The Minnesota Business Partnership represented a change in direction by Minnesota’s elite CEOs[xxxiii]. Reflecting an internal dialog that was years ongoing, the Partnership departed from the past company or industry specific lobbying and one-on-one influence on critical issues of note to them in favor of a cross-business/industry advocacy of issues of general importance and relevance to business and Minnesota economic growth. In essence it injected the corporate CEO’s approach in our case to economic development policy-making. The Partnership was not intended to implement policy but to affect both the content and the prioritization of policies. While not new nationally, it was a style of partnership new to Minnesota. In many ways, the Partnership followed along lines long since pioneered by CED during the 1940’s.

 

The Eighties: Quie and Perpich

 

Quie was a fiscal conservative (he successfully passed an income tax index that saved $1.4 billion and also lowered property taxes nearly $3 billion between 1980-83. Those tax cuts (and a national recession) generated the same results as Reagan’s did—vast deficits. By 1982-83 he faced a state deficit estimated at 17% of Minnesota’s total budget. He spent the remainder of his administration dealing with chronic threat of unbalanced budgets. With the negative effects of the post-1981 economic slowdown, that deficit was magnified—in 1982 there were six special sessions of the legislature to deal with deficit-related issues. Quie’s struggles were as much with a new wing of legislative Republicans as with the DFL. Vigorously anti-tax (again the Prop 13 movement), their target were those Progressive preferred policy areas such as education and social services. Quie, in particular, supported higher education expenditures.

 

In 1981 (Republican Albert Quie), the legislature once again restructured the Department by including a number of community development and energy-related programs in its arsenal. Renamed in 1981 as the Department of Energy, Planning and Development. The merger of workforce ED with the state’s core ED and lead EDO is not common, and is a clear prioritization that workforce and workers (people, i.e. as in community development) are critical elements in economic growth. That this prioritization occurs in a state with a century of support for unions, and a Farmer-Democrat dominated policy process is not surprising. The governor who took the lead in this prioritization, however, was Republican Al Quie who in 1980 advocated an ED/workforce approach entitled “Minnesota Wellspring” whose foundation rested on the state’s “human capital”.

 

 

In January 1983 after an exceedingly divisive DFL primary, a DFL-unendorsed candidate, Rudy Perpich returned to the governor’s office. In the Quie interim, Perpich worked in the private sector (Minnesota headquartered Control Data), and was stationed in Europe. A maverick DFLer Perpich more easily embraced the conservatism evident in Minnesota. His stress on economic growth led him into a salesman role, promoting the state to the external world. He fought to keep businesses in the state as well; he aggressively, but unsuccessfully, pursued the General Motors Saturn Plant. He engaged in a loud dialogue with the various wings in the legislature over the definition of a good business climate for Minnesota. He retained union support by opposing legislation considered to be anti-union.

 

“His next eight years would be focused on ensuring that Minnesota was ‘world class’ so that its citizens could compete successfully in the global economy…. He was constantly looking for ideas abroad and products to sell overseas (one of his bright ideas was to take advantage of “Minnesota wood” and set up a chopsticks factory).”[xxxiv] When pitched by a bunch of Canadian developers to set up a massive retail/entertainment complex to attract tourists on a mass scale, he jumped all over it. In 1992 the largest retail mall in America, the Mall of America, opened up. Guess you got to take the good with the bad. In no time at all (1996-7) the Mall attracted 42.5 million visitors—more than Disney World, Graceland, and Grand Canyon—combined.

 

Renamed the Department of Energy and Economic Development in 1983 (DFL Rudy Perpich), spinning off planning, taking on HUD Small Cities and creating Minnesota Trade Office, the centerpiece in a conscious effort to “internationalize” Minnesota’s ED strategy concentrating on creating jobs through export and attempt to attract FDI. Mid-1980 marked a critical juncture for State of Minnesota ED. These initiatives reflected priorities of the second (and third) Perpich administrations. In 1985, the Office of the Blind merged, and the agency was renamed (and renamed again in 1994 to return MDES to its original title during the Republican Arne Carlson administration). It would seem there is some validity to the charge that each governor upon assuming office renames the departments and offices under his administration.

 

In 1987, the international strategy was elevated in priority and targeted to several sectors, including “high” technology, computer software, medical technology, electronics, agricultural processing, and wood products. Two overseas trade offices in Oslo and Stockholm were established although these offices would be closed in the future. (Elazar, p. 181-2). In 1984 alone, Perpich visited seventeen foreign countries.  Still not satisfied, in 1987 the Department was again renamed to the Department of Trade and Economic Development (DTED), and the energy programs were spun off to the Department of Public Service. To be sure, concern for manufacturing was strong, in fact Minnesota’s Enterprise Foundation was an early recipient (1990-1992) of MEP funding (Upper Midwest Manufacturing Technology Center).

 

Also created in the 1987 legislative package that reorganized DTED was the Greater Minnesota Corporation. GMC was intended to serve rural or urban peripheral areas, and was patterned after the Ohio Edison Program and Pennsylvania’s Ben Franklin Partnership. Initially, the GMC got $12 million in funding, but then was afforded access to the proceeds from a lottery that increased its revenues to about $50mm annually.  The GMC was supposed to promote research in higher education, and invest it in jobs in depressed areas—developing new uses and applications for farm products was its chief investment target; four regional research institutes were set up. GMC proved to be an implementation disaster. Its CEO was forced to resign amid sexual harassment charges and the Board Chair became involved in a scandal in his firm. The auditor criticized it for inadequate control over its expenditures—a deadly sin in Minnesota—and GMC in the next administration was broken up into two separate agencies.

 

The constant threat of an unbalanced state budget in a state still characterized by high taxes, and a preference to education and social services rather than mainstream Privatist style ED, meant that Perpich was on a constant search for new revenues—a major reason why he so aggressively tried to attract new firms. The search for new revenues was shared by the legislature as well, and they in 1982 found a candidate: gambling.

 

The state always had a well-deserved reputation for anti-gambling—it was even included in the state constitution. It was only in 1945 that a way was found to allow bingo, despite an incredibly hostile Governor Youngdahl. In 1982, the state constitution was amended by referendum to allow pari-mutual betting on horse-racing; a horse-racing track was opened in 1985. As Indian-reservation casino gambling and state lotteries gained momentum nationally Minnesotans jumped on board. The state lottery was approved by referendum, amending the state constitution yet again, and the 1988 Federal Indian Gaming Act opened the gates for Minnesota Indian tribes to open casinos.

 

It is asserted by Lass that Minnesota was, in fact, the first state to negotiate agreements with eligible tribes[xxxv]. The amazing success of gambling in its various forms after 1990 makes one wonder what was “in Minnesota water that caused such a dramatic change from its past. In 1990, for instance, Minnesota was fourth per capita in the nation in gambling sales (due in some measure to its early embrace of gambling). In those years, the state opened 17 Indian gambling casinos, easily accessible to the Twin Cities.

 

Kolderie and Blazer assess Perpich’s impact on Minnesota state ED as “expand{ing} its direct development efforts while continuing its indirect strategy”, by which they mean direct state assistance to business and to specific industries and firms increased (consider the $1b GM attraction package), and a host of other projects like the World Trade Center, the megamall and its associated macro tourism strategy, and Perpich’s direct assistance in Iron Range (deindustrialization) redevelopment. They observe this generated a partisan reaction from the Republicans. The Republican house in 1986 proposed eliminating the Department of Energy and Economic Development, “questioning its effectiveness, charging political favoritism, and proposing to move the department programs to a private, nonprofit corporation”[xxxvi].

 

As to an indirect strategy, Kolderie and Blazer refer to their original position that Minnesota uses an active state, a well-run public sector with an extensive array of social and educational services, and a progressive tax system capable of promoting sustainable economic growth. In fact, despite his conservative drift, Perpich had left the Stassen-DFL social/governmental complex intact, and in Perpich’s case had rendered it more efficient and acceptable to voters through decentralization and a rhetoric of privatization. They allude in particular to Perpich’s handling of workers compensation”—an historically important state policy that intersects with unions and the cost effectiveness of existing firms. Perpich’s 1983 “privatization” reform produced a mixed bag of reforms, efficiencies and negative reaction by unions. In 1986 after his reelection, Perpich fired his Commissioner and walked back the changes.

 

By 1990 Perpich’s popularity (essentially he was ending his third term and looking for a fourth) had exhausted itself. Always cranky, highly quirky, thin-skinned (sound familiar), and a populist who never fit into anybody’s establishment, he was defeated by the Republican Arne Carlson. Carlson, a social moderate who supported abortion, women’s, and gay rights, benefited from the disenchantment with incumbents, the two Republican Senators voted in at 1978 were also defeated.  Progressive Senators (Paul Wellstone, for example) reinstated the Progressive hold on Minnesota’s federal delegation. Republicans, however, held onto the governor and picked up strength after 1995 in the House, eventually by 1999 taking control.

 

[And holding it through 2006. They regained control in 2011, lost it in 2013, regained it in 2015 and held in the 2017 election. As to the Senate, the DFL held and retained control from 1972 through 2009. Republicans broke the ice in 2011, DFL regained it in 2013 and held it to 2017 when the Republicans gained control—holding both houses of the legislature for the first time (the Governor was DFL).]

 

The 1990 primary and general elections were wild affairs and the Swedish, originally from the Bronx, Ivy League Carlson survived it all (he lost the Republican primary) by blending his moderate Republicanism with his maverick Republican positions. By this time, it was clear that Minnesota, still fundamentally Progressive, maintained a strong Republican conservative element. Not one to watch his tongue, he embittered both DFL and Republicans alike, and his precarious position affected the quality of those who served in his administration. Turnover would be high, and bluntly the new governor lacked a solid political base. When he was immediately faced with a $1 billion state structural deficit (thanks to Perpich), Carlson had to serious cut the budget—always a popular matter (sarcasm).

 

He attempted his own version of Anderson’s Minnesota Miracle by proposing property tax reforms inviting intense opposition from the DFL and the media. His popularity plummeted to a Minnesota record. For the next six years of his two administration, Carlson played “defensive politics”, using the veto (238 of them) he restrained DFL spending, filed conservative budgets which limited programmatic expansion, and in general maintained a policy approach that continued whatever he inherited from Perpich. He argued for the next six years “that government’s response to social problems was growing faster than the problems themselves”[xxxvii]. Each year he produced a budget surplus. In good times this worked even if it alienated hard right and hard left partisans. Compared by some to Coolidge in his style and demeanor, he was not renowned for his policy innovations, reforms or reorganizations.

 

This all proved popular, he won his second election in 1994 with the largest margin of victory for a Republican since 1944. His role clearly, to Minnesota voters, was to restrain the wildest impulses of the DFL and maintain a fiscally sound, honest administration, strongly progressive state policy system. He was a “check”. In his last budget, he advocated for freedom of choice (vouchers) in education with some limited success. It is claimed his 1991 charter school legislation was the nation’s first.

 

Also, what appears to have been a legislative initiative, a Port Development Assistance Program was approved in 1996. The problem to be addressed by the legislation was to provide state financing for a physical infrastructure of Minnesota’s River and Lake Superior public commercial ports. Infrastructure costs were exceeding the capacity of local port authorities to finance. The new programs provided a maximum state match of 80% to the local 20%. The program was administered by MnDOT’s Ports and Waterways Section. Minnesota’s five Mississippi River ports transported 12m tons in 2007—not a significant figure—mostly agricultural products and some dry cargo. The Lake Superior ports, four of them, are the farthest reaches of the St Lawrence Seaway. In 2007 they shipped about 68m tons, 61% of which was taconite. Coal from Duluth was about 20% of the 2007 tonnage. A great need of these ports was dredging, in that ships had been forced to not fill their ships to capacity because at full capacity they risked ripping their bottoms off.

 

He repeatedly commented the best way to address inequality and promote growth was to balance the state budget. He did not embrace gambling, advocated school-business partnerships. He did offer incentive packages to retain Northwest Airlines, open a new steel plant in the Iron Range, and kept the Minnesota Timberwolves in the state. He claimed to have created 161,000 jobs during his administrations, and enjoyed the state’s lowest unemployment rates in sixteen years. Alan Rosenthal asserts that Carlson’s “narrowly conceived economic development program” “who won a big victory by changing the worker compensation system to keep Minnesota businesses from leaving Minnesota”.[xxxviii]

 

Nevertheless, some of these actions, the Northwest Airlines incentive package in particular, were not well received. The deal was shaky from the start, given the fragile financial condition of the airline, but pressures from other state competing bids, yanked the price tag into levels that generate discomfort ($888mm).Successful in retaining the investment for Minnesota, the subsequent company performance did not meet the original claims or job projections. The initiative overlapped into the Ventura Administration and its play a part in generating in 1999 a major report from the Citizens League. The Report’s title pointedly demonstrated the need for a a redirection in Minnesota’s ED attraction strategy: Help Wanted: More Opportunities Than People. The focus on workforce development and skills training of all sorts became a major talking point during that administration—and led to a 2003 reform and reorganization of Minnesota’s lead state ED agency.

 

He also signed legislation increasing benefits/tax credits to low-mod families, and increased Head Start. Left largely to its own devices, Minnesota state Ed gravitated into an increased incorporation of environmentalism into ED (arguably one of the most divisive issues was the application of the federal (1964) Wilderness Act into the forests of Minnesota—a tourist mecca and hunter and fisherman paradise). The state’s Environmental Quality Board prepared several noteworthy studies and plans. Perpich’s economic growth morphed in these years into something called “sustainable development”. He did not get behind any particular university-led ED, leaving the University of Minnesota to its own devices. His signature legislation is considered to be a 1992 health system, MinnesotaCare, to nearly all Minnesotans.

 

Clearly not an aggressive Mainstream ED, he did make his peace with a state-level community development agenda. If anything, while his Republican party was moving evermore to the right, he ran his administrations along the proverbial Stassen Republicanism.

 

Minnesota Completes the Transition Era: Ventura and Inclusion of Environment in Definition of Economic Growth.

 

Environment Enters into Minnesota ED—Minnesota entered into the environmental age along with many other states. Following the 1962 Rachael Carson, Silent Spring, environmental needs captured the public’s attention. Minnesota was one of the first to respond by reorganizing and refocusing its water pollution efforts (after two serious oil spills in 1962—one of which ended in “operation Save-a-Duck” carried out by the Minnesota National Guard). In 1967, the Legislature replaced the Water Pollution Control Commission with the Water Pollution Control Agency (MPCA, a cabinet department), adding in authority to deal with air pollution and solid waste disposal as well as water. MPCA continues to this day,

Richard Nixon in 1969-70 captured the high ground in the environmental movement by steering the federal government’s passage of EPA and National Environmental Protection Act (NEPA). That act prompted many states (fifteen), including Minnesota, to develop/approve their own versions. Governor Andersen led the Minnesota movement by issuing an executive order in October, 1972 establishing “an interdepartmental advisory structure to consider the policy and planning of the State of Minnesota on environmental matters”.

 

The next year, the Legislature agreed and approved the Minnesota Environmental Policy Act (MEPA) which institutionalized Andersen’s interdepartmental into what is today’s Environmental Quality Board (EQB). EQB was intended to be the state’s chief coordinator of environmental policy/programs, its clearinghouse for studies, and implementer of its environmental permitting and review process (including rule-making and EIS approvals). EQB consisted of nine state department heads and five citizen/expert members, and the Metropolitan Council. Members are designated and the five citizen/experts are appointed by the governor—and over the next five decades, EQB has been seen as the governor’s environmental coordinator.

 

Over the years EQB has assumed leadership in a number of areas, including in 1983 implementation of water planning, and in 1987 review and siting for natural gas and petroleum pipelines (laying the ground for Contemporary Era evolution into fracking and fracking sand regulation). In 1991 it assumed responsibility for energy and environmental reporting, in 1995 for siting of winder energy conversion systems, and as we shall soon see, led the state’s effort in defining and implementing “sustainable development”—all under Governor Carlson. Also worth note was that environmental groups and citizen activists believed EQB an important entity to which they entered into environmental policy-making. EQB by the end of the Transition Era EQB possessed a sizeable staff, a robust agenda, and as implementer of the EIS, some permitting, and EIS review process an important role in several ED strategies. Given the state’s prominent use of high quality public infrastructure as its chief ED strategy, this was an important element in its success.

 

An important, in some ways a Carlson signature (ED) initiative, was the 1993 Sustainable Development Initiative. That initiative, conducted under the auspices of EQB, was incorporated into DEED by action of Governor Carlson. DEED joined formally in the initiative. The hope was to develop a formal sustainable development policy that would bridge the chasm between no-growth and pro-growth perspectives. The latter, the latter often defined economic growth as the definition of “progress”, countering that “no-growth” or even limited growth prevents of inhibits progress. The key to bridging this gap was to define what needs to continue to grow (for example, jobs, capital, and knowledge), and what should not (pollution, waste, poverty—and sprawl). A raft of subsequent legislation followed: Sustainable Forest Resources Act (1995), Metropolitan Livable Communities Act (1995), Environmental Regulatory Innovations Act (1996), Chapter 454 Minnesota Laws of 1996 (requiring state agencies and boards to “reflect and implement the principles of sustainable development”) Community-Based Planning Act (1997). In essence Minnesota jumped into the sustainable development “pool’ with both feet, and a legislative belly-flop.

 

The Minnesota Sustainable Development Initiative traced the origins of sustainable development to the early 1980’s United Nations Commission on Environment and Development. That group carried its message on an extended road trip across the globe. They asserted “a combination of poverty, unemployment, resource use and environmental deterioration had created conditions that are not sustainable and that humans need a new model for development. The Commission concluded that the very nature of economic development must change and that poverty and the cumulative negative impacts of human activities are to be reduced dramatically”. This proved to be the core legitimization and motivation for the subsequent sustainable development “movement”.

 

Sustainable development makes a distinction between growth and development. Development includes much more than simple economic growth. Addressing poverty (in the Contemporary Era it was redefined as relabeled as “inequality”) tasked sustainable development with objectives not usually associated with Privatist economic development. In that sense, at least, one can argue sustainable development is more congruent with the principles of community development. In 1992, the sustainable development movement picked up considerable momentum when the U.S. and 180 other nations met in Rio de Janeiro and committed to adopt a sustainable development national strategy. That commitment led to the establishment of a (1992) President’s Council on Sustainable Development. The developed and issued a “blueprint for action”, the Agenda 21, which was to serve as a guide of federal, state, local and business. In the same year National Academy of Sciences and the British Royal Society embracing sustainable development and asserted “the future of our planet is in the balance … irreversible degradation of the environment can be halted in time. The next 30 years may be crucial”. Also the “nonpartisan” Union of Concerned Scientists issued their “Warning to Humanity” asserting the “people and the natural world are on a collision course”[xxxix].  When Minnesota became active in 1998, the state’s definition of sustainable development embraced a Swedish approach, developed by oncologist Dr. Karl-Henrik Robert called “the Natural Step” which served as a core for a “training program”. That approach adopted three basic principles, one of which would lead to EQB’s leadership in Climate Control:  “Substances” from the earth’s crust must not systematically increase in the atmosphere.

 

Sustainable growth incorporates the following inputs: (1) people’s social and economic needs should be fulfilled; (2) use of renewable resources (time, fish) should be consumed only at a rate that the resource can be maintained over time; (3) gradual reduction of the use of nonrenewable resources (coal, gas—fossil fuels); (4) reduce release of toxic substances that do not readily break down in nature; use resources efficiently (gas flaring, for example) and fairly so future generations will enjoy the resources; use land to accommodate diverse needs, and conserve natural resources; acknowledge the interdependence of the environment and society and the economy; preserve the integrity of ecological processes and biological diversity. Individuals, governments and businesses are tasked with conducting their actions to advance these perspectives.

 

 

Minnesota followed a more aggressive environmental policy than most. By 2017, sixteen states have adopted state-level environmental policy acts that required proposed state government actions be evaluated for their impact on the environment and/or public health. Five states, Minnesota being one, imposed this requirement on its local/county jurisdiction (California, New York, Georgia, and Washington). Three states (California, New York and Minnesota) require environmental review for private individuals and businesses in agriculture or projects requiring state permits or funding. Only two states (California and New York) have formally adopted climate change review including greenhouse gas emissions and potential effect on global warming for state projects only.[xl] Since 2004-7 the Minnesota EQB has formed a climate change committee. That committee has conducted research, taken advocacy positions—leading to the 2007 Next Generation Energy Act which adopted some of the more aggressive renewable energy targets in the nation (25% of state power by 2025, and greenhouse gas emission reductions by 15% by 2015—which were not realized). Implementation was entrusted to the Pollution Control Agency which adopted several programs, the Energy Standard Conservation Improvement Program (renewables) being regarded at time of writing as the most successful

 

The reader ought to be aware this extension of the scope and content areas evolved. It did not start out this way in 1973. The growth became more intense in the 1990’s, particularly under Governor Carlson, and it wasted little time in generating a pushback from both state agencies and private firms. By the turn of the century, the issue of state agency use of the “neg-dec” or negative declaration (which after issuance requires no further action or EIS) was noticed by environmental groups, who initiated court action to require agency conformity to MEPA protocols. The Minnesota Court of Appeals (2000), however, deferred to agency expertise and enshrine a judicial precedent that provided considerable leeway for state agencies in the making of negative declarations[xli]. The behavior of state agencies likely was evidence of an aggressive law not being aggressively implemented. It also enabled pushback from other groups, especially from private firms.

 

The Minnesota Chamber of Commerce picked up the issue and while challenging the very existence of EQB, focused more on “reforming” the EIS and the various standards and procedures which were viewed as onerous. Predictably, environmental groups and activists resisted successfully until the Dayton Administration took office. Governor Dayton seemed somewhat sympathetic to the Chamber’s position and “reforms” were made, but more importantly the size of the EQB staff was dramatically reduced—to the extent that EQB staff was housed in the Minnesota Pollution Control Agency (MPCA). The MPCA itself terminated its advisory Citizen’s Board at the same time. With reduced staff the reach into EIS review was necessarily also reduced. Environmental groups questioned the independence of EQB staff as early as 2014. As evidence of this passivism, when fracking issues, in particular supporting the efforts of local activists to preclude or regulate fracking and the use of sand in fracking, became a hot button issue after in the second decade, the EQB was of little help. State legislation was regarded as insufficient by environmental activists, if not supportive of the industry and EQB proved little help in any pushback. Activists wanted EQB to impose a “Generic EIS requirement for fracking/sand projects, which was not forthcoming[xlii].

 

The pushback picked up considerable momentum when in 2017 the Republicans took control of both branches of the Legislature. Legislation was quickly filed to reduce the role of the EQB, and make substantial changes to the EIS and its standards/procedures. One bill (the Senate’s) went so far as to eliminate the EQB and allow firms to write their own EIS. The House bill was more moderate in retaining the EQB, with reduction in powers, and change in the board membership, as well as modifications to the EIS. Environmental groups are pushing back, asserting the loss of the EQB would devastate the ability of locals and activists to affect making and implementation of environmental policy[xliii].

 

 

Governor Ventura–Finally, as Carlson was “termed out” in 1998, the election that November produced what has to be the nation’s best example of the graduation from our twenty-five year old Transition Era into the 21^st Century Contemporary Era. That candidate was Jesse Ventura. Ventura, a former professional wrestler and TV celebrity, elected from a 3^rd party, the Reform Party, a beneficiary of Ross Perot’s presidential efforts. Ventura was a true populist, attacking both major parties, promising tax cuts and massive reforms. When he got into office he stood alone. No support from any major “inside” or legislative institution. As an outsider, Governor Ventura did not generate much support from the mainstream media or from academic or professional commentators. The literature on his administration is sketchy, and it is evident Ventura’s verbiage and bombast, his approach to governing did not produce cool reasoned reaction and reporting. At the end of his first year in office, he announced he would not run for reelection in 1982.

 

A good bit of Governor Ventura’s platform was a “populist” reaction to Minnesota’s high taxes, and what he (and obviously others) believed was excessive spending, mostly by the Legislature. A good chunk of that excessive (and needless) spending consisted of items that could be considered economic development-related: sports stadiums and convention centers. Ventura claimed Minnesota wiped out a $4b surplus. Ventura was not anti-business per se. His sense of how to foster business growth was to keep government costs down, and by Minnesota standards he favored limited government. This more conventional mainstream ED perspective. As our case study has thus far detailed, this was not the approach Minnesota had followed for decades. As such, Ventura challenged the basic approach to economic development and business climate that the state had followed since the 1940’s. He was not successful in any meaningful sense in this mission.

 

As Governor, he addressed a Tourism Convention declaring his goal of being addressed as “the Tourism Governor”. He reappointed the former Tourism director and increased the tourism marketing budget by $5 million in his first year. He then advocated a $900 million commitment to “upgrade the Journey travel information system” financed in part with private monies. Moreover, Governor Ventura committed himself to be Minnesota’s tourism salesman. One lesson I take from this is that populist governors should not be taken literally, but rather watched for what they do upon reaching office.

 

In 2000, the Legislature/Governor transferred the Dislocated Worker Programs from Minnesota Department of Economic Security (MDES) to the Minnesota Jobs Skills Partnership Board (JTPA) within DTED. The transfer could be regarded as a response to the issues raised by the 1999 Citizens League which urged more concern and focus on worker skills than high cost incentives. He also committed his administration to removing red tape and duplication, which he believed was evident in the numerous workforce programs in operation when he assumed office (he claimed Hennepin County offered 114 different programs).

 

Ventura promised to reduce Minnesota government and spending. He pledged to veto tax increases. But spending did increase and he did increases certain taxes and fees. On the other hand, he did promulgate a reform in property taxes, cut income taxes, and issued the state’s first sales tax rebate. When he left office, his successor inherited a structural budgetary imbalance of over $4.3b—the largest in state history. He was a major player in the approval and construction of a Blue Line light rail on the Twin Cities.

 

Assessment of Transition Era–Commenting in 1988 that most of the state’s programs were relatively new, Kolderie and Blazar (in R. Scott Fosler) acknowledge the “direct role” of the state had not been critical to the State’s past ED success (or failure). Also important was their belief the state was “not in a good position to compete with other state’s using direct inducements”, and that its mid-continent location isolated it from manufacturing attraction. Rather, they asserted “the state has known for a long time its success comes mainly from the success of small business nurtured by the state’s entrepreneurial climate”. That climate, they go on to say, is predicated by the State’s provision of high-quality public services … a supportive framework of public law and regulation … and a policy-making process with a superior capacity ….”[xliv].  The services/facilities identified as central to this business climate are later listed as universities, schools, and welfare/social services as wells as orchestras, art galleries, hospitals, and sports that are “major league’. This is congruent with our conception of Contemporary Era Progressive state-level economic development.

 

While not taking a position on the merits of this assessment, it is important as a mid-Transition Era commentary on how and why Minnesota had moved and the strategy-rationale that could support its future evolution. This is an assertion that state business climate is set not by low taxes and regulation, but by high quality public services/facilities presumably supported by higher tax rates—and regulation. Kolderie and Blazar assert Minnesota, while engaging in some attraction, is not obsessed by it. The key characteristic is that state-level tax abatement is linked to firms already in Minnesota. As defense for their assessment of Minnesota’s mid-1980 ED strategic “philosophy” Kolderie and Blazar believe “Minnesota has developed a special political culture that treats government and the political process less as an activity through which individuals, families and interest groups protect and enrich themselves (congruent with Elazar’s individualist political culture and our Privatism), than as a ‘commonwealth’ in which people come together to solve problems”.[xlv]

 

 

Minnesota in the Contemporary Era

 

As Minnesota entered our Contemporary Era, it took a path reflective of its own culture and politics, a path notably different than a community development/neighborhood path more typical of the Pacific Coast, and the high-tech, university-led ED prevalent in Connecticut/ Massachusetts for example. Nor, for that matter, did it faithfully follow in the footsteps of Michigan and Pennsylvania which stressed “reindustrialization” along with development of sunrise sectors. We on the main agree with Kolderie and Blazer’s observation that the State of Minnesota’s (not its sub-state jurisdictions) most distinctive aspect of Transition Era economic development was its conception of business climate which rejected the Mainstream ED’s paradigm of a competitive low cost, limited government approach. Minnesota, from Stassen onward (1938) consciously or unconsciously pursued its “high quality public sector as its principal strategy of economic growth”. That meant state-level EDOs that relied on Mainstream ED tools and programs garnered secondary treatment and priority.

 

Minnesota’s Transition Era policy system, heavily shaped by the DFL-dominated Legislature, stressed other policy areas such as social services, education, disability and health issues, and a strong comprehensive welfare program—among others—all managed by a competent high quality public sector. In this endeavor, the State assumed direct leadership of local jurisdictions, and did so through its provision of direct financial support to local governments. The State, and the Legislature was also active, through a semi-subsidiary the Metropolitan Council, in the structure, conduct and financing of the Twin Cities infrastructure and a good chuck of its economic development strategies. An interesting facet of the state’s local ED involvement was a constant, some would say, chronic interest in sports stadiums/teams—very untypical for a Blue State such as Minnesota.

 

Whether or not the high quality public sector/business climate strategy produced economic growth is not my task to determine, but state economic growth during the Transition Era did not follow the East Coast intensive deindustrialization, and the Big City industrial hegemonic implosion. That crisis in the Seventies and Eighties was not felt in Minnesota as it was in New York City, Detroit, or Cleveland. But population and economic growth rates slowed, certainly in the 1990’s concern with economic growth grew. More importantly, several background factors and forces were clearly in motion.

 

The Republican opposition to the DFL had shared, to a lesser degree perhaps, in the DFL’s high quality, public sector growth strategy, but by the early 1980’s a more aggressive wing of the Party, concerned with social agenda and fiscal and tax issues (much like the national Reagan Republican party) emerged—and in the Legislature fought a mostly losing battle. The high quality public sector strategy produced lots of state expenditures, and necessarily high taxes. Both became an increasingly serious concern, particularly in times of national recession. It obviously, given the election of populist Jesse Ventura, peeled off a lot of Minnesota voters.

 

By the time of Republican Governor Carlson (1990’s), a governor comfortable with the high quality public sector strategy, austerity and maintenance, not growth in public programs and expenditures was more the issue than ever. More and more, the state budget was thought of having a “structural” imbalance between expenditures and revenues/taxes/ Tax “reform” or reorganization was constant—until it produced Governor Jesse Ventura. The sense of failure that accompanied his administration set the tone for Minnesota politics (and economic development) in the Contemporary Era. Given that the Contemporary Era started out with the election of Republican George Bush, the after effects of 9/11 and the Dot-Com Bubble recession, budgetary/fiscal troubles and tax levels would become defining features of Minnesota’s Contemporary Era policy-making.

 

Contemporary Era State Economic Development: Pawlenty

The strength of the Legislature in consistently following the “high quality public sector economic growth and business climate strategy”, left more conventional or Mainstream ED programs and strategies at the discretion of the governor (often Republican), under whose control the state’s lead EDO largely rested. The level of support and personal commitment logically varied with each governor, and as noted earlier, often resulted in EDO reorganizations and renaming as each governor adjusted its parameters to fit his image of state-level ED. In my opinion, Rudy Perpich was the most aggressive proponent of economic growth and the most convinced user of conventional Mainstream ED programs. He stressed programs dealing with the state’s international competitiveness, and he aggressively countered deindustrialization of the Iron Range, his political and personal home base. Important governor’s such as Andersen, comfortable with the “high quality public sector economic growth strategy” spent less time in Mainstream ED, and more time in making the high quality public sector strategy more sustainable.

 

Minnesota governors played the attraction game and like all states targeted their attraction candidates by sector and industry. Minnesota tended to focus more on strengthening established sectors rather than developing new sectors. Minnesota’s technology cluster, mostly composed of medical firms and some software, was targeted. Strong private “trade or industry associations, such as BioBusiness Alliance of Minnesota, demonstrates that this attraction/cluster program was very much a public/private affair. But to me when confronted with established firms threatening relocation or shutdown, the gloves came off. In these instances Minnesota incentive packages were as big as any, and were not without their success. Considerable attention was directed at depressed Iron Range cities, and rural or “Greater (Non Twin Cities) Minnesota. Always exceedingly controversial in Minnesota, incentives remained a prominent tool.

 

Tim Pawlenty commenced his two terms as governor in January, 2003.A former Republican two term Minnesota House of Representative Majority Leader from St Paul, he had been in elective office since 1988, and had served in many local and state positions during his career. Victorious in a three-way Republican primary, his outstandingly creative theme was balancing the Minnesota budget with no new taxes. In a three-way general election he won with nearly 44% of the vote. In his 2006 reelection he won in a close election by 1%. While Pawlenty took state-level ED seriously, making important contributions to state economic development, his administration repeatedly had to deal with the chronic budgetary and fiscal implications of the existing Minnesota state government. That budgetary tale should serve as backdrop for our subsequent description of his ED activities.

 

According to Minnesota Management and Budget Department general fund expenditures an average of 21.3% per two-year term between 1960 and 2003. During Pawlenty’s administration that was lowered to 3.5% (Wikipedia, “Tim Pawlenty”). That source states that “slowing down state spending and opposing tax increases” were the signature issues of the two Pawlenty administrations. Pawlenty inherited from the consummate populist no new takes Governor Ventura a $4.3b deficit—again the largest, but far from the first large budget deficit, in Minnesota history.

 

With the DFL back in control of the Senate, he was able to reach an accommodation that hurt nearly everybody: a sizeable package of fee increases, tons of spending reductions in social services, welfare, and transportation. He restructure state-city direct aid to match “need” rather increments over a base. He compromised by agreeing to increases in state wages and pulled back from property tax reforms. He did, however, impose several bureaucratic reorganizations, of which the Dept. of ED and Workforce Security was one. Whatever else these mergers accomplished they did so making budgetary savings. The fiscal imbalance, however, remained, and by the time he was returned to office in 2007, he faced yet another deficit of $2.7. This time he reduced through more cuts, using one time borrowing of various agency accounts, and shifting payments into the next budget year—low quality solutions that did not address the obvious structural imbalance between expenses and revenues.

 

When he left office in 2011, he left his successor with a $4.4b shortfall—yet again the largest in Minnesota’s history. Minnesota’s property taxes had increased by $2.5b, and Moody’s had lowered the state’s bond rating. Partly to blame in Pawlenty’s backing away from more budget cuts was an adverse Minnesota 2010 Supreme Court Decision that rested on the lack of an approved state budget (Pawlenty and the Legislature could not come to an agreement), and subsequent unilateral budget cuts by Pawlenty were deemed unconstitutional, and that decision held on appeal. In 2010, Pawlenty vetoed the legislatively approved state budget, but the legislature was able to approve most of their budget in subsequent actions.

 

The hopefully obvious reason I am concentrating on budgets and fiscal sustainability relates to our previous assertion that Minnesota had followed an alternative ED business climate and economic growth model, with exceptions since 1938. The “High Quality Public Sector” as the state’s basic strategy for economic growth was clearly under stress and strain. The Republican Party by the Contemporary Era had mostly moved away from its previous Progressive inclinations, and under Pawlenty was determined to enact cost savings, if not tax cuts. A structural imbalance, however, meant tax cuts were out of the question. In other words, the reliance of the state on this strategy had rendered budgets and taxes an essential element of the state’s economic development approach.

 

Certainly by 2011, the Pawlenty cutbacks and slowing down the rate of expenditure growth did not work wonders, and by the Administration’s end the budgetary situation was somewhat worse than what Pawlenty had inherited. Left unsaid thus far in our discussion are the tax and expenditure implications of the 2008-9 Financial Collapse and Great Recession—and the early reality that post-Recession return to prosperity would be slow and grudging.

 

Pawlenty’s Economic Development–As to economic development, as incentives became even more controversial—and the deals more hairy—the need to include workforce development, skills training in particular became more apparent. That trend became dominant when the Contemporary Era’s first governor, Republican Tim Pawlenty merged the state’s ED workforce department/programs with the state’s lead-EDO. In July 1, 2003 Pawlenty’s DTED merged with MDES and its name changed to Department of Employment and Economic Development (DEED) which it is today.

The marriage of DTED and Workforce ED was both congruent with the de facto thrust of Mainstream ED, and simultaneously an expression of Minnesota’s Progressive default to help people, not firms. It also reflected a growing consensus that workforce was a critical element of an attraction strategy. Minnesota’s need for economic growth became more pronounced by 2010, and through Pawlenty’s administration one can see a slow drift of Minnesota ED was into knowledge-based ED with its emphasis on skills and skills retraining, as well as innovation and entrepreneurship. Still operating on the edges of Mainstream ED, workforce (re)development had become a primary focus and strategy.

 

Pawlenty also found time in 2005 to lead a major trade mission to China. Trade missions were an annual affair under Pawlenty; he led trade delegations to Canada (2003), Poland and Czech Republic in 20004, India in 2007, and Israel in 2008. The now long-standing state international and export strategy launched way back with Perpich remained a cornerstone of the State’s and the governor’s ED approach.

Pawlenty quest for revenues prompted his sparring unsuccessfully with Indian tribes early in his first term to convince them to share “profits” with the state.

 

Continuing that mysterious hold sport stadiums have with Minnesota state governors and legislators, Pawlenty was a solid backer of in 2006 to fund a new stadium for the Minnesota Twins. He was willing to get behind an increased county sales tax to help pay for the bonds issued to build it, and he exempted the initiative from a required referendum. In the same year, he vetoed a Twin Cities Central Corridor Light rail project.

 

Attraction activities often were linked to firms lost to the State’s neighbors, particularly South Dakota. Minnesota perceived itself losing firms and jobs to these low cost business climates. The State’s attraction program, “Positively Minnesota”, expanded its scope to include more intensive use of site selectors and marketing site selector forums. It also participated heavily in plugging tourism and conventions, as well as bio-tech. Attraction efforts were complemented with vigorous local EDOs also joining with the DEED and participating in Positively Minnesota initiatives. It is evident that many sub-state EDOs were also pursuing their own attraction strategies.

 

Pawlenty’s economic development signature initiative was his JOBZ program. He described it as  the “mother of all tax incentives” applied to a large number of defined and targeted “areas” in which new and firms and businesses were eligible. There were no corporate income taxes, no property taxes, no taxes on goods purchased (sales), and if used in the zones no taxes on investments for twelve years. Pawlenty in an interview also described this as the “kitchen sink of incentives”. Said and done, as critics observed, this was a glorified Kempesque EDZ.

 

Pawlenty’s original intentions were to focus JOBZ on challenged rural areas and manufacturing which he stated were losing population, tax base and jobs. Reports at the time observed that Minnesota had lost 38,000 manufacturing jobs in recent years. Suffering the fate of all geographically-targeted programs, the legislature expanded the number of zones, and broadened eligibility criteria. By the time Pawlenty’s administration was over, and he was running for President, all sorts of job creation numbers were bandied about, and several articles pointedly found abuses and unpopular examples. The program was locally administered, and only loosely monitored at the state level, but was aggressively used by local EDOs and firms. Minnesota’s Legislative Auditor had a field day, and university professors found no end of improper use of tax abatements. In the presidential campaign, JOBZ seemingly was at odds with his 2012 calls for not targeting and picking targets, and not relying on subsidies to promote economic growth. That his program operated on the state level, versus federal—certainly an important factor—was ignored.

 

Infrastructure and public works remained a cornerstone priority especially for the legislature. Pawlenty sparred with them on several projects, sometimes ostensibly to lower costs, others because he felt the state could not afford them. In late 2006 Pawlenty reversed his previous opposition and signed a legislatively approved $1b public works bill that funded a rail line expansion for Northstar Commuter in the Twin Cities, a new prison, a bioscience building at the University of Minnesota, a science building at the U of M’s Mankato campus, and a $26m expansion of U of M’s Carlson School of Management. Also using federal funds, the vetoed Central Corridor light rail project was rescued and went forward—part of a stimulus during the Great Recession. That the public works bill was not only congruent with Minnesota’s High Quality Public Sector Strategy, but a doubling down on it during a period of intense fiscal stress confirms the political consensus behind it had not disappeared.

 

To the extent climate change had entered into ED policy, Pawlenty twisted and turned during his second administration as he attempted to position himself politically while serving what he deemed was Minnesota’s long-term needs. In 2007, he signed the legislature’s NextGeneration Energy Act and also the six state Midwestern Greenhouse Gas Accord. The thrust of both legislative initiatives was to reduce greenhouse gases, develop a market-based multi-sector cap and trade program. By 2009, however, Pawlenty reverse his position on cap and trade, and later to express skepticism regarding the nature and degree of greenhouse gasses.

 

In 2007, he announced (SEED) Strategic Entrepreneurial Economic Development Program for rural areas. The initiative connected rural entrepreneurs and small businesses to the twin policy cornerstones of DEED: workforce and international/export. The goal was to develop more rural entrepreneurs by providing support and assistance, linking them to universities and counseling, and to directly provide financial assistance. Total program obligations were supplemented in 2008 to include a new $20mm commitment and a one-time $50mm bond issuance.  It committed $13.5m to a RLF and a Small Business Product Development Grant Program. That these programs, first instituted in 2007, had been kicking round for more than two decades elsewhere suggests the traditional reluctance of Minnesota to direct business firm assistance had melted a little bit.

 

In 2010, Pawlenty and the Legislature agreed to fund several innovation and science and tech initiatives. The motivation was again the perceived sense that states like South Dakota were eating Minnesota lunches—this time by luring in innovative entrepreneurs, high tech startups, and science and technology firms in general. The largest technology related sector is medical devices with firms such as Medtronic, Boston Scientific, and St Jude Medical—and with a healthy mix of new startups as well.

 

Legislation created the Minnesota Science and Technology Authority, focused on creating high tech jobs and addressing relatively mediocre position for Minnesota in the New Economy Index, which assert that Minnesota’s business formation, and entrepreneurial activity during the century’s first decade was off the mark. The Science and Tech Authority was an attempt to duplicate the 2002-2008 Ohio Third Frontier initiative. Minimum funding, however, and the legislature rejection for the following two years of any additional major programmatic funding ($10 million), soon brought the Authority to an administrative death. Interestingly in 2015, BLS data placed Minnesota as the nation’s fastest growing state in creating technology jobs.

 

Another legislation approved $50mm in “angel” investor tax credits for very early state high tech startups. That bill had been kicking around the Legislature for seven years; the proponents, Democrats, had been unable to find sufficient DFL and Republican voters to pass it. In the midst of a $2 billion 2010 budgetary deficit debate, the issue caught on—again South Dakota figured in the debate—and it was approved. Pawlenty was on board from the start, and with Democratic support he reprogrammed unspent welfare funds, an action later described by the Minnesota Supreme Count as “unallocation”, for the poor to buy gas for their cars—a transfer not popular with established DFL and advocates for a high quality public sector strategy. The innovation, Science and Tech Authority, and high tech legislation was in for rough times in the next two years.

 

As early as 2009 Pawlenty was tagged as having national ambitions in 2012. There is no doubt that his agenda was stretched to include out-of-state activities, and his in-state actions reflected post-term aspirations. He was termed out and that meant his future political life entered into his last years in office. In a related action, in 2010, he declined to embrace Medicare expansion as part of Obamacare.

 

Next—Mark Dayton: In 2017 as I write this section, Progressive commentators are bragging about DFL/Democrat controlled Minnesota. “This Billionaire Governor [Mark Dayton] Taxed the Rich and Increased the Minimum Wage—Now, His State’s Economy is one of the Best in the Country. … Raising taxes on those who can afford to pay more will turn a deficit into a surplus. Raising the minimum wage will increase the median income. And in a state where education is a budget priority and economic growth is one of the highest in the nation, it only makes sense that more businesses would stay” crowed the Huffington Post. … Mark Dayton inherited a $6.2B deficit and a 7 percent unemployment rate from his predecessor, Tim Pawlenty … when Pawlenty was at the head of Minnesota’s state government, he managed to add only 6,200 more jobs”[xlvi]. Minnesota, true to its seventy-five year “high quality public sector” ED strategy had seemingly beaten the most serious economic disaster since the Great Recession.

 

Minnesota was (is) doing well as I write. The issues, of course are how well, compared to whom, and why. But in comparing the new Governor Dayton to the old Governor Pawlenty, there is an 800lb gorilla on my desk: the impact of the Great Recession. The recession officially started in December 2007, and Pew reports Minnesota suffered its lowest employment level in September 2009. The state lost about 160,000 jobs[xlvii]. Most states did not reach their low point until a year later. Minnesota’s subsequent recovery placed it solidly in the middle of the national pack.[xlviii]. Indeed, the raw 2013 monthly numbers looked very nice and very comforting, but they were a bit deceptive.

 

When Pawlenty retired little more than a year later the national economy was in a mild recession and America had entered a slow growth period of recovery. It was not until September, 2013 that Minnesota regained its 2008 level, it had not, however, overtaken its low point in 2009. That technicality mattered little in 2013 when good news and robust job growth meant success for the state and its leaders. Compared to a majority of states that reached their low point a year later than Minnesota, Minnesota was crushing its neighbors. Some of those neighbors never did come back as did Minnesota; some, like North Dakota had to cope with a 2015 “fracking” recession, or their manufacturing deindustrialization legacy far exceeded that of a more diversified Minnesota.

 

Writing a “current history” is not without its perils; perspective comes at a cost of some complexity, if not subtlety. Minnesota was doing well. It should be both proud and relatively happy. Compared with some neighbors Minnesota did better, but marginally compared to the nation’s growth states. Yet, truth be told, Minnesota home to the headquarters of 17 Fortune 500 corporations had a solid and nicely diversified economy, with clusters in agriculture, food processing, and medical/health care that were resilient even in a terrible Recession. If you had to be somewhere during the Great Recession, you could have done a lot worse than be in the Land of Lake Woebegone where everybody is above average.

 

Yet beneath Lake Woebegone waters, problems and wild things lurked. The most troublesome is that chronic structural deficit, the tension between the costs and expenditures of a high quality public sector strategy. The new governor inherited it, through a good deal of his first term he confronted it. And confront it he did. That is the most interesting story of the present Minnesota governor.

 

In the 2010 election, DFL candidate, Mark Dayton was elected by less than 9,000 votes in a three party affair in which the Independence Party’s 11% share arguably split the conservative vote. In case the reader hadn’t noticed, Dayton was Minnesota’s first Democratic/DFL governor in twenty years—since Perpich. Speaking of Perpich, do you know who his last economic development commissioner was? It was Mark Dayton. He was the guy on board when Perpich chased the General Motors Saturn Plant.

 

Dayton was not your typical governor. He was a billionaire. His grandfather had founded Dayton-Hudson, which in the early 2000’s became better known as Target—you know with the bulls-eye logo. His father had founded a now merged bookseller, E. B. Dalton. A Yale grad, Dayton, a Vietnam protestor, followed his own path, not that of his father by any means. He worked in the public sector nearly all his life, from a school teacher to social worker, from Mondale aide, to Perpich commissioner, to being elected Senator of the United States (2001-2007). He retired from Washington and eventually, using mostly personal funds won the DFL/Democrat primary. In a three party contest (Ventura’s old Independence Party got nearly 12% of the vote), Dayton beat the Republican by about 9,000 votes—in yet another recount.

 

In fact, that three way race presents one of the most critical of Minnesota’s post-Recession realities. Its political culture had ruptured. The Democrats/DFL were able to exploit the breakdown of the Republican Party which spun off its equivalent of a Tea Party: the Independence Party. The “resistance” in Minnesota was less in social issues, than revolt against taxes and the burden of a high quality public sector. With a 9,000 vote margin the Democrats won the governorship by a whopping 9,000 votes—perhaps the same 9,000 folk who did not vote for Donald Trump six years later–though they lost the Senate to the Republicans. Just kidding! The old Progressively-inclined Stassen-like Republican Party had itself been taken over by a tax cutter, moderate by Independence Party terms. The partisan deck had been reshuffled and that represented a fundamental break from the Transition Era past.

 

As the Huffington Post mentioned, Dayton inherited a huge deficit from Pawlenty and the Great Recession—a structural deficit that had been first reduced by Andersen and his 1971 Minnesota Miracle, and then gradually, but increasing reappeared in Quie’s and Carlson’s administrations. Ventura did nothing to make it go away, and Pawlenty confronted it, but in the end, it beat him. The Recession was frosting on the cake. Dayton got no honeymoon. It was waiting for him when hung up his coat in the Governor’s office. Negotiations broke down with the Republican Senate, and House. On July 1 the Minnesota state government (and legislative negotiations) shut down—staying shut down for one day shy of three weeks.

 

Sparing the reader from the not-too-pretty details of why and what happens when a state shuts down, suffice it to  observe the Republicans wanted big spending cuts and no tax increases, while Dayton wanted tax increases with less spending cuts thus preserving the integrity of the state’s high quality public sector approach. In that Republicans lost control of the Legislature in the 2012 elections, one suspects Dayton got the better of the battle. Sort of splitting the differences, an agreement between the warring parties papered over the deficit with a reduced state budget—minus all the Republican social policy baggage. The government reopened.

 

Until the DFL won the elections a year and half later, the post-shutdown interim period was clumsy, feelings were bitter, but several typical Minnesota ED affairs required the governor’s attention. The first was a 2012 attempt by Republicans to get a right-to-work bill passed. That went nowhere; the Republicans themselves killed it. The other was once again the need for the state to get involved with, and finance a sports stadium bubbled up into the state agenda. Pawlenty had to deal with the baseball Minnesota Twins; in the midst of the budget crisis and during the shutdown, Dayton had to figure out how to deal with the football Minnesota Vikings.

 

As background, sports stadia politics are primarily local, driven by local competition that tax-base sharing did not address. It intrudes into into the state agenda for two reasons: locals look for state money to pay for their political agenda, and secondly, Minnesota’s state economic development (especially the DFL-dominated Legislature) and the implications of the Metropolitan Council being a “creature” of the state legislature) place a high priority on infrastructure as a key ingredient of its business climate, one element of which is sports stadia.

 

Up to May 2011, the Vikings stadium affair lay within Hennepin County’s (Minneapolis) agenda. In that month, negotiations and the financing agreements broke down. Into the vacuum piled Ramsey County (St Paul). They soon announced an agreement with the Vikings (locating the stadium in Arden Hills), an agreement subject to endorsement by the state legislature—and its empowerment to levy an additional sales tax. Dayton was dragged into this because the agreement called for $1B on new state funds not in the 2011 budget agreement—plus another $131mm for transportation access. He also advocated for building the stadium in an obsolete farmers market in Minneapolis.

 

Negotiations at the state level were predictably a slog, until Dayton broke the logjam in March 2012 (in the midst of yet another state budgetary crisis). The DFL split, with a significant group opposed to the project. In March Dayton announced his own agreement with Vikings to build the stadium in Minneapolis at the old Hubert Humphrey Metrodome stadium site. That sounded great to the Legislature which in May approved the agreement, and the Minneapolis City Council approved it afterward. The $1.1B U.S. Bank (fixed roof) Stadium opened for business in 2016 (with the Minnesota Gophers basketball team an additional user). The owner of the facility is the Minnesota Sports Facilities Authority. By way of déjà vu, the Vikings first facility in Bloomington (1961-81), on a site that presently hosts the Mall of America. In 1981-2, Vikings moved to the Humphrey Metrodome where it stayed put until 2013 when construction commenced for the new stadium. During construction they played in a stadium on the University of Minnesota campus.

 

Anyway, state policy-making cannot long stray from fiscal affairs, budgets, and deficits, but in 2013 the worm turned (just what does that mean?). The chaos of 2011 reaped unexpected benefits in 2012 (Minnesota budgets run in a two year cycle). Revenues were higher and expenses lower—producing a large surplus. Extra money legislatively had to go into a rainy day reserve fund and by the time a new budget had to be approved, Minnesota was flush with dough—(with new debt, unfunded pensions, and money borrowed from department funds still unpaid). More importantly, Dayton enjoyed the return of the Democrat/DFL control over the legislature. The political consensus underlying the high quality public sector strategy was once again solidly in place. Dayton did not waste the opportunity.

 

By 2016, there was an active debate between the Republicans in the Legislature to reduce business property taxes primarily, and the Governor who advocated augmenting earned income and child care tax credits—and investing surplus proceeds, to the extent possible, in pre-K education. In 2017, with Republicans in control of both legislative houses, the Republicans were drafting a “significant tax relief package” targeted to small business, agriculture interests, and college students paying off loans” as well as to ordinary taxpayers. DFL countered that given the terrible experience of the 1999 Minnesota income tax cuts, and the likelihood the Trump administration would devolve costs onto the states, any surplus should go into rainy day reserve funds. As I write this, it seems that 2017 some form and level of a tax cut is likely—as is increase of state reserve funds.

 

In 2013 he pushed for, and won, a $2.1B tax increase (wealthy and smokers got soaked). The state income tax rate was increased from 7.85% to 9.85%–allegedly the highest in the nation (others say it is the fourth largest: depends how you measure it). The state minimum wage was increased to $9.50 an hour by 2018, and a state law guaranteed equal pay for women. Included in the new budget was approval to issue $775mm Capital Budget—one third of which was labeled as “economic development”. Two projects garnered $35mm each: a major expansion and remodeling of the Mayo Clinic Civic Center, and $35mm to expand the Mayo Clinic. $32mm was plugged into a statewide housing and $27mm when to St Paul to construct a regional sports facility for minor league baseball and amateur sports. Another $25mm went to redesign and renovate Minneapolis famous urban renewal project: the Nicollet Mall, and $25.6mm financed civic center expansion in Mankato and St Cloud. Some $20mm was approved to finance “programs specifically designed to help businesses expand in Minnesota (in NY we call this the Governor’s walking around money”.

 

If economic development got the most (26%) of the Capital Budget, higher education did well also (about $159mm) 21%, and prisons and public safety-related (Homeland Security) facilities got $128mm (17%) and Environmental-related another $122mm (16%). Transportation and Transit, which the Governor wanted locals, i.e. the Metropolitan Council to step up to the plate, did rather poorly with only $65mm or 8%. The point to be made, is that in 2013-2015, with fiscal stability in place due to significant increase in taxes, the DFL legislature and governor reestablished the primary of the high quality public sector economic growth strategy—and the new Republican Party left high and dry, screaming their heads off.

 

Adding insult to injury, what passes for economic growth these days returned to America. Minnesota’s portion yielded around 172,000 new jobs between 2011 and 2015. Wage and median income grew and unemployment during these years was the fifth lowest in the nation. CNBC and Forbes cited the state as among the nation’s best economic achievers—and the place to do business. Moreover, and probably as important, since the 2013 tax increase, Minnesota budgets have been in the black, with billion plus dollar surpluses each budget cycle. The Governor in turned pledged to reinvest a third of that money into public schools. Social Services and welfare were well-treated in the annual budgets after 2013. In 2017, Governor Dayton tackled the issue of inequality and diversity in Minnesota by creating a new MBE initiative, and pledging to increase affirmative hiring in Minnesota state government. He was one of the strongest advocates for Obamacare Medicaid expansion—which the state approved.

 

That ain’t the way things are supposed to go in conventional Privatist Mainstream ED-land. And to be sure not all Minnesotans were on board with the new taxes and activist state government. The legislature in 2017 turned Republican, both House and Senate. Still, Minnesota under Dayton is a success story, and the long-time DFL ED strategy vindicated and upheld despite the stresses. The Minnesota economy had held up, and while its growth, using a number of indicators (not just one) was solid, but not spectacular. As a Blue State Minnesota had nothing to apologize for.

 

Having said all this, one might wonder how a successful Blue State’s governor would practice an ED approach which closely mirrored conventional, incentive-laden, business assistance and business support programs and strategies, while giving some lip service to the usual Blue State innovation and knowledge-based economic development strategies. In fact, one could argue that Mark Dayton, our old economic developer, chaser of General Motors Saturn Plant, did just that—without blushing or without an apology.

 

Funding the Mayo Center expansion, a cornerstone of Greater Minnesota (non-Twin Cities) economy, was something one suspects any governor would have done. These were exactly the right kinds of jobs, in a politically-correct sector—and given the extremely competitive incentives from other states that would obviously occur, Minnesota and Dayton had to step up to the plate. But civic center expansions and Big City malls surely reflect the high quality public sector strategy. That, however, did not preclude Dayton’s consistent, verging on enthusiastic use of Privatist Red State incentives and tax abatements. Even the Bluest of states almost inevitably respond to the realities and needs of their sub-state jurisdictional economic bases.

 

From 2013 onward, Dayton using state funds allocated by the legislature, provided incentives to a respectable number of firms. In 2013 alone, Dayton proposed $86million to fund for business development and incentive programs. When asked in 2017 about why he uses incentives and tax breaks when “everybody knows they don’t work”, the Governor responded “It’s very competitive with other states offering subsidies … You can argue [incentives] either way, but it’s not a perfect world. Cliffs Mining (a Minnesota company] has announced they are going to develop a new facility in Ohio; $300million in incentives. Their Republican Governor is as happy as can be. Incentives do make a difference”[xlix].

 

He earlier, with Legislature support, funded a new DEED $1.5mm export trade initiative, and in 2013 increased it to $5mm. That Perpich’s “international strategy” had by that time achieved bipartisan support to become a core Minnesota ED strategy, not a mere “arrow in its quiver”. In 2012, Twin Cities jurisdictions, i=global trade advocates partnered with Brookings Institute to conduct a “MSP Export Initiative to increase exports from Twin Cities from $17.6billion in 2010 to $35billion by 2017. Governor Dayton keynoted the announcement and DEED’s Minnesota Trade Office was a member of the partnership.

 

In the past, Minnesota incentives had a distinctly defensive business retention tone about them. Less so for Dayton. He created the $30mm Minnesota Investment Fund (lodged in DEED) whose purpose was to provide funding “if an opportunity crops up to recruit or grow a business, with a focus on manufacturing, technology, or industrial sectors”. If this were not sufficient, Dayton also created another similar-purposed program, the Minnesota Job Creation Fund which, in reality, was a reformed version of Pawlenty’s JOBZ program (extended to the entire state and reimbursed taxes after jobs were created), infusing it with another $25mm[l]. So the state was on hand to fund the expansion of a $60mm Shutterfly distribution center, with $3mm incentives—negotiated when Dayton personally flew to California to meet with its CEO (and I thought only a southern governor did this). Interestingly, Dayton has displayed little appetite to chase neighboring Wisconsin firms, despite Wisconsin’s aggressive attraction program.

 

Next was an Eagan delivery logistics facility and a technology development office in Minneapolis. Did we mention an Amazon fulfillment center? In the business retention area the state was involved with Polaris expanding operations in three Minnesota cities. Receiving special attention was the political hotbed that was Greater Minnesota, where a sizeable number of firms (including a $4mm forgivable loan to Digi-Key for a $200mm distribution center) made major investments and jobs encouraged with state investment[li]. With Governor Dayton, it appears a Blue State can play conventional incentive-laced business development with the best of the Red States. Still, the DFL-dominated 2016 Legislature dramatically cut the Governor’s incentive programs, slicing over $33mm from his budget request.

 

Not only that, he vetoed legislation to preempt Twin Cities jurisdictions from creating their own minimum wage/benefit requirements for employers in their economic bases. This once again points out the strong role of the state in sub-state economic development, but also demonstrates Dayton’s holds some belief in the traditional Privatist sense of business climate, in that he placed reliance on the state’s $9.50 minimum wage requirement, and prevented local jurisdictions from increasing it still further. He also was open to the possibility of adjusting the level of minimum wage to standard of living costs of Minnesota’s regional economies. Still he was upset in 2017 when Republicans in control of the Legislature did not advance funding for a transit infrastructure initiative pursued by the Metropolitan Council. The legislature preferred the counties fund the initiative, Dayton the reverse. This is an important ED example of the how Minnesota conducts its state-dominant high quality public strategy approach to economic growth—and it is under challenge in 2017.  The Governor defended that strategy by asserting:

CNBC ranked us the fourth-best state for business. The reason we’re that high is due to infrastructure, transportation, education … those are public investments and they benefit everyone, including business. But if the highways are inadequate and they can’t get their employees to work, they are going to look someplace else. Similarly with education, the quality of the workforce is typically the No.1 reason why businesses say they are going to locate or expand in our state. So if we diminish the quality of education we are slitting our own economic throat.

In fiscal 2012, state support for higher ed was at the lowest level since 1981. We’ve reversed it, but we’ve only restored about half …. Similarly capital investments have lagged behind … which is senseless when you think of how vitally important that is to our economic futures.[lii]

In 2017 the Governor included an additional$25mm in the Minnesota Investment Fund, and $17mm for the Job Creation Fund. In his 2017 Capital Budget Bill, Dayton poured the most money into transportation-related projects, including $55mm for wastewater and water quality. He did include $10mm for the Reinvest in Minnesota program (business retention) and $12mm for Business . Development Public Infrastructure Fund, and $1.2mm for Innovative Business Development Public Infrastructure grants. In another legislation he proposed amending Minnesota TIF statutes to facilitate construction of workforce housing in Greater Minnesota, defining workforce housing as a eligible ED target.

 

Having done all this, how did Dayton respond to the 2017 Amazon Second Headquarters competition? St Paul, and its Mayor Coleman—a DFL candidate of next year’s governor—has a site and is looking at the State as a partner. The State submitted a package of incentives that was characterized as “restrained”. Why? DFL opposition is vocal. A line of DFL contenders are already in motion to replace the termed-out Dayton in 2018 election. Dayton is not on board with their reluctance to participate in the competition: “It’s a nice intellectual debate usually conducted by people who have jobs, usually secure ones. In the real world every other state is involved in this, its competition. Its’s like business, and the benefits far exceed the costs”. Dayton, however, did appear sensitive to an incentive package so extreme that firms resident in Minnesota would be offended. There is also concern that with unemployment so low, and skills shortages a serious issue, that Amazon’s sheer size would aggravate the existing economic imbalances. His priority in 2017 is to increase funding for transportation and education infrastructures, and to provide new support to workforce development—that would attract more industries to the state[liii].

 

So where is Minnesota’s politically-correct Blue State innovation and knowledge-based ED strategy? It’s there, duly called out to satisfy constituents and the strategy’s constituency. In 2017, the Lieutenant Governor, the spokesperson for the latest iteration, “#InnovateMN Campaign” reiterated Minnesota and the Dayton’s administration commitment to “celebrate discoveries and technologies that will generate future economic opportunity” and support Minnesota firms that generate the patents to produce them. In the particular address, the successes of composites were cheered, and the obligatory memorials to past great patents, such as the pacemaker, heart valve, taconite pellet and autopilot, and Bisquick and even Spam were applauded.

 

The key to the innovation strategy was from her perspective a well-educated workforce—K-12 was and is truly a cornerstone of Minnesota’s high quality public sector ED approach—and the Governor’s latest initiative to invest $609mm in preK-12 to “close disparities and ensure Minnesota students are prepared for college and career training … and invest $255mm to reduce college debt and ensure all Minnesotans have access to quality affordable higher education”. Lieutenant Governor Smith also reminded listens that companies like Medtronic and the University of Minnesota had combined launched more than 100 startup companies in the last decade.

 

In 2017, the Governor’s “Opportunity Agenda” included $67mm for a health/sciences center at the University of Minnesota, and a $28.3mm for a new chemistry and advanced sciences building at U of M Duluth. Also the initiative would invest $8mm over two years to directly support cancer research which they believed will eventually create jobs. Another key element in the Opportunity Agenda was a $60mm investment to build high-speed internet networks in Greater Minnesota’s rural areas (22% still lack access in 2017). Finally, to address the critical need of financing innovation and tech startups, the Lieutenant Governor reminded her listeners that the (Pawlenty) Angel Tax Credit that injects 25% of a startup financial package. That Tax Credit had from 2010 to 2017 funded 345 “businesses in growing industries like software, biotechnology, and medical devices [to] secure needed startup capital”. Between 2010 and 2015 that program had leveraged more than $318mm in private sector investment. In the 2017 budget the Governor included an additional $10mm to continue the program to 2019.[liv]

 

Lost in all this, however, is “the other half” of DEED’s organization nexus: the state’s workforce programs, “All Hands on Deck”. Workforce, as it seems everywhere else, cannot penetrate the media. Much may be going on, but it “way” below the tip of the publicity iceberg. In 2012 the Governor’s Workforce Development Council released a report, which in the main became Governor Dayton’s “Jobs Plan” approach. It directed the state’s attentions to reducing the state’s skills gap by providing career-specific training to adults. The state’s FastTRAC program was expanded. That program provides career-specific training in high demand occupations in health care, education and manufacturing. Dayton provided an additional $4.5mm funding to serve about 3,000 clients. Governor Dayton also created a pilot program, the Minnesota Opportunity Grants that provided 2000 grants for up to two semesters of training for future jobs above 175% of the federal poverty level. Special targeting for those with disabilities, and those wishing to pursue careers in postsecondary education.

[i] Ted Kolderie and William Blazar, “A High Quality Public Sector as a Strategy for Economic Growth” in R. Scott Fosler (et al), New Economic Role of American States (New York, Oxford University Press, 1988), p. 300.

[ii] There were some “southern” Democrats, in Minnesota but most were similar to Stephen Douglas’s moderate “middle state” free soil/popular sovereignty. Daniel Elazar, a founder of contemporary political culture theory, and a student of Minnesota politics, believed only about a thousand whites habited Minnesota when the 1848 territorial government was established. He believed by the time the bipolar 1857 state constitution was devised, some 150,000 were resident. Census reports 6077 in 1850 and 172023 in 1860. For him those who constructed the 1857 state constitution were “moralist” New Englanders or descendants of New Englanders from upstate New York, northern Illinois, and southeastern Wisconsin” (p. 9). These moralistic Yankees “were virtually the first to occupy their future commonwealth, so they didn’t have to compromise their communitarian individual” with any ‘rugged’ individualistic elements already entrenched in power (pp. 9-10). At one level that may well be true, but the state constitutional powerbrokers were long-time residents, for example Henry Sibley and Alexander Ramsay (the first two governors. The latter was a pure Yankee but a Democrat and the former from Pennsylvania was a Whig). Neither, whatever their position on slavery, was a particular friend to Native Americans; see Daniel Elazar, Virginia Gray, and Wyman Spano (Minnesota Politics and Government (Lincoln, University of Nebraska Press, 1999).

[iii] Barbara Allen, “Framing Government for a Frontier Commonwealth: the Minnesota Constitutions(s)” in George Connor and Christopher Hammons, The Constitutionalism of American States ( (University of Missouri Press, 2008), pp. 509-528-; quote taken from pp. 516-7

[iv] League of Minnesota Cities Information Memo: Public Purposes Expenditures, June 12, 2017

[v] Ronald Coan, A History of American State and Local Economic Development (London, Edward Elgar, 2017), pp. 75-76.

[vi] In 2015, Minneapolis-St Paul was home to 668,000. The next city, Rochester, had an estimated 112,000, but the next sixteen cities were less than 100,000 and more than 50,000. The next twenty cities ranged from less than 50,000 to 25,000.. Say it another way, Twin Cities Combined Statistical Area contained 3.87 million of Minnesota’s 5.5 million population.

[vii] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 138.

[viii] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 138.

[ix] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 142..

[x] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), pp. 145-6

[xi] Daniel Elazar, Virginia Gray, and Wyman Spano (Minnesota Politics and Government (Lincoln, University of Nebraska Press, 1999), p. 10

[xii] General Statutes of the State of Minnesota in force January 1891; https://books.google.com/books?id=Ej8wAQAAMAAJ&pg=PA200&lpg=PA200&dq=1881+Minnesota+railroad+bond+issue&source=bl&ots=mfOw4CXkO9&sig=nPVt0sA0j8C7jKtNQyu2sX03m9g&hl=en&sa=X&ved=0ahUKEwjJ4_f-XWAhWh7oMKHaDHCMMQ6AEIMTAC#v=onepage&q=1881%20Minnesota%20railroad%20bond%20issue&f=false

[xiii] Harold Peterson, “Early Minnesota Railroads and the Quest for Settlers”, Minnesota History Magazine, March 1932, pp. 25-44, quote on pp. 27-8.

[xiv] Harold Peterson, “Early Minnesota Railroads and the Quest for Settlers”, Minnesota History Magazine, March 1932, pp. 25-44, quote on p.29.

[xv] Carey McWilliams, Southern California: an Island on the Land (Peregrine Smith Books, Salt Lake City,1973),  p. 100.

[xvi] Harold Peterson, “Early Minnesota Railroads and the Quest for Settlers”, Minnesota History Magazine, March 1932, pp. 25-44, quote on p.41.

[xvii] American History: From Revolution to Reconstruction  http://www.let.rug.nl/usa/essays/1801-1900/the-iron-horse/railroad-towns.php

[xviii] See the early evolution of the American industrial park in Coan, As Two Ships, pp. 134-7.

[xix] Coan, As Two Ships, pp. 228-233.

[xx] Daniel Elazar, Virginia Gray, and Wyman Spano (Minnesota Politics and Government (Lincoln, University of Nebraska Press, 1999), p. 12.

[xxi] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), pp. 170-4.

[xxii] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), pp. 183-4.

[xxiii] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), pp. 184-96.

[xxiv] Daniel Elazar, Virginia Gray, and Wyman Spano (Minnesota Politics and Government (Lincoln, University of Nebraska Press, 1999), p. 114.

[xxv] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 285.

[xxvi] Minneapolis peaked in 1950 with nearly 522,000 and declined in 1960 to 483,000 and as the Sixties progressed it was evident that decline was continuing—confirmed in 1970 by a 434,000 count. This was a nearly 18% decline. St Paul peaked in 1960 (313,000+), but declined slightly to 309,000 in 1970. The urban counties in which each were located (Hennepin for Minneapolis and Ramsey for St Paul), each increased dramatically; Hennepin added 283,000 new residents and Ramsey 120,000 (figures rounded).

[xxvii] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 290.

[xxviii] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 291.

[xxix] 1957 was the year of the first COG. By 1965 there were ten operating and the model was the hot innovation du jour. Within five years there would be over 300 COGs; see William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 291.

[xxx] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), pp. 291-2.

[xxxi] Peter Dreier, John Mollenkopf, and Todd Swanstrom, “Regionalisms Old and New”, in Richard Clucas, Readings and Cases in State and Local Politics (Boston, Houghton Mifflin Company, 2006), pp. 307-8.

[xxxii] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), pp. 296-7.

[xxxiii] Wilfred Bockelman, Culture of Corporate Citizenship: Minnesota’s Business Legacy for the Global Future (Galde Press,1999), pp. 72-7; see also Judson Bemis and John Cairns, “Minnesota Business is Part of the Solution”, Harvard Business Review, July-August, 1981.

[xxxiv] Daniel Elazar, Virginia Gray, and Wyman Spano (Minnesota Politics and Government (Lincoln, University of Nebraska Press, 1999), p. 128.

[xxxv] William Lass, Minnesota: a history (2^nd Ed) (W.W. Norton & Company, New York, 1998), p. 301.

[xxxvi] Ted Kolderie and William Blazar, “A High Quality Public Sector as a Strategy for Economic Growth” in R. Scott Fosler (et al), The New Economic Role of American States (New York, Oxford University Press, 1988), p. 302.

[xxxvii] Daniel Elazar, Virginia Gray, and Wyman Spano (Minnesota Politics and Government (Lincoln, University of Nebraska Press, 1999), p. 132.

[xxxviii] Alan Rosenthal,, The Best Job in Politics: Exploring How Governors Succeed as Policy Leaders, (CQ Press, Revised Ed, 2012, p. 195.

[xxxix] Minnesota Planning Environmental Quality Board, “Sustainable Development: the Very Idea”, January 1998, pp. 1-6.

[xl] https://ballotpedia.org/State_environmental_policy_acts#Minnesota

[xli] Stacy Bettison, “The Silencing of the Minnesota Environmental Policy Act”, William Mitchell Law Review, Volume 26, Issue 4, (2000).

[xlii] Christina Boarini, “Strange Nonsense at the Minnesota Environmental Quality Board (and the MPCA), Community Voices, June 26, 2014

[xliii] Glen Olson, “Future of Minnesota Environmental Equality Board in Question”, Winona Daily News, March 26, 2017.

[xliv] Ted Kolderie and William Blazar, “A High Quality Public Sector as a Strategy for Economic Growth” in R. Scott Fosler (et al), The New Economic Role of American States (New York, Oxford University Press, 1988), p. 293.

[xlv] Ted Kolderie and William Blazar, “A High Quality Public Sector as a Strategy for Economic Growth” in R. Scott Fosler, p. 294.

[xlvi] C. Robert Gibson, “The Billionaire Governor”, Huffington Post, April 25, 2017.

[xlvii] Annie Baxter, Minnesota employment back to pre-Recession level” MPR News, September 19, 2013.

[xlviii] Jake Grovum, “Which States have the most job growth since the recession?”,  PEW Charitable Trusts, May 13, 2015; http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2015/5/13/which-states-have-the-most-job-growth-since-the-recession

[xlix] Adam Platt, “The Politics of Business in Minnesota”, TCBMAG.com/politics_public_policy, July 31, 2017.

[l] Tim Pugmire, Dayton proposes $86 million in spending to create jobs”, The Current, January 31, 2013.

[li] Brianna Bierschbach, MINNPOST, September 20, 2017)

[lii] Adam Platt, “The Politics of Business in Minnesota”, TCBMAG.com/politics_public_policy, July 31, 2017.

[liii] Briana Bierschbach, “Why Mark Dayton is so Cautious about Pitching Amazon”, MINNPOST, September 20, 2017.

[liv] Newsroom, Office of the Governor, “Lieutenant Governor Tina Smith Highlights Minnesota’s Innovation Economy”, February 17, 2017.