Letter from Siberia to the M7

I recently read an intriguing article in the "World in 2007" issue of The Economist magazine. In a full-page letter, Mikhail Khodorkovsky, a former Russian oil tycoon serving a nine-year jail sentence for fraud and tax evasion, gave his thoughts on how he sees the world taking shape in 2007.

He introduced the strategy of "reindustrialization" as a way for more mature economies (e.g., Milwaukee) to exploit their competitive advantages over developing countries (e.g., China) through energy-efficient manufacturing. Khodorkovsky predicted that while labor might be cheaper in China, the west's energy-efficiency advantage in production will be an increasingly important asset during prolonged periods of rising energy prices.

It's almost as if the Milwaukee 7 (M7) had read this letter from Siberia. This week, the M7 released its initial Strategic Framework to grow the region's economy. The first step will attempt to bolster smaller scale, research intensive, "next generation" manufacturing production facilities in the region. In an age when economic development experts fall all over themselves to talk about bio-tech, nanotechnology, and bioinformatics, this certainly seems to be a contrarian move by M7. In fact, just two weeks ago when I presented on a panel of such economic development experts, Richard Longworth (an author from Chicago) spoke of globalization and how pursuing manufacturing was largely a failed strategy for rust-belt economies.

But according to Prof. Ned Hill of Cleveland State University, such a contrarian strategy may have its merits. Hill is popular for saying: "Don't be a rube; think for yourself—Economies are not built through jealousy or envy."

The M7 acknowledges that pursing such a reindustrialization policy is a "most risk - greatest opportunity" strategy. After all, our manufacturing sector has stumbled in recent years. Just released are state rankings on value-added manufacturing from the US Census Bureau and compiled by the State Science and Technology Institute. The rankings place Wisconsin's growth between 2001 and 2005 below national averages in all three categories of competitiveness. For example, Wisconsin was 33rd in growth of value of manufacturing shipments (14% growth in Wisconsin compared to 19% for the US), and 42nd in the growth in the average value added per employee (29% growth in Wisconsin vs. 43% in the US). These indicators show the state heading in the opposite direction relative to the rest of the country when it comes to high-end manufacturing productivity growth.

So we have our work cut out for us. But the M7's reindustrialization plan may be just the catalyst for such a turnaround. At least the region is showing signs of thinking for itself and bucking the herd mentality that is so prevalent among economic development experts.