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Home News  Ditching factories, funding education and the myth of low business costs: Lou Glazer's data-driven economics
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Wednesday, February 20,2013

Ditching factories, funding education and the myth of low business costs: Lou Glazer's data-driven economics

by Walt Sorg
A soft-spoken policy wonk has become one of the most influential voices in Michigan on how to reinvent the state’s economy.

No, it’s not the self-described “One Tough Nerd” in the Governor’s Office. 

He’s Lou Glazer, co-founder and president of Michigan Future, a nonpartisan Ann Arbor-based think tank. For a growing army of Michigan economic policymakers, Glazer has become the go-to guy for the facts behind nurturing prosperity.

In recent months, Glazer’s Michigan Future blog has become central to the debate on how to restore Michigan’s economy to its post-World War II prominence. His formula? You can’t do it the same way it was done a half-century ago.

Glazer, whose political pedigree begins with former Democratic state Sen. Doug Ross and includes seven years in the Blanchard administration, is a fervent non-ideologue, someone whose agenda is driven solely by data. Not surprisingly, his ideas have gained wide acceptance among Democrats and academics. 

Glazer is increasingly enlisting Republicans and business groups to the cause of rethinking Michigan’s economic future. Former Republican House Speaker Paul Hillegonds sits on Michigan Future’s Leadership Council; the GOP-leaning Business Leaders for Michigan shares his call for expanding higher education; the business-oriented Lansing Economic Area Partnership embraces Glazer’s call for making Michigan cities more inviting for talent (place-making); he is sought out for advice by local economic development organizations, businesses and chambers of commerce across Michigan. And Gov. Rick Snyder buys into many of Glazer’s policy suggestions, including expanded early childhood education and an emphasis on talent attraction and retention.

Where most Republicans part company with Glazer is on the issue of business costs. More on that later.

Starting with autos

As deputy director of the Commerce Department in the Blanchard administration, he played a key role in efforts to build Michigan’s economic future on Michigan’s past: an auto-based economy. The strategy focused on becoming the world center of advanced robotic manufacturing.

There was a fundamental flaw in the strategy: Technology — robots — replaced people on the assembly lines. And this was a time before the Internet or widespread use of personal computers, which accelerated the displacement of laborers with technology. 

“We just didn’t realize how the world was going to change,” said Donald Grimes, a senior research specialist at the University of Michigan’s Institute for Research on Labor, Employment, and the Economy, who is a frequent Glazer collaborator.

“All the governors in my professional life, from Milliken to Snyder, have made autos the linchpin of their economic strategy,” Glazer said. “By the turn of the century we were convinced that wasn’t going to work. The data was overwhelming: factory employment was on the decline, partly because of globalization, but largely because of automation. And it meant the (high) wages being paid in the auto industry were not sustainable.”

“The data was overwhelming” is a recurring theme in Glazer’s professional life. Another key word is “truthiness,” a term coined by comedian/satirist Steven Colbert in 2005. Colbert defined truthiness as what a person claims to know intuitively “from the gut” or because it “feels right” without regard to evidence, logic, intellectual examination or facts. Glazer is a sworn enemy of truthiness. 

“I’m obsessed with this: We are going to go where the data takes us even when it means changing our minds. There are things we used to believe that has turned out to be wrong, and we’ve said that we were wrong. This is a world that’s being changed by globalization and technology. We’re trying to figure out the formula for success in that world rather than assuming you can dream up stuff that you can’t do, because those two forces are stronger than your political beliefs."

On cities

Glazer’s short essays on reinventing Michigan’s economy, published on the Michigan Future blog, are focused on data. The blog started as an exercise to draw attention to the Ann Arbor-based think tank’s long-form policy papers. It has evolved into a key element in establishing Michigan Future as an influential voice being heard not just at the state Capitol, but in cities across the state.

The strategy has two core elements: increase the number of people with college degrees and build an environment that attracts, nurtures and retains talent (place-building). Increasingly, the latter means revitalization of Michigan’s cities.

Hillegonds, who sits on Michigan Future’s Leadership Council, sees a growing intellectual consensus around the organization’s strategic outline. But he concedes that the concepts are not translating quickly enough into policy changes.

“Because of the economy, we’ve had less government involvement with our cities and place-building,” said Hillegonds, now a senior vice president with DTE. “Now, with the economy improving, the Legislature hasn’t shown an interest in creating new programs or spending more money on place-based strategies in our cities.”

Hillegonds sees an ally in the Governor’s Office, but says Snyder has been detoured by the ongoing fiscal crises facing Michigan cities. 

“He really understands the importance of cities in the state’s economic development strategies. But we’re at a time, even with a recovery, where the focus has been on emergency management rather than growth strategies.”

Lansing, with a $9 million budget deficit heading into the next fiscal year, shares those budget challenges. But Glazer sees this area well positioned to take advantage of the changing dynamics of economic growth. 

“I’ve always had the sense that of the three largest metro areas, (Lansing) would be the easiest to make some of these changes. Mid-size metros with research universities have a real chance to play in this economy,” Glazer said.

Lansing’s economic diversity — insurance, manufacturing, state government and healthcare — combined with the spinoffs from a major research university is the foundation, he said. To succeed, however, Lansing needs to do more to retain talent. Despite the presence of MSU, the percentage of college graduates in the Lansing area (28 percent) lags far behind cities like Minneapolis and Madison.

“If you just do the higher education part and our kids keep moving to Chicago, it’s great for the kids that get a great education and reduced tuition, but it’s not great for the Michigan economy. We’ve got to figure out a way to keep our kids here after graduation,” he said.

The emphasis on talent attraction and retention was at the heart of a recent one-hour meeting between Glazer and the leaders of LEAP.

“We had about 30 CEOs, mayors, township supervisors and institutional leaders meet with Lou for more than an hour, and they were enthused” said Bob Trezise, president and CEO of LEAP. “Since then, individual CEOs have asked Lou to meet with their individual leadership teams to push the issue of talent attraction and retention. They want to better understand the macro issues of talent recruitment: What do they want?”

Michigan Future

Glazer, a 64-year-old native of Southfield, cut his political teeth on the staff of state Sen. Doug Ross, an Oakland County liberal who became a mentor in the art of fact-based policy decisions. After a one-year stop on the staff of another Oakland County politician, Gov. James Blanchard, Glazer moved to Blanchard’s Commerce Department as deputy director. A year later, he and Ross reunited when the latter succeeded Ralph Gerson as Commerce director.

When Blanchard was defeated for a third term by John Engler, Glazer decided against continuing in state government. He concluded he could have a bigger impact on the outside.

“Even when we had done good things in the Blanchard years, it wasn’t impactful enough to make a big difference,” he said.

In the late ’80s, Ross had left state government to head a think tank in Washington that created an economic game plan for Baltimore based on the idea that globalization and technology were changing the dynamics of economic development. Ross returned to Michigan in 1991 to replicate the Baltimore project for Michigan with Glazer as his research and writing partner. The result was the creation of Michigan Future Inc. When Ross returned to Washington to work in the Clinton administration in 1993, Glazer continued on his own.

Working with collaborators from the academic world, Michigan Future produced a series of policy papers.

“Interest in our work has been countercyclical,” Glazer noted. “When Michigan was struggling in the early ‘90s, people paid attention to us. In the late ‘90s, interest died as the economy boomed.”

Then the bottom started to fall out of Michigan’s economy in the final two years of the Engler administration and continued to plummet. Auto sales tanked; the state’s unemployment rate soared from a low of 3.3 percent in mid-2000 to 8.1 percent by mid-2003 as the auto industry shed tens of thousands of jobs. It would peak at 14.8 percent in 2009.

In February 2004, Glazer and Grimes wrote a report ambitiously titled “A New Path to Prosperity? Manufacturing and Knowledge-based Industries as Drivers of Economic Growth.” 

“We made the case that factory-dominant states like Michigan were now the poorer states compared to those states that were knowledge-based,” Glazer said. “We went directly at this notion that there was a factory-based prosperity route for Michigan going forward. That report got a lot of attention.”

As Michigan’s economy continued to deteriorate, Glazer and Grimes continued to build their case based on the experiences of other states. Grimes said Glazer’s persistence has been a key to his success in influencing policy.

“One of the first times we put up some data (regarding the income differences depending on education level), the academics said, ‘What do we do next year? You don’t say the same thing twice.’ Lou, because he comes from more of a political/government world, realizes you have to say the same thing over and over and over. You have to push the same ideas. This is something academics don’t grasp. If it had been left to the academics, it would have been said once, and they would assume everyone gets it — and it would have been lost.”

More education funding

Glazer is especially critical of the bipartisan political infatuation with Indiana. Indiana’s economic strategy is based on attracting manufacturing by lowering business costs: tax cuts, reducing labor costs (by enacting right to work, among other things), granting lavish state economic incentives and reducing costs for regulatory compliance.

He asks: If high business costs are the death knell for an area’s economy, “why isn’t Manhattan collapsing? It’s booming. The reason: Talent concentrations in a knowledge-based economy trumps everything.”

Glazer is aggressively nonpartisan in his efforts. Despite his Democratic roots, Trezise calls Glazer “totally apolitical, completely beyond politics.”

His calls for a stronger emphasis on higher education have been echoed by Snyder as well as the CEO-laden lobby group Business Leaders for Michigan. The differences between Glazer and groups like Business Leaders for Michigan are in the degree of investment in higher education — and how to pay for it. 

Michigan has been cutting support for higher education for the last 15 years under three governors. That pattern, Glazer says, has to end. And the modest increases proposed in the new Snyder budget, he contends, are just a small down payment on what is needed. While Glazer agrees with Business Leaders for Michigan that Michigan needs to spend less on prisons, he says savings in the corrections budget isn’t nearly enough to adequately fund higher education.

Glazer emphasizes that investments in higher education have to focus on long-term economic needs and anticipate potential seismic changes in employment.

“I don’t know if the research in driverless vehicles will work, but if it does, that’s 4 million driving jobs gone. Smart utility meters are eliminating thousands of meter-reading jobs. If you just train people based on today’s technology, their skills become obsolete as the next generation of tools comes along. You make all sorts of bad decisions if you assume that the economy is relatively static when the reality is that it is constantly evolving.”

As the debate continues, Glazer will continue to hammer his core strategy: raising academic achievement in the state, building a holistic environment for retaining talent and setting aside the political obsession with making Michigan’s business costs the lowest in the nation.

“Our advice to policymakers is simple: focus on investments in human capital.”


Why Indiana?

In two blog posts last month, Glazer laid out the case that reducing business costs doesn’t equate to economic success. One post focused on Indiana. He wrote:

“Across the board Indiana is a low prosperity state:

•  Per capita income (the best and broadest metric of economic well being): 41st

•  Private sector employment earnings per capita: 33rd

•  Average wage: 36th

•  Proportion of households with incomes 1.5 times the poverty 

    rate or lower (a good measure of low income residents): 31st 

    worst (ranking inverted)

•  Proportion of households with income four times the poverty 

    rate or higher (a good measure of middle class or better): 38th


The two defining characteristics of high prosperity states is they are over concentrated in the high education attainment sectors of the economy and the proportion of adults with a four year degree or more. Indiana is near the bottom on these metrics as well:

•  Proportion of adults with a four year degree or more: 44th

•  Proportion of wages from high education attainment 

    industries: 49th

•  Proportion of jobs from high education attainment 

    industries: 49th

Seems like a reasonable question to ask our policy makers is “why do we want to be like Indiana?”

In a second blog post, Glazer backs the same argument, as usual, with cold hard statistics, comparing low-cost North Carolina to high-cost Massachusetts:

“Across the board North Carolina is a low prosperity state, Massachusetts a high prosperity state:

•  Per capita income (the best and broadest metric of economic 

    well being): North Carolina 36th, Massachusetts 2nd

•  Private sector employment earnings per capita: North 

    Carolina 37th, Massachusetts 1st  (Excluding natural 

    resources industries: 36th and 1st)

•  Average wage: North Carolina 29th, Massachusetts 3rd

•  Proportion of households with incomes 1.5 times the 

    poverty rate or lower (a good measure of low income 

    households): North Carolina 39th, Massachusetts 6th (1st 

    being the place with the lowest proportion of low income 

    households)

•  Proportion of households with income four times the poverty

     rate or higher (a good measure of middle class or better): 

    North Carolina 38th, Massachusetts 4th


The two defining characteristics of high prosperity states is they are over concentrated in the high education attainment sectors of the economy and the proportion of adults with a four year degree or more:

•  Proportion of adults with a four year degree or more: North 

    Carolina 27th, Massachusetts 1st

•  Proportion of wages from high education attainment 

    industries: North Carolina 17th, Massachusetts 2nd

•  Proportion of jobs from high education attainment 

    industries: North Carolina 22nd, Massachusetts 2nd

So much for low-costs states have the best economies!”

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