Indiana, Mitch Daniels, Manufacturing and Trade

By February 25, 2008Labor Unions, Trade

Excellent presentation and Q&A session today at the American Enterprise Institute by Gov. Mitch Daniels of Indiana, who was in town for the winter meeting of the National Governors Association. (He reports he’s released early from NGA attendance having been called to jury service.)

Indiana is the most manufacturing-intensive state in the nation, and the economy is doing pretty well. Daniels noted that the state unemployment rate is at its lowest in six years, and for the third year in a row, the state has broken the record for new investments coming to the state. The governor expressed clear support for foreign companies investing in Indiana, citing the car companies, Toyota, Subaru and Honda.

Which led to the most interesting part of the Q&A session, at least for those who follow manufacturing. A Kalamazoo native asked about the economies of Michigan versus Indiana and wondered about the role of organized labor in discouraging investment in the state. While taking pains not to denigrate unions, Daniels said the adversarial model of labor-management relations appeared to no longer function well in a globablized economy.

And then he turned to trade:

I do get letters and e-mails and things from neighboring states that remark on this contrast, and so forth, so anyway. On the subject of trade, Susan Schwab was one of the presenters and gave a very good presentation, pointed out among other things that since NAFTA, manufacturing output in America has more than doubled. So among her messages was, whatever problems you may be experiencing don’t have anything to do with NAFTA.

But the governor of Michigan took exception to that, and in what I thought not very persuasive terms, attempted to lay the problems of her state on that. I didn’t say anything…there’s no point in that place, or any place, I guess, to have an argument about it. But there’s nothing about Michigan that doesn’t apply to Indiana, too. And yet we have made economic progress. It leads you to think that there are other things, other variables involved, like tax, and costs and regulatory policy and so forth.

In December 2006, Indiana’s unemployment rate was 4.6 percent and Michigan’s was 7.6 percent.

A transcript of the relevant portion of Daniels’ Q&A is in the extended entry below.

UPDATE (8:40 a.m. Tuesday): The relevant portion of Daniels’ remarks are available here in an .mp3 format.

[Full disclosure: This blogger was a registered lobbyist for the state of Indiana before joining the NAM two years ago.]


I already told you we’re working hard to diversify the Indiana economy, which is still – unless we’ve diversified enough already – the most manufacturing-intensive state in America, not Michigan, not Ohio or Pennsylvania. That is, manufacturing income over total, manufacturing jobs over total, we have been No. 1 for a long time, and therefore very exposed to the worldwide productivity-driven decline in manufacturing employment.

That said, you have to walk and chew gum, and we’ve had some very good success doing that…In 2006, only a few states had any new Japanese and assembly plant investments. No state, save ours, had got more than one. We got three. Three major…one of them was not Japanese. We’re the only state with three Japanese automakers in the state – Toyota, Honda and Subaru. We’re the only state with two Toyota assembly plants. I think we might be the only state with four, total.

We are committed and I’ve gone to Japan every year. We also have got 250 or more parts and Tier I, II suppliers inside our state. So, none of them is unionized, but that’s a matter between management and workers, but Indiana workers have demonstrated now 250 some times now, I guess, that they’re quite comfortable in a work environment that is flexible and that is organized in a different fashion than the old adversarial model that served us well for a long time.

Automotive News just recently reported that Indiana is going to move from No. 6 to No. 3 market share in automotive assembly, which is a huge move; that’s the import of the article by the way. We’re jumping there in the space of, I don’t know, three years. The projection is by 2010 or 11.

So, this is a clinical statement, not a value judgment: The model that served us very, very well in our state and nation in the past, as we all know, has not proven at all well suited to the world economic competition. What the workers in our state have proven is the same skills, work ethic, the other advantages we think we offer are as real as before, and they have proven adaptable to the newer, more modern forms of how you organize work.

Can I can go on just for a second on this? I’ve just come from this meeting they have once a year. I do get letters and e-mails and things from neighboring states that remark on this contrast, and so forth, so anyway. On the subject of trade, Susan Schwab was one of the presenters and gave a very good presentation, pointed out among other things that since NAFTA, manufacturing output in America has more than doubled. So among her messages was, whatever problems you may be experiencing don’t have anything to do with NAFTA.

But the governor of Michigan took exception to that, and in what I thought not very persuasive terms, attempted to lay the problems of her state on that. I didn’t say anything…there’s no point in that place, or any place, I guess, to have an argument about it. But there’s nothing about Michigan that doesn’t apply to Indiana, too. And yet we have made economic progress. It leads you to think that there are other things, other variables involved, like tax, and costs and regulatory policy and so forth.

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