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May 11, 2005

What Made Minnesota?

To the left, the debate of Minnesota's future can be summed up (or at least crudely stereotyped) by the signs on the laws promising the owner is "Happy To Pay For A Better Minnesota"; by purple-faced columnists intoning that the "Wingnuts" want to "turn Minnesota into Alabama"; that it was the Hubert Humphrey-era ideal of the essentially monobloc state government that engineered Minnesota's economic boom from the forties through the present via a combination of aggressive government intervention, public-private partnership between the state and the state's biggest (non-government) employers, and a legislature that got in line behind Minnesota's softcore socialism, GOP and DFL, because everyone agreed that it was the best way to get things done. The story concludes with the articles of faith that Minnesota out-produces, out-grows, out-educates and out-serves its neighbors because, naturally, of that philosophy. We should all, in short, be "Happy to Pay For A Better Minnesota".

I read a quote the other day - it was about compulsory education, but I think it applies here: "The greatest triumph of [Minnesota's softcore socialism] is that nobody can imagine doing it any other way".

I have some questions.

First: Do I have this straight?

  1. Minnesota became a state in 1858; settled largely by Germans and Scandinavians (with sizeable Irish and French populations in what would become the Twin Cities), it was agricultural, isolated, and largely poor.
  2. The state was blessed with immense resources; agriculture, dairy and timber first, inexhaustable water-power on the Mississippi and St. Croix rivers to run the grain and lumber mills, and then immense reserves of taconite iron ore
  3. Along with the resources, the state also had immense transportation; the Mississippi River and its tributaries (the Minnesota bringing crops, the St. Croix bringing lumber), the railroads that came to and were eventually headquartered in the Twin Cities, and of course an outlet to the Great Lakes through a natural harbor that was turned into a world-class cargo terminal at Duluth.
  4. The combination of resources and transportation made the Twin Cities the financial and business center of the upper midwest; Minneapolis and Saint Paul attracted resources, raw material, revenue and talent from the Dakotas, Iowa, Western Wisconsin and even Nebraska and eastern Montana, in the same way that the Mississipi River attracted runoff from the same area.
  5. Because of the resources, transportation and geographic positioning, large businesses sprang up in the Twin Cities; Burlington Northern, Daytons, Minnesota Mining and Manufacturing, Cargill, General Mills, Pillsbury, all huge companies that drew on the proximity to resources and market access to create empires.
  6. In the meantime, the Land Grant university program of the late 1800s, which created state universities across the recently-settled West, combined with the Twin Cities' financial, social and commercial position to make the University of Minnesota system large, well-funded, and influential.
So by about 1920-ish, Minnesota looked like this:
  • The Twin Cities, home to many large, successful businesses, as well as the seat of government and higher education.
  • Outstate, home to lumber, shipping, agriculture, and a lot of poor and working-class people working in each of the industries.
Then came the depression. The radicalization of the labor union movement and rural politics (as seen in the descendants of the 1890's Grangers like the Non-Partisan League and other populist groups) combined with the communitarian heritage of the dominant Scandinavian culture () to create a political movement that we now call the DFL, embracing the New Deal in microcosm - especially in its attempt to harness the power of Minnesota's big businesses. The leaders of the business community played along, for whatever reason; politics. convenience, fear of potential consequences, whatever.

Then came World War II; immense demand for steel brought work to the Iron Range; the Twin Cities' railroads, agribusiness, ammunition and emerging technology businesses rapidly expanded to fill immense needs (aided by hordes of university graduates provided by the university system that had been developed over the previous several generations), and spawned a generation of high-tech giants, Honeywell, CDC, FMC and Sperry, who prospered during the Cold War (building among them nuclear triggers, computers, naval gun turrets, submarine sonar and myriad other things that seem like relics today). After the war, the booming consumer economy built thriving service industries - Dayton/Hudson, the Saint Paul companies, Northwest Mutual Life, Prudential, and a group of regional banks that took advantage of the proximity of the Federal Reserve.

It was somewhere during the early sixties that Minnesota ceased to be a Republican state.

So let's see if I have this straight: before Minnesota became a high-tax, "high-service" state, Minnesota's urban core was prosperous, while its rural outskirts were subject to the same cycles as agriculture, timber and mining everywhere else in the country.

Since the end of World War II, Minnesota has both prospered, and adapted a high-tax, high-service, high-intervention government model compared with three of its four surrounding states. Minnesota is also historically more prosperous because of the presence of the Twin Cities and the diversified, resilient, regional center it represents, and because of the confluence of resources and facilities that made it that way. Other states have adopted similar models - with varying results.

Since the end of WWII, other parts of the country have adopted lower-tax, lower-service, lower-intervention models of government - again, with varying results.

So - given the advantages with which Minnesota started the game compared with the rest of the upper midwest, is it either fair or accurate to say that Minnesota owes its relative economic prosperity and resilience to its high-tax, high-service, high-intervention model of government/business interaction? Or, given that (as I hold above) nearly if not all the ingredients for that prosperity existed before that model was adopted, could it be that rejecting the high-tax, high-service model (while retaining the excellent and vital university system) would have done more good in the long run?

Those who bleat that we are but a tax cut away from being "a Cold Omaha" - why is Omaha Omaha? What made Fargo or Des Moines or Sioux City into what they are? Taxes? Or the ineluctable forces of the market acting on the place, the people, the resources, the technology and the national policy of the times when each was founded, and have acted on their respective growths and fortunes ever since?

Because if Montgomery, Alabama were at the nexus of agriculture, transportation, technology and workforce (and had been on the right side in the Civil War), they could be the ones whose monkey columnists would be poo-poohing their local punditry, scolding that a tax hike could "make us into a humid Bloomington".

Posted by Mitch at May 11, 2005 07:22 PM | TrackBack
Comments

I'm not sure when you got to the state Mitch, but I go back over 25 years, to the Al Que era. Now back then we faced a budget crisis, yes they have those things actually pretty regularly around here, much like everywhere else. After much wailing, handwringing and carring on the legislature did what it alway did. It raised taxes. And there was still a short fall. That's when Que did a really stupid thing. He fronted for the DFL and the Rino's on increaseing the sales tax, temporally of course, from 4 to 5 percent and then again from 5 to 6.5%, and increased the number of things subject to the tax.
The next year was an election year. Guess who lost the Governership by a huge margin? I recall laughing at the insistance of the legislture that the increase in the sales tax was temporary. I wish I had made a bet with some one back then. Que also ended up as a state joke for years afterward. People would have have their answering machines voice say things like, "This is former Gov. Que, WAIT DON'T HANG UP I NEED THIS JOB!"
You also notice how Jessie didn't run a second time when the economy started to turn south. So it seems most folks aren't REALLY willing to pay for a better Minnesota. By the way why don't those folks just send the state whatever they thing they should pay, instead insisting that we all pay more? Not very Christian is it?

Posted by: shawn at May 11, 2005 05:11 PM

Good post. I often regret reading any punditry pertaining to economics, from any part of the political spectrum, due to the hare-brained ways in which people assert cause and effect, without empirical foundation, all to fit their ideology. One would think that holding a Ph.D. in economics would deter preople from such intellectually dishonest exercises, but if one did, one would be wrong.

Posted by: Will Allen at May 11, 2005 06:09 PM

My take - top two priorities for any region's success in today's economy.

1. Higher education. Obviously you must have a reasonably good K-12 school system to make this work.
2. Transportation infrastructure provides the means to allow economic activity to occur. ie people to generate wealth.

I don’t see the Republicans in Minnesota willing to commit to these investments through increased taxes or able to truly find enough waste to cut in other areas to fully fund the needs. Pawlenty's $200 million gamble on gambling is a perfect example of this. We've had double-digit increases each year at the U for almost a decade. We have done basically nothing on transportation relative to our needs. We have completely and intentionally undercut the transit system in recent years.

I am not saying there is no waste. I am not saying there are no people taking advantage of the system. I am not saying that we shouldn't try to do more with less. I am saying that SOMETIMES you have to do more with more and the Republicans don't seem to be willing to do that right now. Additionally they don't appear all that pragmatic about financial concerns. After all - a anti-gay marriage bill is one large reason we didn't get a bonding bill done in the lowest interest period in 40 years. That is a rediculous waste. Regardless of your view on that issue we need enough pragmatism in our leaders to get the main things done. Instead we will be wasting millions in extra interest payments and that issue hasn't moved yet. In other words that whole legislative group just made us all Pay More for the Same MN.

Posted by: Nick Frank at May 11, 2005 06:18 PM

Nick, if you could come close to empirically proving that spending more on education would have the desired effect, you could win some converts. However, people deeply suspect, with good reason, that the additional tax revenues will not provide that effect, and thus they are reluctant to tax themselves further.

Posted by: Will Allen at May 11, 2005 09:08 PM

Will - Obviously I don't have all the answers. That's why I'm here debating. However lets see if this argument has any traction. Higher Ed tuition is going up at rates that vastly outpace wage growth. At a certain point some people are priced out of the higher ed market. I think we can all agree on that

I've seen some data - I can dig for it if you really need me to - that suggest the average college grad earns over $1 million more than their High School dimploma counterpart over the course of their careers. Since the state would pick up additional taxes on the $1 million over their career we can justify the additional expenditure today.

Personally assuming this is true I would propose that we add funding today for higher ed (including trades) to hand out forgivable grants as gap financing to those with economic need. The grants are forgiven over some period of time, say 10 years, that the person is employed in the state earning above a certain threshold. Otherwise they are paid back like loans. This addresses the problems a lot of our neighboring states have where they are sending their subsidized graduates to MN.

K-12 is a whole nother bag. Let me think about it a bit more.

Posted by: Nick Frank at May 11, 2005 10:16 PM

I think a little early to mid 20th century history on political parties in Minnesota is in order. The DFL came into being in the late 1940's with Hubert Humphrey and Eugene McCarthy leading the charge. Before that merger Minnesota was a three party state. The Farmer-Labor party was quite strong with Floyd B. Olson our governor during the depression. He died suddenly at age 44 in 1936. There was talk of Olson running for President one day, but his death ended that dream. Incidentally, State Highway 55 is named for Governor Olson. The Republicans were in power during WWII and up to the creation of the DFL. Probably because the Democratic and the Farmer-Labor parties were fighting for the same voters. After the merger the DFL suddenly had the majority.

Posted by: Warren at May 12, 2005 08:26 AM

One of the crucial points in discussing rationally ideas is to have reasons and evidence for your positions. If I say, "The Twins should trade for a power hitter" I should be prepared to answer the question, "Why, what good would it do?" If I want to say "Minnesota should raise taxes and increase spending on Higher Ed." I should be prepared to do the same. I think that one of the few good things that Gov. Turnbuckle did was to clearly point out that spending more money on Education is not the solution. "How much is enough?" If it is demonstrable, and people here can come up with the figures, that despite increasing the education budget at much higher that inflation has not helped, and that other states with substantially less spending are doing better jobs, then perhaps we should look at the system rather than pour more money into it. If I can not fill a bucket with water, I start looking at the bucket for holes/

Posted by: billhedrick at May 12, 2005 08:44 AM

I have to second Bill's comments about the education system. Minneapolis spends more than just about any of its neighbors on a per-pupil basis and horribly underperforms all of them by just about any yardstick you want to use; all of the information is available on the MDE website. So pretty obviously, throwing more money at them isn't going to help.

Posted by: Kevin at May 12, 2005 09:49 AM

Well, my working class Swedish family got to MN in the mid-1800s, and we've always been interested in history, including regional history--something we read about, discuss, debate, and study. And understandably, though Scandinavian-Americans contributed to the profound immiseration of the state's Dakota, Ojibway, and African-American people, we have some pride in the fact that for decades the Scandinavian networks and influence did also allow Minnesotans to incorporate some lessons from the successful, solidaristic social democratic experience overseas, helping us avoid the hyper-inequality-based, race-to-the-bottom, working class-be-damned Southern strategy that's all the rage with you kids these days. (You know, like how Louisiana had all that natural resource, and yet still, when it was all pumped out, so were all the money and opportunities?) Anyway, now we find that the South didn't lose that civil war so much after all, did they? I congratulate your apparent lack of understanding of strong, historically-rooted political-economic currents in MN as another noble effort to contribute to the Great Big Fat Republican Revisionism Project. Go hegemons! For real historical analysis, I recommend you (and everyone) read historian Jennifer Delton's "Making Minnesota Liberal." While I don't always agree with the analysis, at least she provides a precious, precious glimpse of actual, historical data.

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