A decline in fourth quarter manufactured exports from Minnesota announced this week should give state officials and lawmakers pause about what the state is doing to help business grow our way out of the current recession.
Such reflection isn’t likely, however. State policymakers are preoccupied weighing how to use federal economic recovery money to cover state budget shortfalls. We’re patching potholes, not building roads to the future.
That became obvious on Tuesday when the Minnesota Department of Employment and Economic Development (DEED) released fourth quarter export data. The value of Minnesota’s manufactured exports fell 2.9 percent from the same quarter of 2007 while U.S. exports declined 4.4 percent.
At first glance, that doesn’t seem too bad given the severity of the national recession. But for the full year of 2008, Minnesota manufactured exports grew 6.2 percent (to $17.3 billion) while U.S. exports increased by 9.8 percent. We’re didn’t keep pace with the national economy.
Exports were a strong prop under the U.S. and Minnesota economies during the first three quarters of last year, mostly for the wrong reason. The U.S. dollar fell against the value of other currencies in world markets where there was little confidence in America’s abilities to handle its problems. This gave a boost to exports by making American-made goods comparably inexpensive when priced in dollars.
But America’s economic problems spread worldwide in the fourth quarter. That weakened global demand for our products and made American-made trade items more expensive as the dollar appreciated in value when other currencies began to fall.
As John Freivalds, a language consultant and international trade expert, reminds us, “The dollar is the reserve currency for world trade.” The fourth quarter, then, offered the coincidence where our currency gained strength even as our economy worsened because we were taking down others with us.
That raises the question, then, whether Minnesota’s comparatively poor performance in trade during the past year was more a coincidence of the mix of products we manufacture or a consequence of disinvesting in trade related infrastructure and services.
We must ask the question even if the answer will reveal itself in the year ahead. That’s because Minnesota has always been disproportionately trade dependent. We produce too much to consume at home; we invent and manufacture too many things and are too distantly removed from large domestic population markets for easy disposal. To overcome such obstacles, we have always needed to stay a step ahead of other manufacturing centers and find ways to overcome geographic and logistical obstacles.
The disproportionately large number of multinational companies we have based in Minnesota proves that we did.
Freivalds, managing director of JFA Marketing, helped many of the Minnesota multinationals when he had his language and marketing consultancy based in the Twin Cities. He looked back on Minnesota business in an article published in the professional Multilingual magazine in its April / May 2008 edition.
He reported on the Mayo Clinic at Rochester starting language programs for its employees in 1951 to serve patients at the world’s preeminent medical diagnostic center. He looked at how 3M Co. began its “language society” in 1968 in which employees study world languages during noon hours in the company’s cafeterias and meeting rooms
“It’s my theory that these organizations became world savvy because of the isolation of Minnesota from the rest of the world,” he wrote. “They have no illusions about themselves like many firms have in major metropolitan areas.”
Reached at his home this past week at Dubuque, Iowa, Freivalds noted that Cargill Inc. is an even larger example of a Minnesota-based company using and developing people skills and technical skills to reach markets everywhere. Like 3M, he said, Cargill business activity externally far exceeds domestic U.S. sales.
“Look at the ‘Cargill Worldwide’ site on the web,” he said. “You can click on most of the major world languages and see what the company is doing around the world.”
Such global outreach shows what a major company has done internally by investing in employees. But as Freivalds was pointing to language people skills, Twin Cities newspapers were reporting how Cargill has brought a healthy new food ingredient to market that was developed from a University of Minnesota professor’s research. This has great promise for heart healthy foods, throughout the world.
A call to action, a call to think
As a think-tank, Minnesota 2020 seeks to promote discussion of issues that move Minnesota forward in areas of economic development, education, healthcare and transportation. Language skills are part of the infrastructure that tied these four areas together into what has been a nice, convenient Minnesota package.
That infrastructure is starting to look frayed. Without proper state support for education at all levels, our Minnesota-based businesses will lag other states and regions in communicating and reaching world markets and in innovative product development. Without proper support for transportation for both people and products, Minnesota will revert to a frontier geography far removed from global economic activity. Economic development demands public support for education, transportation and advanced healthcare innovation and delivery.
Maintaining what we have in Minnesota, and building for the future, are big challenges in the current economy. It can’t be achieved on the cheap but it must be done.