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Doug Rothwell: Michigan economy is no longer last but needs to improve

A longtime advocate for economic development in Michigan left that role this year, turning over an influential business organization focused on improving the state’s economy to new leadership.

Doug Rothwell ended his tenure at Business Leaders for Michigan this fall after what he says are many successes, but also remaining challenges.

The organization grew out of Detroit Renaissance, a business roundtable for the city that launched in the 1970s. After forming and leading the Michigan Economic Development Corp., Rothwell moved to the Detroit-based organization and rebranded it with a stateside mission. 

His goal, Rothwell said, was “to really get us, as a state, thinking about how we fit into the global world that we have to live in and work in, rather than just our little cocoon within the state’s borders.” (Editor’s note: Rothwell  is on the steering committee for the Center for Michigan, the parent company of Bridge Michigan.)

The nonprofit’s members are executive leaders of Michigan’s largest companies and universities. According to Business Leaders for Michigan, those members “drive nearly 40 percent of the state’s economy, generate over $1 trillion in annual revenue and educate nearly half of all Michigan public university students.”

Rothwell built the organization on benchmarking and competitive analysis, urging policy decisions that could move Michigan into a top 10 state for business. He now lives in Chapel Hill, North Carolina, and is involved in a number of economic initiatives through the University of North Carolina. While in Michigan, Rothwell had chaired the Michigan Strategic Fund, MEDC, Michigan’s Life Sciences Corridor and the American Center for Mobility. 

As Jeff Donofrio, former director of the Michigan Department of Labor and Opportunity takes over Business Leaders for Michigan, Paula Gardner, Bridge Michigan’s business editor, caught up with Rothwell. Here are excerpts from the conversation:

 

Where does Michigan stand today, as you leave Business Leaders for Michigan?

Better. We’ve come so far from where we were a decade ago, when we were virtually dead last on every measure. But if you look at where we are today, despite COVID, most of the data says we are an above-average performing state, which is a tremendous comeback. 

But our goal is to be a top 10 state, so we can’t be satisfied with where we are. And there’s still a whole lot of work that we have to do to get to the top of the pack.

When you consider the magnitude of changes that you influenced, what is at the top of that list?

What I’m most proud of are the two organizations that I helped create, the Michigan Economic Development Corporation and Business Leaders for Michigan. I say that because those organizations have stood the test of time. The MEDC is going into its third decade, and BLM has been around for over a decade. They provide a platform for people to do good work and grow the state’s economy. The fact that they lasted as long as they have  through different administrations, different CEO leaders, different political environments makes me feel pretty good that these are enduring organizations … that will stand into the future. 

What resonates from both of them that makes you say that?

The commitment to do better. When I first got to Michigan, one of the things that I didn’t think we did very well was measure how we were doing. We typically measured our progress based on how Michigan has done in the previous year or previous 10 years as compared to how we’re doing against those we’re competing against. That’s a different bar. 

What concerns you about Michigan once COVID is over?

We change our minds too much about what policy objectives we’re trying to achieve. You can identify virtually any subject area and you’ll find this in Michigan. 

Our education policy objectives change every couple of years, our economic development policy objectives change, what we think is satisfactory in terms of infrastructure investment changes. That’s a real problem. We’re competing against the best in the world. Those places typically have very consistent efforts underway that they pursue over the long term. For example, Massachusetts has had an education reform agenda for a couple of decades. The most aggressive economic development states are those in the south that have been investing in economic growth for decades. Every time we decide to zigzag in a different direction, we just hurt ourselves.

Coming out of COVID, the most basic issues we have in Michigan haven’t changed: Education, infrastructure and diversifying the economy. But we’ve not always pursued those three objectives consistently enough to see the kind of result we need to see.

Is that an argument against term limits for Michigan’s Legislature?

That’s part of it. Part of it is also just the fact that we haven’t had to think long term as some other places did. Until the last couple of decades, Michigan was one of the strongest states in the country. We invented the middle class, we invented the mass assembly of vehicles and products and had all of these Fortune 100 companies headquartered here. Michigan was a very successful, thriving state. 

We’re a different state today. We have to pick our priorities a little more selectively, and we have to stick with them.

Are there enough influential voices in agreement to be able to make those decisions?

It’s probably harder now than it’s been just because of the political environment. This is among the more divisive times that I’ve seen. The 1960s and ’70s were a rough time, too. It was easier for us in Michigan to get on the same page when we were 50 out of 50. When you’re in desperate straits, people know that you’ve got to work together.

Putting COVID aside, the state of Michigan is not in crisis. We are so much better than we were. That doesn’t mean that if you don’t set your priorities, you’re going to achieve your goals.

Michigan spent years as a divided state, east versus west. How do you describe the geographic tension right now?

It’s a lot better than it was. The east-west tension 10 years ago was much worse. The Detroit bankruptcy was a good test case. There was strong support on the west side to take the actions to get Detroit back into fiscal health again. I’d like to think that [BLM] was a part of that. The same is true on the east side, where folks have been exposed to the rebound in Grand Rapids and the success of West Michigan. 

There will always be some regional divisions because there are different needs across the state. I don’t think it’s nearly as divisive as it was 10  years ago.

When you consider how the business community funds the Republican legislative agenda, are members satisfied with what’s happening? And what does that tell us about how business leaders are investing in our state?

Business, at large, is not as politically invested as you describe. … There are a lot of business leaders that certainly follow politics and the like, but that doesn’t mean they’re financially invested. I think that’s a smaller group than business at large.

Business wants certainty. … [Owners] care about consistency, and certainty and policy because they’re making financial decisions that have consequences for years to come. There’s been a lot of things that happened under Republican administrations that they’ve liked. For example, getting the federal corporate tax structure in a more competitive place was a good thing. Same thing in Michigan — elimination of the Michigan Business Tax and putting in the corporate income tax was a huge deal for the state’s competitiveness. Sensitivity to regulations that aren't overbearing and that are appropriate are things that the business community is always going to care about. 

At the same time, things that will be critical for Michigan to move forward are coming from the businesses.  A better education system.  A higher education system that’s affordable. We need to have workforce development and training for our people. Those are things you hear a little more from the Democratic side (but businesses support them). 

My feeling is it’s a little bit of an overstatement to say business is in lockstep with Republicans on everything.

How has Michigan done on diversifying its automotive-heavy economy?

I think we’ve done OK, in part because the auto industry has changed so much …  It’s bringing in the technology investments and such. … There’s also been growth of entrepreneurship in the last decade or two, which also has helped diversify the economy. Technology has allowed companies to be in different locations than in the past. Michigan is now on the radar screen for a lot of companies (due to our strong engineering talent) that aren’t in the “auto” space. 

At the same time, I’d say this is an area where Michigan’s inconsistent consistency comes into play. Twenty years ago we tried to establish a life sciences corridor and we stuck with it for a couple of years, then we tried a technology tri-corridor, with the money split up between life sciences, IT and advanced manufacturing, That kind of whittled it down to be not enough critical mass for any area. 

Now, for example, we’re trying to advance the mobility sector, but that’s going to require a 10- or 20-year effort. That’s not what Michigan has done. We have not stuck with things to see the fruits of our labor. 

Is mobility a keeper? 

Not only do we need to stick with mobility, but we need to look at a couple more areas that could benefit from a more forward-looking policy. We’re a peninsula state. Logistics for us is going to be more important than in an average state. Investments we could make in certain infrastructure would enable us to play a larger role in the logistics space. Yet we've not been able to bring to closure to the Detroit Freight Terminal, or really invest in the port facilities the way we should and the Aerotropolis (near Detroit Metropolitan Airport)  has been stop and go. 

The whole world seems to be chasing mobility. What is our distinctive play for that?

We’re the only place that has the R&D, the technology talent base and the manufacturing base all in one place. California still can’t say that, Texas can’t say that, South Carolina can’t say that. 

But what that means is we’ve got to double down in certain areas. Let’s talk about the talent base. Do we really have the curricula in our colleges and community colleges to the degree we should to meet the needs of this mobility sector today and in the future? My guess is probably not. Do we have the infrastructure in place to be able to support the launching of these new products on the roads? Probably not.

There are things we can do. That doesn’t guarantee success. But we can lay the foundations in place to guarantee support. It’s not going to be enough for us to have individual companies doing this. It has to be the state as well. 

What do you worry most about right now?

Staying hungry. The thing that I look at most about Michigan is population growth and personal income growth. Both are lagging. The places in America where incomes are rising the most typically are in places where the population is also growing.

We can’t change the Michigan climate…. But what we can change is doing a better job to leverage the assets we have to be a place that people want to come to. Every kid in America, if understood properly, should want to work in the mobility sector.

What is undone for you as you leave this job?

Something I’m not happy about is … I do see today a lack of appreciation for what our higher education institutions have meant for America and certainly for Michigan. If you asked me about the greatest assets in Michigan, I’d say our higher education system. We have some of the best in the world. The fact that we don’t embrace that and do everything we can to leverage that is a disappointment to me. 

The next frontier is K-12 education reform. … We’ve got to change the way we fund education. Kids are getting left behind, and with COVID, it’s getting worse.

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