The old Montana economy is gone: Get over it

When I was in college, average income in Montana ranked in the top 10 of American states. Now we’re in the bottom 10, along with Mississippi and Arkansas. The reasons are clear. Our once prosperous
basic industries – ag, forestry, and mining – are, and have been, in hard times. This is most unlikely to change.

By John Baden
Foundation for Research on Economics and the Environment
Bozeman, Mont.

That’s the reality. For those who long for a return, I have simple advice: Get over it. Those days are over. The underlying forces of change are beyond our control.

Here’s the basic question. Do we want to emulate West Virginia, where they’re blowing the tops off mountains, and sacrifice our environment for a few more years of income whose cost is environmental
destruction, or do we adjust to the new economy? I chose the new economy and expect a brighter, wealthier future.

The key to success lies in three strategies. First, protect wildlife habitat, our scenery, and amenities. Second, stress education and infrastructure. Third, enact policies that foster entrepreneurship. None of this is
easy. The transition is wrenching to those of us in the declining industries.

However, the economic reality is clear and inescapable. While politicians may try to pretend it away, like the late-19th-century Plains Indians and their Ghost Dance to eliminate the whites and bring back the
bison, realists don’t. The world has changed but economic principles have not. Here are a few examples.

Beaverhead County, Mont., once had 200,000 sheep. Now, there are fewer than 10,000. This is no accident. Substitutions from Patagonia, et. al., and lower-cost foreign competition simply outcompete us.
This is not because they are smarter or work harder; rather, these areas have a comparative advantage at raising sheep.

Our prime timber and rich minerals have been exploited. Trees grow well where it’s warm, wet and low. We’re high, dry and cold. And we’re not growing any mineral deposits. Again, the old days are over.
Aspiring politicians are cowardly liars or fools to pretend otherwise.

A positive future depends on recognizing our assets, and on understanding that brains, not brawn and commodities, will be rewarded. The key lies in education, the service industries, and environmental
quality.

Service carries negative implications. It shouldn’t, for it includes far more than catering to tourists. Again, think education and entrepreneurship. Consider our successes. Obviously, there are high-tech firms
scattered across Montana. None rely upon our local economy. All are integrated into the national and international economy.

I see four successful arenas: high tech; niche agricultural products, such as Conservation Beef and Predator-Friendly Wool; retreats for the wealthy and the services they require, including architects, craftsmen,
orthopedic surgeons and money managers; and finally and most important, firms with national operations whose owners and managers want to live here.

A prime example is Barnard Construction Inc. Headquartered in Bozeman, Barnard has multimillion-dollar projects scattered across the country: Oregon, Texas, New York, and most recently, an $86.4 million
project in Florida. They are major operations constructing dams, pipelines and sewer systems, and doing environmental remediation. Barnard competes with billion-dollar firms like Bechtel and Morrison
Knudsen.

With modern communications and a good airport, companies like Barnard operate all over the country while based in Bozeman. To attract such companies, it’s essential to provide a well-educated workforce.
Barnard actively recruits from Montana State University and other regional universities, giving our youth opportunities to stay here.

And these are not the low-paying jobs that sully the idea of a service-based economy. The starting salary for a newly minted engineer at Barnard is about $35,000, with full health and retirement benefits plus
annual bonuses and other compensation.

But in addition to a good university and reliable air-travel facilities, a community must have the less-tangible qualities that attract and retain those with high human capital. These people increasingly value
the environment. Further, they seek the conjugation of small-town amenities with cultural opportunities, such as Bozeman’s symphony.

Running fiber-optic cable to Glendive and Malta won’t produce a renaissance for eastern Montana. Those who believe otherwise confuse hopes with expectations. Most folks simply don’t want to live there.

Our region can have a great future. But only if we acknowledge the changing economy, the increasing value of human capital, and the characteristics which attract it.

John A. Baden, is chairman of the Foundation for Research on Economics and the Environment, and Gallatin Writers, both based in Bozeman. John C. Downen, research associate at FREE, contributed to this
column.

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