Time to End Economic Studies in Montana, Time to Act, says Trade Advisor

"Montana, big enough to hold the future," would be a better theme for the state than "the last best place," says Arnie Sherman, director of the World Trade Center in Montana, in speaking to an audience at the International Trade Seminar, at Montana State University-Billings, last week.

Posted by: The Big Sky Business Journal

Sharply critical of what he perceives as a lack of effort in developing the state’s economy, Sherman suggests that Montana leaders should look at states who used to lag behind Montana and copy things they did that now place them ahead of the state.

Major investments in education and establishing programs for major venture capital were among the suggestions he made to move the state forward. Putting incentives in place that encourage businesses to add value to products, and providing means for job training, were also among Sherman’s recommendations.

Saying that while he doesn’t disagree with anything reported in the state’s newest economic development study, Sherman was critical of the fact that it remains just a study. It identifies no means of funding or strategy in how to implement it.

Montana has had enough economic development studies over the past two decades; what the state needs is to do something, he said. "Don’t agonize," said Sherman, "organize."

"Wishing for improvement doesn’t make it happen," said Sherman. Montana has no game plan or even a play book, said Sherman adding that given that, all the cheerleading in the world doesn’t make much difference.

"No more plans," he said "The worst of all the plans that have been done for Montana is better than what’s actually happened — which is virtually nothing." The most insidious tax in Montana, said Sherman, is the taxing of our patience. "We’ve been waiting for two decades for something to happen."

South Dakota has been rated number one as a good environment for small businesses by the Small Business Survivability Committee, noted Sherman, "Why aren’t we borrowing some of the things they did," he asked, "It’s not rocket science."

Numerous states — South Caroline, North Carolina, Vermont, Mississippi, Alabama, etc. — have all improved their economic status, moving far ahead of Montana, according to Sherman, who wonders why Montana isn’t examining how they did it and following suit.

"Montana has no plan or political will to share in this new market place," he said, referring to growing international commerce and the fact that Montana is barely noticeable as a player.

Looking backward and trying to correct or change the past is one of the reasons for Montana’s failure, according to Sherman, who starkly outlined the state’s abysmal place in the national and international market place. Only slightly apologetic for being so blunt, Sherman said, "You can’t put lipstick on this pig." As minimal as they are, Montana’s exports have slipped by 50 percent, reported Sherman. Montana had $600 million in exports last year. He compared that to Idaho which had $3 billion.

He ran through a litany of "lasts" with which Montanans have become all too familiar: last in per capita income, last in wage levels, last in exports.
Over the past 18 years, emphasized Sherman, Montana has ranked among the bottom five states in per capita income. Our per capita income is $9,500 below the national average. "Maybe" said Sherman that has something to do with the reason the state also consistently ranks first, second or third" in the rate of suicide.

While Montana likes to tout itself as a state of small businesses, said Sherman, the fact is there are only about four businesses that are large enough to qualify as "small." The reality is Montana is a state of "micro" businesses, and programs should be tailored to meet the needs of micro businesses.

"Our economy is being poisoned," he said, by a number of "political fairy tales," such as the claim that the state is over-taxed

Totaling all state and local taxes, Montana is the eighth least taxed state in the nation, he said. "I’m not saying we shouldn’t readjust our tax structure. It was put together in a hodge podge way and it is not rationale," he said. He was critical of Montana’s resistance to increasing taxes to fund economic development programs. Claiming "we don’t have any money, doesn’t solve any problems," he said. He was critical of property tax cuts that primarily reduced taxes $250 million, eighty percent of which benefited five Montana companies, he said, four of which are not domiciled in the state.

Sherman suggested giving tax credits to business only when they actually do something — only when they improve infrastructure, expand or add value to products.

Every time taxes are cut it’s done with the claim that it will improve the economy, but said Sherman, "that never happens."

He also noted that there were 11-12 million people who pass through the state every year who are not taxed.

One of the "poisons" effecting Montana according to Sherman, is an anti-government attitude, which, Sherman said, he found amusing in that Montana manages to get back $2 for every dollar it pays in federal taxes. Montana ranks right at the top in terms of the amount of the federal largess it receives per capita.

What that says, said Sherman, is that you have a Congressional delegation that’s very good at getting federal funds. He assured that that same delegation could easily get $20 million or $30 million to support some economic development strategy, if one were ever devised.

The anti-government attitude is one, however, according to Sherman that means "no money, no investment and leads to no growth."

Some of the anti-government attitude may more accurately be attributable to a "schism between people who want growth and those who want no-growth," said Sherman. That reflects another myth — that growth can be stopped. "You can’t stop any of that," said Sherman, "You have to get control of it."

Local, state and federal government "partnerships" with private enterprise work, contends Sherman, although he is quick to add that he does not advocate that government should be running any economic development programs. Private sector programs have proven most successful in other states, he said, noting that North Dakota privatized its entire Department of Commerce.

Sherman was equally adamant about dispelling "the myth" that Montana is an agriculture and natural resource state.

Less than five percent of the people in the state work in agriculture, natural resources and timber combined, he said. The areas in which most people work are government, health care, retail and construction.

"A natural resource based economy is never going to happen again," said Sherman, adding that that does not mean things shouldn’t be done to encourage and develop those industries as much as possible.

Another myth, according to Sherman is that people will come here because of the state’s natural amenities. "Montana may be the last best place," he said, "but there are other nice places that also have vibrant economies."

"If we don’t control our own future," he said, "We will be the victim of it."

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