Five Questions with AC&E Economist Lawrence Martin (Monitor: May 3, 2010)
With his extensive academic experience and economic knowledge, Michigan State University Professor Lawrence Martin is a valuable asset to a state that has struggled mightily for more than a decade and lost over one million jobs in that period. His research on a wide range of economic topics and familiarity with Michigan make him a good fit to address attendees of the 2010 MCUL Annual Convention and Exposition (AC&E), which is what he will do May 20 during the Economic Issues Luncheon.
Martin has conducted studies on taxes, unemployment, international trade, smuggling and tax evasion, and no doubt will use this broad base of knowledge to inform the credit union community of where Michigan has been and where it’s going. Monitor had a chance to ask him to preview some of the topics he’ll cover at the AC&E; with economic analysis and policy recommendations as important as they have ever been, be sure to attend the luncheon to hear him expand on Michigan’s economic situation.
Monitor: You have published on a variety of topics in your research and lectured on a number of economic-related areas. Has working with this diverse subject matter helped you better understand the economic difficulties facing Michigan and their potential policy solutions?
Larry Martin: Understanding Michigan’s problems and prospects does involve a great many ideas. In my talk I will draw on research on various areas, including the work on cross-country growth comparisons, which seeks to identify the factors that contribute to better long-run performance among the world’s economies. Another important and relevant line of research looks at what attributes of metropolitan areas promote resilience and population growth. I am chiefly a public finance economist, however, and will spend some time on how we can improve our tax system in the state.
Monitor: During the last decade, it seems like discussion has shifted toward Michigan’s emerging economy that will focus on different industries than it has in the past. Do you think this is where we’re headed, or is it possible that some parts of the manufacturing sector (like the auto industry) could be revitalized?
LM: These kinds of things are inherently unknowable. Anyone who could predict which industries will rise and fall can make millions in their pajamas placing orders for financial transactions over the Internet. I intend to discuss why it is important for a state to focus on creating conditions for economic growth rather than try to pick the sectors where that growth will occur.
Monitor: Do you believe Michigan’s massive job loss and economic downturn could have been prevented, or were the advances in technology and industry going to inevitably change the landscape?
LM: The decline could have been mitigated. I don’t, however, fault the usual suspects. Of course management could have been more forward-looking and nimble, unions could have negotiated more flexible work rules, and the state could have enacted more sensible tax and expenditure policy. Then again, I could have been a better professor. But there is a key factor that was missing in Michigan; I’ll open the envelope and reveal the answer during my talk.
Monitor: We keep hearing state government talk about luring businesses to Michigan and helping small businesses grow and diversify our economy. Are we seeing some of this happen?
LM: When the state directs resources to attract particular firms or industries, it can point to successes. The more important questions concern the overall conditions of business. So far, not so good.
Monitor: What kind of positive role do you think financial services, such as credit unions, can play in Michigan’s recovery?
LM: We have seen quite clearly over the past couple of years how important it is to have a smoothly running financial system. Reliable and efficient financial services are at the heart of a successful economy. Our recent problems involve trade in complex financial instruments, excessive leverage, sale on world capital markets of local assets – such as mortgages – and a general lack of information about what was bought and sold. Credit unions have always provided simple and understandable financial products and maintained solid balance sheets. They have traditionally held onto a large fraction of their assets. Through long-lived relationships with their clients they have had accumulated good information about credit risks. These are the qualities of financial institutions that the doctor – of economics – would order.