State of Transition #2; Tom Urban, John Ruan, Richard Kosobud

Major funding for this program was provided by friends of Iowa Public Television. After nearly continuous construction says the legislature through its first rule of land in 1885 Iowa now boasts a road system that is woven so thoroughly that it provides access to virtually every one of the state's fifty seven thousand square miles. Maintaining the system is a formidable challenge. By some estimates nearly 40 percent of viable roads and 50 percent of its bridges are below state standards. Maintenance not new construction. Is the strain on the state's four hundred twenty four

million dollar state road budget. But the important thing is their road system is in place. As is the I will rail system. For roads multiplied by more than half the state's rail lines were abandoned. Today the rail system is a lean 50 500 miles of potentially profitable track although it will demand some 100 million dollars more in upgrades. Are essential to the Iowa economy. Trains. Trucks. And barges on rivers to the east and west to transport grain in the field to the world. But agriculture alone cannot pay the cost of maintaining the state's transportation system. Support is now depended upon success of the state's entire economy. The answer however no longer lies solely in new pavement new rails or new machinery. We can't afford them so we need to spend our time integrating the system so that

we have a truly intermodal transportation network. And that the whole thing is represented by truck trailers on flat cars. Or the joint will barge tariffs that we put together just a few years back. Those things I think are the way the future. In other words it will be intelligence not machinery that will guide Iowa's economy through a state of transition. Good evening I'm Gene Borg. There's little question that the state's transportation system has well sort of the I O week on AP especially its agricultural sector but maintaining this system will be expensive and will require that the roads and rapid roads carry more than just farm products. They will have to carry the products of Iowa's industry and that means the state must develop and diversify its industrial base just as some of its studies have done. I'm a lazy summer afternoon in Mason City. A town that is anything but lazy.

See. Sinestro employees possibly 450 people. The largest computer is made right here. Alexander manufacturing a local person who stood out in his know it was 30 expansion. US rock out of the National. Another industry looking at Mason City because they were searching for an expanded plant location outside of Cedar Rapids. It was difficult to say oh Rock Roll and coming back and staying in the state of Iowa. They were joyous is a happy man. His job as Mason City is industrial salesman was born in a mid 70s crisis when his town seemed to be suffering a slow death. Today he can boast that his city has been first in industrial expansion in Iowa for the last three years. And there's a critical need he says for the rest of the state to follow

Mason city's lead to expand and to diversify its base of employment. It's very important to the timers in the fraud dodges the super files the rest of these communities also have a very strong program going without it the state will suffer and so will Mason City. Joining us point is clear Iowa communities can hang together or they can hang separately. It is to avoid the latter there are serious problems to be resolved. For example the number of new industries and plant expansions in the state last year was at its lowest point since the early 1960s. And for the state's 38 hundred industries manufacture a diversity of products many have a heavy and potentially unhealthy reliance on agriculture. Of the 240000 industrial jobs in the state. 30 percent. Nearly one out of every three are tied directly to the farm. Traditionally agriculture has buffered the state from national economic troubles.

But when the bottom fell out of farm prices a couple of years ago the state's agro related indeed Agra dependent Metta factory sector hit the skids sending the January unemployment rate to a high watermark of eleven point one percent. That statistic perhaps more than any other indicator illustrates the need for greater industrial diversity. The question is how. More often than not the fashionable answer has been high tech. Perceived as a healing economic shot like it's been in California Massachusetts and North Carolina. By and large that hasn't happened yet. Iowa is one of twenty eight states shown in gold with development departments targeted for high tech. But it's budget of 2.1 million dollars to establish a high tech console to spur development in research. Pales when compared to funding programs like Michigan's 375 million dollar commitment to high tech.

According to Ron Kraft interviewed before he left his position as head of industrial development for the commission Iowa's first step toward high tech development is lot of what it will be for naught if the state doesn't commit itself for years to come. The $64000 question that all of our aware as well as to be committed to it five years from now if there it is going to work. It is going to take a long term commitment or are quite frankly I think that states wasting their time. No doubt the state must spend more than just time it need to spend money. And it's beginning to do that. To sell business and industry in general in the state. The Iowa legislature appropriated the 15 percent budget increase for the development commission this year. The increase in light of current fiscal shortages. Was skilled and productive workforce.

It's ample energy. And its water supplies would seem attractive to industry. But to continue to compete with neighboring states in the race for industrial development. It's believed by many that Iowa must offer more like publicly financial incentives for industrial expansion. But according to Dan Otto an Iowa State University economist and co-author of a study of government financed incentive packages for industry such enticements are surprisingly unrewarding. All states are playing a very similar game in the type of incentives they offer. So that. As a matter of the trying to keep up with the others incentives are about way each other and we can't really see that they make a large difference in the bottom line. No matter same business leaders the state must continue to provide the incentives just to stay competitive with its neighbors incentives or simply the

ante in a very high stakes game. But it is a game that the public must be willing to finance. And Ron Kraft says that commitment may be lacking in Iowa because historically Iowans have had it pretty good. We have just been through the worst recession. And the rest economic times three years at that since the 1930s. And yet even in that period of time how much Iowans say if you look at the total population really hurty I submit they are holding all that bad. It hasn't become important enough to them that they have really let their politicians know and let everybody else know that they want jobs and they'll do whatever has to be done in order to get jobs. Since 1970 I was an agricultural exports have grown by 500 percent. Manufacturing exports are up 400 80 percent. The Iowa Development Commission estimates there are now more than 800 Iowa companies selling abroad.

To date $1 out of every four of Iowa's gross state product is attributable to export sales. In fact exports have risen at a rate that is far faster than the national average. But even as foreign sales of either products increase the global marketplace becomes more competitive. That means as Sarah Friendster explains that I would need world class traders to gain more access to overseas markets. At the turn of the century the market for most honorable business men and farmers was down the road or around the corner. Through the years though their products began to move coast to coast and border to border. And today their marketplace is the world. South Korea and Japan Saudi Arabia and Egypt a market place where America has been losing out losing dollars

and jobs our entire economic future. I think with the U.S. entering the competitive mainstream of the world position. Retreat position of competitiveness that competitiveness according to international trader Harold wills should be enhanced by export trading companies. The logic is that a trading company in which banks can participate and which is protected from antitrust challenges on overseas sales can small and medium sized American businesses who don't have the funds or expertise to export. It will not do everything. Companies themselves must be willing to change change the way they do business and the kind of product they produce altering its color shape or design. If that's what it takes to sell it.

We need to be flexible and we need to use all elements available through it. Simply because the other competing countries. And when we do enough we're left. In short regaining preeminence and world trade requires what is called the entrepreneurial spirit and it can be found in Iowa today that I am pleased to announce the formation of the I want to export import trading company under the leadership of demoing banker John Ruan with the backing of six other companies with international experience and the support of the governor. The I want to export import trading company was unveiled last March. The American businessman that was doing it. Im going out to export his goods has been somewhat my own and in that he doesn't bother working for other other products around him that his friends wait for other companies in this area might sell.

In other words if you export cattle why not also export shelter and feeding equipment as the trading company hopes to do. Basically we will be leaning towards product lines because I was noted as an egg industry and also many of our founders within the company are related to the product line this summer. Salesman Larry Miller's job has been to sell the idea to companies like Prince manufacturing Corp. in Sioux City Prince manufactures hydraulic cylinders. Many of which are used in agricultural implements it already tailors some of its products for export but wants to sell more overseas to diversify its profit base. Well we say. For a number of years to reach across the. World right. Now.

To do this sort of thing in short Prince's needs ideally matched what the training company had to offer. We're very pleased that actually this will be. The first time. What Iowans export is as important as how they do it and what would improve on was export picture say trade officials is an increase of value added sales. Put simply value added products are commodities like meat which have to be processed before being sold. Creating jobs and increasing the product's value. For example according to the U.S. Department of Agriculture in 1982 a metric ton of corn was worth $114 while a metric ton of beef was worth more than $4000 and pork. Almost 3000 those dollar differences are behind the promotion efforts of the

recently inaugurated taste of Iowa campaign. And the trial of your old freind I will meet Sanford aimed primarily at the domestic market. Selling those meats overseas where trade barriers abound is easier said than done. For example in Japan a good customer is also an erratic customer courtesy of government import restrictions and those barriers make for uncertain profits if the market fluctuates little bit or say have too much pork on the market in Japan. Then they cut us back. So you see when you're sitting there without the marketplace that you built the crew up you built a whole boarding operation up or whatever to zero and then all of a sudden you're without it so you have to keep yourself protected a little bit. And our approach to it is that we want to do export business and we're seeking out and aggressively pursuing. But we're not willing to get control of this we're going to depend upon the best market for the majority of our products.

This might that caution Mark alters companies have sold millions of dollars of variety meats over C from his own plant and from other packers and he has done it by meeting the customer's special demands. For the. License plate once and for all. Very much so. So we have. In today's global economy meeting the customer's needs may also include the ability and willingness to barter exchanging commodity for commodity. Bob Fisher who recently won an award for his export efforts has been working with I want Congressman Cooper Evans on trading I want grain for Nigerian oil the reason Nigeria and many other countries simply don't have the money to buy what they need. But they do have other things that can be used and can be taken in world commerce from petroleum and surely run a barter is simply

to carry trade despite the limitations of the monetary system. Fischer says those limitations will probably last for the next decade. And that means that I would businessmen who want to hold their own in the world market like those attending this export conference may have to join other traders who now use various barter mechanisms for an estimated 15 to 20 percent of world trade. We need to develop a skills bank on barter trade. If past performance is any indication the odds are good that I will meet that challenge. In 1981 for example I was ranked 10th in the country in the value of its agricultural and manufacturing exports and third per capita suggesting that the entrepreneurial spirit that is needed to meet the future is alive and well in the heartland. As alive as it was in 1916 when this shipment of cod liver oil was

loaded out for delivery to China. I'm Sara fresher. World class traders are only a part of the puzzle less So what issue is the composition of Iowa's economy. The potential for diversity the climate for development. We'll explore those issues tonight with the president of the Rwanda companies and a major force behind the creation of the export import trading company. Richard Corsi a bad and economist with the university but on the right who studied the economies of Midwestern states and the president of Pioneer International. That's of course Bad Brad like to start with you. You have studied the economies of the Midwest I'd like to start right now before we look into the future. Why is it that Iowa and the Midwest if indeed they are. Let's assume that they are because it's said that the lagging behind in the current economic recovery why is that.

Well Dean let me mention that I was part of a group of researchers at the University of Illinois who at the call of the president of their university and their governor tried to sort of a the Midwest economy including Iowa try to find out where we are now and then take a look ahead. And in a sense I would say that we have several long lasting problems that have been sort of accumulating that during the 50s and 60s we met quite well. There's a changing world markets in the 60s when lots of new jobs were being formed we didn't mind losing old jobs of black and white television and bicycles but now it's a little more aggravated. There's the problem of increasingly productive agricultural capacity that we have not yet learned how to deal with and to use effectively. And then Dee and I think in the 70s we had a number of shocks. First we had some energy shocks or PAC won and OpEx too. We had supply side trucks and agriculture to sort of a commodity price boom in 72 73 and the national economy leadership turned to fighting inflation and this is sort of weighed heavily on the Midwest and I were to some extent. Now.

There are many opportunities and the researchers at the University of Illinois came up with this sort of conclusion which maybe in later discussion I can deepen a little that they found that probably the Midwest and Iowa would be relatively smaller than the national economy in the future. And by that they mean precisely population growth would be below the national average. Gross National Product growth in the Midwest and in Iowa would be below the national average. But the opportunities for being relatively smaller but relatively better are there. You've heard Dr. Carson tell about the Midwestern wreck Do you see for Iowa came in. Are there some things that we should be shedding about ourselves in order to look ahead and do and to grow in the future. How do you react to what Dr. Coles but has said well I don't know if I can sort out all that the doctor said but. And what he said I think has a great deal to do with the future.

Maybe not the near future. My concern would be what can we do. With what we have now because our problem if it is if there is a problem is now. But one of the advantages as you see then that Iowa has that you as a businessman would like to exploit to make the state grow. Well that's a difficult question to answer. But again I would exploit the thing we have most of which. Are probably with the soldiers we have a good institution like I was a university. I think there's more we can do with the with the food we produce that we're doing for example. I read some figures someplace where there's something in excess of 70 percent of the food that we grow as it was processed outside of the state of Iowa. Well now if you want to create jobs why don't we attack the processing and do it here in the state.

Do you think that we're not doing enough of that right now we're done. Well I don't know what's being done but I would say that 70 percent of it is being done someplace else. It's certainly a target for us to shoot at. Tom urban. That's fair I think part of the problem is that for too long the three major segments of our society have not worked very closely together. The businessman has gone about doing what he wants to do. The government has gone about doing what it wants to do and the educational system has their own world. I think John would agree I think there's a great ferment in the state. The moment to try and bring those three structures together to try and meld the actions by the government actions by the business community and actions by the educational system in such a way that we begin to create some new wealth and I think that's going to happen. I visited I know John has when I was state people and people in the last six months and they're very interested they give you an example. One can identify an industry perhaps in food processing where we have the educational

standards that I would state to support it. They for instance bring in people from all over the world for annual conventions and agile annual educational seminars and certain aspects of food processing. We have at our disposal and businesses in the state of Iowa who can use that education as well as use all those people coming in as potential customers. The government can be very useful in helping those people come for instance. So we have the makings of a sort of three legged stool system in Iowa to get us farther down the road. Do you believe that there is too much emphasis no on grabbing for the maybe quick fix that really will work. High tech rather than capitalizing is John. And you're so seemed to be saying right now on what we have that's basic and that is adding value to the products that we already produce here certainly And of course that's the rule of businesses.

Those businesses which get very far away from businesses they know usually don't don't succeed. We will only succeed if we build on what we do. And I'll just note it's true rial is true of any corporation. We have some great talents we have great engineering opportunities here through I was state and a small medium sized businesses. We have a significant biotechnology opportunity and I will. We have a significant a food processing opportunity. So and of course one needs to remember the pharmaceutical aspects of the state so we we've got a lot going for us simply a question of putting that together let the entrepreneur kind of float to the top and make things happen. You talked about the advantages both Tom and John. John. What are the disadvantages that we have to work around. What do you see the obstacles that must overcome. Well I've heard some discussion on this a number of times and obviously there's differences of opinion. There are those who say that Iowa doesn't have obstacles

and there are others who say that our taxes are high and I labor costs are high. I think you have to reach a conclusion there must be some of that that needs to be dispelled. Otherwise there wouldn't be we wouldn't lose some of the industry that we have. Nor will we lose the opportunity to bring industry in here if that industry finds a more lucrative territory someplace else. So it's I think I think the state government has to face up to the fact that they have to dispel that thinking. Does Iraq have Tomah been the capital resources here in order to encourage development or can that capital come from outside the state. The reason I asked that he was that one of the factors that surveyed the business climate is the potential for capital investment within that certain area will have it. Or certainly more than that capital today is international in scope. I think to talk

of Iraq as a capital market is not really realistic. There's capital available throughout the world for good ideas that can be put to use from other light source. You just look at what happened to the banks and savings and loans over the last three years Ira cash moved in and out of Iowa right rapidly I think capital markets are worldwide. We need Of course in Iran where every state needs are entrepreneurs. We need people with ideas that are true you hear stories of someone who's had a terrific idea was turned down by 400 people before that person finally got the money but the fact that good ideas were presented will find money a good idea has historically been well rewarded in this country and I don't see that changing. I've drawn Iran as a living example of a good idea really rooted I think over the problem the problem is that we lose we lose that industry for the industry discovers that the climate that they thought was

there isn't there. So we have to dispel some of that somehow in advance. I don't know guys we will continue to lose or fail again. John's making a good point. I suspect that's true of I want a general that we've not done a particularly good job of selling what we have now you know I'm not the first to say that everybody said that and I hope with the new development commission activity and the activities of the regional parts of the state whether central north western north eastern Iowa eastern Iowa that we can do a better job of selling what we have which is really pretty exciting. How important is that you've attached great importance here but do companies really make their decisions on higher will marry is promoted by the new venture to mean you've actually yes just like you buy a product because you want to be sure you want to be sort of the product you feel better having bought that private was well sort if you have that sort of non-government eye when you come here you're happy to have some source like barons or or Fortune Fortune

if if they say that I was ranked at such and such a level let's say that it's a lower ranking I rank ings not good. The man is looking for a place to book to put a plant and his researchers. They use that information they buy it so if there's a big disparity between Iowa let's say and North Carolina the man says well why you just don't spend any time looking at Iowa here let's concentrate on there we go down to half a dozen locations and decisions are made like that. So if we have a problem and there must be some kind of a problem we need to face up to it. Go back to something you said earlier and was a good business builds on its strengths and there we were talking about Iowa's agricultural economy. The one problem there is that if you ever question economy just down as it is you're tied too closely to it which

pulls the entire state. Isn't that the case for diversity. I don't think so. I have a lot of trouble with diversity. I think what you do. You make a play over time. You do a particular thing extremely well and you let time take care of the ups and downs. If you're trying to protect yourself every year from going up and down you're probably end up destroying your business. So I make the case that we should take the strange that we have and build on them. Agriculture is still a major growth industry in the world today and we have our ups and downs that are somewhat cyclical by nature. But over time we're going to do very well staying with agriculture Negra culture related activity. But I would agree with this that I doubt of very many places in the world where there's a really good agriculture and it's not what you talk about being the bread basket of the world and if we're going to have to feed the population growth many more miles than we have now

better area to concentrate on not to the exclusion of something else but what better to concentrate on that which we have the most of and which we are most expert at right now. So you talk about national policy one of the major issues we have today in this country. Is the conflict between per capita income on the farm and export prices. Now there is another very deep danger on the horizon. We have special tariffs and quotas. There is protection of jobs I talked about jobs if we try to preserve jobs we're going to hinder the growth of new jobs and the growth of sales of agricultural products and we're divided on that. The country is divided and we're really at the point where we're deciding where local content special content legislation so you have to have so much build in America to build a car and things like that. I understand there was an old jobs and want to hang on to them but it can be very costly to move jobs. And I one who needs to be the leader and I was in or

most of I was in a populous state and populism I suppose could be defined by an adversarial relationship between the people in business and the people in the banks or the people in the utilities. I think that's disappearing. I think there's a recognition now that all aspects of our society have got to start to work together as a recognition on the part of the legislature. Certainly a recognition by the educational institutions and part of why we're business that those groups begin to see that they can help each other make the pie bigger rather than spending all their time trying to decide right up the potty. Then I think we'll make some progress. Here's a government than that common thread that draws units together. I hope not. I hope that it is a partnership that the businessman can take what leadership that person should take the leadership in the universities can take their activities in that business and government can work together I don't see depending on government to lead us out of the problem.

I'm sorry with that we're out of time thank you Tom Reuben Dr. Richard Corso bud and John Breaux on for being our guest tonight. In addition to its industry and its transportation system an interview last night to the Iowa economy its workforce had to be one of the most productive in the nation but like the economy that employs it it too is in a state of transition. And for an in-depth look at the forces that are reshaping Iowa labor be with us tomorrow evening at 9:00 interurban I'm Gene Borg Thanks for joining us and good night. Major funding for a state of transition was provided by

friends along a well public television. Do do.