Morton Marcus: How good is Indiana really?

Our state cheerleaders naturally proclaim that Indiana is hot. They mean that we are attractive to companies looking to locate facilities for future production. We cannot verify their statements. We can only look at the evidence at hand.

Nationally, we hear that California is dead on the water and citizens and businesses are fleeing to Texas and Idaho. Also, if Illinois is a rotting ship, do these rats move to Indiana?

There are so many ways to examine evidence to look for “the truth.” Let’s try GDP, or gross domestic product, our imperfect measure of economic activity.

How have states fared in jumping the gap between 2019 and 2021?

Nationally, inflation-adjusted GDP grew by 3% between 2019 and 2021. This was the result of a 2.8% decline in 2020 but a 5.9% growth in 2021.

What? Real GDP down just 2.8% in 2020? Yes. While we cut spending on services — by 6.6% in 2020 — we needed bigger TVs, faster computers, and more stuff — spending on durable goods rose 10%. Our efforts to fight evil contributed to more economic activity.

That’s what GDP is all about. It measures what we do. It doesn’t judge whether we enjoy what we do. We will buy cigarettes this year and medical services later. We buy art and porn.

California alone contributed 25% to the nation’s real GDP growth between 2019 and 2021. Indiana accounted for just 1.5% of the nation’s real GDP growth.

California had a 5.3% growth rate, almost double the statewide 3% and more than double Indiana’s 2.5% growth, which ranks 27th nationally, comfortably middling.

However, our Hoosier guides would ask us to review the latest data. OK. U.S. real GDP grew 1.8% from mid-2021 to mid-2022 and hard-breathing Indiana grew 1.7%.

Across the country, social commentators are declaring that the COVID pandemic has transformed our lives. Home delivery is the death of retail as we know it. Working from home is forever embedded in our work environment. The malls and office buildings will all be converted into apartments. The resulting higher density will bring public transport back.

But that’s not all. Less commuting and the concentration of economic functions (whatever that means) are complemented by tiny electric cars that end congestion and make parking painless.

More likely, it will be many years before we understand what happened in 2020 and beyond. Which changes are permanent and which are temporary? Among the many damaged personal and business relationships that have resilience and which will perish?

Up to this point, the Indiana recreation has been dominated by automobiles, body and trailers, and parts manufacturing. And 29 of our 65 sub-sectors have yet to reach their pre-COVID baseline levels. Is this the shape of our brave new world?

Morton Marcus is an economist. Reach him below [email protected] Follow his and John Guy’s views on Who Gets What? wherever podcasts are available or at mortonjohn.libsyn.com. Send comments to [email protected]

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