What are the forces moving the Minnesota economy? Adam Belz tries to identify the trends and show the connections between Minnesota and the larger U.S. and global economies. You can connect with him on Twitter: @adambelz

Education aside, what will drive innovation in Minnesota?

Posted by: Adam Belz under Business trends, Economics Updated: September 13, 2013 - 11:39 AM

Dan Carr knows how to throw a good conference, and on Friday morning The Collaborative held a panel discussion over breakfast on the state of innovation in Minnesota and the country.

Lynn Casey, CEO of PadillaCRT, moderated, and the panelists were:

  • Doug Baker, CEO of Ecolab
  • Pete McNerney, partner at Thomas, McNerney & Partners
  • Tim Pawlenty, former governor and CEO of the Financial Services Roundtable
  • Art Rolnick, co-director of Human Capital Research at the U of M

The discussion landed on education as the key driver for the Minnesota economy. Rolnick pointed out that Minnesota started to outperform the nation in the late 1950s when the state began to pour money into education, and Pawlenty said Minnesota cannot be complacent about educaiton.

The discussion was far-ranging -- touching on medical device regulation, taxation, banking reform and immigration -- but education (which Rolnick famously has championed for decades) dominated the last 30 minutes or so.

Then Casey asked for each of the panelists to close out with one recommendation that would help the state innovate more and grow its economy faster.

“I need you to choose one, and it can’t be education,” she said. “If you were to pull one lever, and it could be pulled successfully in order to change the trajectory even better than we have it in terms of successful innovation…what would it be?”

Here are the answers.

Pawlenty: “I would try to improve the business climate here as it relates to the cost of doing business overall. It’s always going to be a relatively high-cost state but it can’t be so high that it becomes discouraging.”

McNerney: “It would be the regulatory environment. It needs to be clearer, more transparent and more predictable. There’s a little bit of progress in that direction but we have a long way to go.”

Baker: “Leadership. I think we have caught ourselves in a trap both in the state and country broadly – we’re not on a pro-growth agenda, we’re not on a come together, let’s get it done, identify the issue agenda. We are in a divide agenda. And as a result I think we are weakening ourselves, not strengthening ourselves, and we’re weakening our ability to get after the things we need to get after.”

Rolnick: “I’d go after business taxes. Most economists would argue that all taxes distort, but business taxes are a double taxation that distorts business decisions. I know the conventional wisdom is that business taxes are taxing the rich. Not true. That tax tends to fall on labor and on low-income workers as consumer prices are higher. I think Minnesota could lead the way if we get business taxes down – I’d get them to zero. If you want to tax the rich, tax the rich. Tax consumption, do it directly. But let’s continue to create an innovative, competitive business climate by leading the way, by getting business taxes as low as we politically can. I think if we make it clear how they distort and how much more innovative our economy would be, I think that would be a big step forward.”

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