Midwest governors seek solutions to regional slump

America's industrial heartland, hit harder than most regions by the nation's manufacturing slump and high unemployment, is badly in need of an economic rebound.

No group is more keenly aware of that need than the governors of that heartland. Economic recovery has been the umbrella theme of every workshop session at the annual Midwest Governors Conference here.

But separate interviews with governors from the Great Lakes states of Wisconsin, Minnesota, Illinois, and Indiana suggest that so far there are few signs, if any, of a return to a more vigorous economy in the region.

Indeed, few governors hold out much hope for any improvement until interest rates fall nationally. The high rates, they say, have adversely affected everything from business investments to individual purchases while reducing state tax receipts and inducing new government tax burdens. David Stockman, President Reagan's budget director, tried to assure governors at the conference here that the current high interest rates are strictly temporary and could come down as soon as early next year.

All of the governors queried said they did not think the Midwest economy would ever return to the same intensive reliance on heavy manufacturing. But neither do they expect the major structural shift -- from manufacturing to a largely service-oriented economy -- that many have predicted the region must have for its economic survival.

Midwestern governors agree that some diversity is highly desirable. They disagree on how much. Illinois' Republican Gov. James R. Thompson, for instance , says that it is "unthinkable" to consider that the Midwest, as some have suggested, give up its production of steel. "We can't throw out what made us great -- we have to take what we have and add to it."

Most Midwestern states are hard at work in efforts to step up their recruitment of small businesses, which according to all statistics are responsible for the bulk of new jobs created, and to increase agriculture and manufacturing exports from their states.

Most Midwestern states have export offices either at home or abroad these days. Gov. Lee S. Dreyfus (R) of Wisconsin, whose state maintains an at-home export office, suggests that major businesses with overseas offices could be tapped to help small businesses step up exports abroad in the same fashion as universities have built up their alumni system. He adds that in Wisconsin during the current economic slump diversification has helped and that agriculture and tourism are what have "really been carrying us."

Another way of helping the Midwest's economy, says Indiana Gov. Robert D. Orr (R), is a more intensive effort to recruit overseas businesses to set up offices in heartland states. He says he took part in the ground breaking last week in Columbus, Ind., for a German combine manufacturing plant that will employ 500 Indiana workers over the next two years. The governor says that his state now has about 90 foreign-owned businesses, which employ about 30,000 Hoosiers.

Most governors say they feel some of the reports about migration of businesses and job hunters to the Sunbelt have been exaggerated and some of the moves influenced by such reports.

"We haven't done enough to toot our own horn," he insists. He points out that Illinois has just launched a $1 million promotional campaign. An early offshoot: a 20-page insert in the September issue of the Scientific American stressing the state's attractiveness as a potential high-technology location.

One report issued last month by Robert R. Nathan Associates Inc., a Washington consulting firm, suggested that the Midwest would continue to grow but much more slowly than other regions during the 1980s. It predicted that the region would never become another New England in terms of luring substantial numbers of high technology firms. One reason: the Midwest's lack of abiligy to attract the needed highly trained personnel.

In any case, no governor here is ready to throw in the towel on any possibility for the region's economic improvement. The Midwestern governors are also well aware that all the promotional efforts and cheerleading will have no effect unless there are solid improvements in state financial climates behind the pitches.

Gov. Albert H. Quie (R), whose state of Minnesota, contrary to the Nathan report, already is considered a strong high-technology center, is firm on the necessity for further improvement in the business climate of Midwestern states. He argues strongly for the need for further improving the business climate of Midwestern states. Specifically, he would like to see Minnesota reduce the workmen's compensation rate as well as the corporate income tax for small businesses and the industrial property tax.