Ann Markusen's academic and research career is hard to summarize. She has done so much. She has been a Brooking Institute Economic Policy Fellow, a consultant to the Clinton Administration, the World Bank, Cleveland, Pittsburgh, Berkeley, and Chicago, and to the states of Michigan, Ohio, and California. In addition, she's an expert on the steel industry, defense conversion, and an author of at least 10 books. Most recently, she has been studying the role of the arts in the overall economy and in economic development, as well as the issue of "good jobs." Currently, Ann is a professor at the University of Minnesota, Humphrey School and has just finished editing a book about business incentive reform.
Among these many achievements, I wish to single out one for special emphasis. Known for her ability to "integrate economic theory, history, statistics, and industry case studies", her book, Profit Cycles, Oligopoly, and Regional Development, is a brilliant prototype for those who wish to tackle the big questions and offer a new way of thinking in economic development.
Published in 1985, during the tumultuous industrial restructuring in the older industrial heartlands of America, Dr. Markusen engages in both "high theory" and empirical testing. Her starting point is: "Traditional theories of regional development have failed to account for innovation and long-run structural change. They have ignored the role of corporate strategy and the existence of market power."
She offers an alternative "profit cycle theory." Synthesizing the work of Joseph Schumpeter and Karl Marx, product cycle theories of business economists, and theories of oligopoly behavior, she explores the how, why, and when a region's leading industries undergo major changes. Markusen hypothesizes that "changing sources of profitability along an industry's evolutionary path will first concentrate and later disperse production geographically, setting in motion a methodically destabilizing process for regional economies."
Besides examining the fortunes of 15 industries, Markusen focuses in depth on the steel industry's evolution during the past 100-plus years. She compares rising industries and other declining sectors (e.g., automobiles, textiles, lumber). By using both longitudinal and cross-sectional data, she seeks to find support for the profit cycle theory and its spatial implications. The data and histories appear to support her ideas of agglomeration and dispersal of industry. These changes are accompanied by fundamental transformations of the occupational structure. This, in turn, will alter the local strengths and weaknesses of particular communities, thereby altering corporate site relocation decisions.
She points out that "across US regions sectoral structure is highly differentiated." Michigan is (or was) autos. Pennsylvania was steel. Et cetera. Moreover, since each of these industries is operating at a different stage in its evolution from research and development to mature, declining commodity product, they vary greatly in their blessings and woe. And someday your leading industry will switch from job creator to job loser. Oligopolistic sectors may stunt the diversification of a region's diversity, despite (or because of) its "super-profits" earned at certain stages of its evolution.
She concludes:
The prospects for balanced regional development in a country like the United States are not encouraging . . . Spatial separation of management, finance, and control from production seems increasingly to be leading toward a new form of regional differentiation where entirely class-specific enclaves exist - downtown New York, San Francisco, and Palo Alto for the professional-managerial class and entirely new communities like Sparks, Utah for blue-collar workers."
Change will be constant, painful and costly for those communities caught by regional obsolescence. Some areas will not return to a new equilibrium of growth, despite their now lower production costs.
Even if Ann does not have all the answers, she zeroes in on the significant development challenges.