Michigan's billion-dollar experiment in diversifying state's economy yields mixed results

Four years after Michigan launched the 21st Century Jobs Fund to diversify its economy and create jobs, the first two major initiatives under the 10-year, billion-dollar program have generated mixed results so far. A handful of small companies that received loans look promising, a handful have failed and only a small number of direct jobs have been created.

Venture capital firms outside the state that were awarded millions have been slow to invest in Michigan businesses. The majority of the grants, loans, and investment dollars went to recipients in one city: Ann Arbor.

The Detroit Free Press’s Katherine Yung writes that on the positive side, many of the small companies that received loans say the money has proved critical to their survival. “It’s really helped enable a lot of growth in our company,” said Michelle Crumm, co-founder and chief business officer of Adaptive Materials. The Ann Arbor maker of portable fuel cell power systems for the military used the $6.3-million loan it received to buy new manufacturing equipment and to develop its products.

The jobs fund has been the centerpiece of Governor Jennifer Granholm’s economic development strategy. Critics say the money could have been better spent. Others accuse the state of trying to pick winners by funneling millions to only four industries: advanced manufacturing, alternative energy, life sciences and homeland security and defense.

“It’s very difficult to pick the right technologies and industries,” said Lou Glazer, president of Michigan Future, an Ann Arbor think tank, and a former deputy director of the Michigan Department of Commerce. “Government doesn’t know how to do that very well.”

Yung writes that officials at the Michigan Economic Development Corp., which administers the jobs fund, insist the programs are working. Ned Staebler, the agency’s vice president of capital access and business acceleration, described the fund as “hugely successful.” He said the state is building a critical mass of innovative companies in industries in which Michigan has a competitive advantage.

Four years in, a small number of direct jobs have been produced

In 2006 Michigan embarked on a bold experiment to save its economy: making loans to fledgling companies, investing money in venture capital firms and awarding millions in grants to university professors and nonprofit groups (also see this report on the Michigan Security Network: “Michigan seeks homeland security business,” 28 August 2009 HSNW; and this story on Michigan attracting ITR security investment: “California IT security company adds