The Midwest region overall wasn't a strong performer in this year's study. But it has several business hot spots, including the Kansas City area, Chicago and Madison, Wisconsin, which ranked sixth among midsize cities.
Geoffrey Hewings, director of the Regional Economics Applications Laboratory, or REAL, at the University of Illinois, Urbana-Champaign, says Midwestern states aren't doing enough to encourage trade within the region. While the U.S. signs free-trade agreements with Canada and Mexico, trucks still need a license plate for each U.S. state they drive through, and each state has its own weight limits and regulations on interstate shipping. Some 40 per-cent of Midwestern out-of-state exports go to other Midwest states, Hewings says. Streamlined trade between the states could provide a substantial economic boost.
Though productivity has improved here over the past few years, employers still appear hesitant to add workers, says Hewings. At current growth rates, it will take top-ranked Midwestern state Illinois (ranked 12th nationwide) another 30 months to return to its pre-recession economic peak, he estimates. The rest of the Midwest still has three full years to go before its business community is back to its previous high.
The Midwest's economic black hole is Detroit, which came in 29th. The sagging fortunes of auto giants Ford and General Motors are having ripple effects in the business community, according to Hewings. A recent study by REAL estimates that the future negative economic impact of GM's planned pension cuts will run in the billions in Michigan alone.
In 12th-ranked Chicago, many city boosters are seeking to replace old-time manufacturing jobs and foster a more entrepreneurial, business-friendly climate. New institutions to support growing businesses have been springing up, says Paul O'Connor, executive director of economic development organization World Business Chicago. For instance, the Chicagoland Entrepreneurial Center and the University of Chicago's Polsky Center for Entrepreneurship both opened in 1999, and last year, the city created a small-business assistance office.
Chicago has its central location going for it, as well as its low business costs relative to major U.S. coastal cities. Downtown Chicago is humming with new activity, including the Wrigley Global Innovation Center, which was opened last year by gum and LifeSavers giant Wm. Wrigley Jr. Co.
For its part, 11th-ranked Kansas City boasts a longtime entrepreneurial climate, says O. Homer Erekson, dean and professor of economics and business policy at the University of Missouri-Kansas City's Bloch School. The culture of innovation here dates back decades, to tax giant H&R Block and Marion Laboratories. The charitable foundation created by late Marion Labs founder Ewing Marion Kauffman continues to be a big supporter of growing businesses in the area and nationwide.
One recent Kansas City innovation that's being copied all over is KCSourceLink. Founded three years ago, KCSourceLink gives entrepreneurs easy, one-stop access to more than 140 service providers. A national version, U.S.SourceLink, is now rolling out around the country.
With major employers including Applebee's, Hallmark and Sprint, Kansas City is humming with economic activity, says Gail Worth, 41. The owner of Gail's Harley-Davidson, which she bought six years ago, Worth says the company--located in the suburb of Grandview--will see $21 million in sales this year.
Worth loves the city's four-season climate, with brief winters that keep shoppers browsing for bikes almost year-round. City government is highly accessible, and the business tax and regulatory burden is light.
"Politicians here are actually fun to be around," Worth says. "From the mayor to the city council, they get out there and meet with people. If I have an issue, I don't hesitate to pick up the phone."
She also cites a strong chamber of commerce, which helps connect businesses with specific expertise to others who might need help. There are plenty of business networking events, too.