Ronald Pollina on the "Managed Decline" of U.S. Economy, Real Estate

Ronald Pollina, a site selection specialist and commercial real estate broker based in Chicago, has released his fifth annual evaluation of the job creation and retention efforts of the federal government and all 50 state governments, and it doesn’t paint a pretty picture of the long-term economic outlook for most of the nation. The report, “Keeping Jobs In America: Pollina Corporate Top 10 Pro-Business States 2008,” warns that the federal government and many state governments offer little or no effective assistance to promote job growth or keep existing jobs in the United States. As a result, the report posits, U.S. prosperity will continue to leak away like air from a balloon as not only jobs are outsourced, but as American companies grow their workforces in other parts of the world, rather than here. Future prospects for commercial real estate growth are, by implication, impaired under this scenario–unless the states and the federal government shift gears regarding job retention policy. The study evaluates and ranks states based on 29 factors, including taxes, human resources, right-to-work legislation, energy costs, infrastructure spending, workers compensation legislation and jobs lost or gained. At the top of its ranking are: North Carolina, Florida, Virginia, South Carolina and Wyoming; California, by contrast, finished dead last at 50th place. This afternoon, CPN spoke with Pollina, CEO of Chicago-based Pollina Corporate Real Estate, about the report. He is also author of the forthcoming book, Selling Out a Superpower: The Price of Globalization.CPN: What’s the problem with some state economic development efforts? Pollina: Some states have real professionals working in that field, while others have political hacks who never really learn anything about economic development. That’s part of the problem, but it’s deeper than that. You need a good governor and a good state legislature, ones who understand economic development. A lot of them will claim they’re all for jobs and economic development, but often it’s talk followed by little action. CPN: What’s the impact of weak job retention efforts on real estate markets? Pollina: Because of the offshoring of manufacturing jobs, naturally those states that have been the most dependent on manufacturing will be hurt the most in that area–states such as Wisconsin, Minnesota, Illinois, Indiana, Michigan, Ohio and Pennsylvania. About 1,800 manufacturing plants are closing every year in this country, and what are we replacing them with? Not new plants, but distribution space, if they’re replaced at all. Manufacturing isn’t the only activity being offshored, however. White-collar jobs are as well, and that’s having a detrimental impact on office markets nationwide. That’s because we’re seeing the offshoring not only of existing jobs, but growth overseas for U.S. companies that otherwise would be happening here. CPN: Do the problems drill down to secondary and tertiary markets? Pollina: Yes. Plants in small towns are closing because they can’t compete in the global marketplace. And it isn’t even just the cost of labor, which usually gets the blame. It’s also a matter of high taxes and regulations. CPN: What could the states do about this situation? Pollina: A lot more than they do. There are states that do virtually nothing to help existing businesses. Something it’s just a matter of the details of infrastructure–a new exit or stop light or something along those lines. We also mismanage the funds we do allocate to economic development, such as farm subsidies that mostly go to wealthy farm corporations, while there are almost no subsidies for the manufacturing sector. Yet even in rural areas, more people are involved in manufacturing than farming. Our priorities have to change.