“Reappraising Minnesota” is a commentary series that seeks to re-evaluate Minnesota’s basic condition today and its evolution since 1973, when a Time magazine cover story praised it as “A State That Works.’’ The author is Dane Smith, who wrote about politics and government as a reporter from 1977 to 2007 for both the Star Tribune and the Pioneer Press. Smith, now retired, also served for 10 years as president of Growth & Justice, a think tank that advocated for a more equitable and sustainable economy. Read other pieces in the series here.
Smith will be presenting a summary of the Reappraising Minnesota project in an online lecture series beginning Feb. 7. The two-hour presentations, through the Selim Center for Lifelong Learning at the University of St. Thomas, will be simulcast online on Wednesdays at 10 a.m. for four weeks. The fee for the series is $100. Click here for registration.
Minnesota’s rising stature as an innovative economic powerhouse, managed by generous and progressive business owners, was a central theme of the August 1973 Time magazine cover story that revealed “The Good Life in Minnesota” to the rest of the world.
Near the top of the story, the Time writers focused on a disproportionate concentration of Fortune 500 headquarters and emerging high-tech expertise: “The state harbors some of the nation’s fastest-growing computer companies — Honeywell Inc., Control Data Corp., Univac — along with a diversity of such other corporations as 3M Co., General Mills Inc., Geo. A. Hormel & Co., Pillsbury Co., and Investors Diversified Services Inc. (IDS), one of the nation’s largest mutual fund conglomerates.”
Time observed a decline in the dominant industries of the state’s first century — especially mining and logging — while maintaining its top rankings in many categories of farm production and agribusiness. Minnesota today still ranks 5th in total value of agricultural production, and companies like Hormel and General Mills, Land O’Lakes and CHS (formerly Cenex, a farmers’ co-op) are still on the national Fortune 500 list. Cargill doesn’t appear on the Fortune 500 list because it is a privately held company, the largest in the United States and the third largest in the world, and the reigning behemoth in agricultural commodity trading.
Some of those early mainframe and supercomputer companies are gone, having merged with others or moved operations and headquarters to the West Coast or elsewhere. But Minnesota has forged ahead of other states and become even more of a leader in all things relating to health care, medical devices, water treatment, and other technology industries. A nimble light-manufacturing sector, with many mid-sized companies, and a strong financial services sector round out the portfolio. Minnesota and especially the Twin Cities remain a “headquarters economy,” with a critical mass of legal and administrative talent that can move between companies. Retail giants like Target and Best Buy are more dominant than ever, and the Mall of America, built in the 1990s, is still the largest indoor retail center in the nation.
What seemed to impress the Time writers most, however, was the philanthropy and communitarian ethic of the business elites. Time lauded the Dayton, Pillsbury and Cowles families, and 3M, IBM and Mayo Clinic for philanthropy, arts patronage, and civic activism.
“The business community’s social conscience … is a reflection of the fact that so many companies have their headquarters in the state. … The companies’ concerns are reflected in their annual reports; most of them carry a section called ‘Social Concerns’ or some such.” Other national media followed suit, marveling at institutions such as the “5 percent Club’’ and efforts as recently as 20 years ago by business leaders in The Itasca Group to raise the alarm about growing racial disparities, well before Black Lives Matter was formed.
Those leaders also tended to be liberal Republicans or moderate Democrats, sometimes also called Business Democrats. Their philosophy rested on an ethic of obligation to workers, customers, community and environment, not just shareholders or their own personal fortunes. That ethic was prevalent elsewhere in the nation, from the Great Depression through the 1970s. But it began to fade with the reactionary return in the 1980s toward maximizing profit and shareholder return as the primary or only objective of the free-enterprise system.
Increasingly conservative Republican presidents and congressional leaders (the GOP controlled the White House for 27 of the 50 years between 1973 and 2023) steered national economic policy back toward laissez-faire. And more moderate Democrats often collaborated rather than stand their ground on such key issues as deregulation, labor rights, environmental action and economic security for workers. [cms_ad:x101]
Today’s MAGA Republicans, in the thrall of billionaire celebrity Donald Trump, stand in even sharper contrast to that social responsibility ethic of 50 years ago. In 2024, they are engaged in a relentless counterattack against any and all businesses that support diversity training or racial justice initiatives, or that favor a path to citizenship rather than deportation for undocumented immigrants, or that embrace climate action and LGBTQ rights. Demonizing of the word “woke” and anything that can be labeled “DEI” (for diversity, equity and inclusion training programs), or ESG (environmental social governance) has become paramount.
Despite all that manufactured furor, many Minnesota corporations and business leaders have been reluctant to turn away from racial equity and climate action as important business concerns, if not top priorities. And despite more than 40 years of increasingly hostile attacks on the state’s liberal character as “bad for business,” Minnesota was ranked 5th by CNBC (Consumer News and Business Channel) on its 2023 list of Best States for Business. Conservative and libertarian think tanks use a narrower set of criteria and continue to rate the state near the bottom. But most non-ideological associations and business media put Minnesota near the top or well above average on broader, multi-factor measures of business vitality and economic health.
Considering its allegedly anti-business mentality and perennial Top 10 rankings in tax obligations on high incomes and corporate profits, Minnesota ranks 6th on the Fortune 1000 list, 17th in millionaire households per capita, 7th on patents per capita and generally high on other innovation indicators.
Still, not quite as special
One of the more balanced and comprehensive analyses on the state of the state, also based on a reappraisal of the Time 1973 article, was published 20 years ago by the St. Paul Pioneer Press. This sweeping special project was entitled “Still the Good Life in Minnesota?’’
In that series, business editor and columnist Dave Beal wrote a lengthy article assessing the economy 30 years after 1973 as “far larger, stronger and more diverse, but also more like the national economy in some ways, with less local ownership, less philanthropy.”
Beal and other writers for the project emphasized widening inequality in the national and state economy, increasing racial diversity and disparity, and a decline in both innovation and community involvement by business leaders. That basic critique could be applied today, as well, with even stronger concerns on the racial disparity front and with new concern about a workforce shortage since the Great Pandemic, especially skilled workers, and declines in educational attainment and vocational credentials.
Noting slower GDP growth in recent years than the national average, Star Tribune business columnist Evan Ramstad in late 2023 urged “more of Minnesota’s government and business leaders to squarely confront that the state is no longer the exceptional economic performer it was when they were young.” Ramstad added: “Minnesota remains a wealthy state in strong fiscal shape. However, it is growing more slowly than at any time in its history and it is constrained by labor scarcity that’s also without precedent.”
No analysis of the economy and business in the United States can overlook the phenomenal increase in inequality, especially stagnation in the middle and the much larger percentage of wealth and income now captured by the top 1% of households. Despite this windfall, conservative Republicans and their wealthy donors bitterly resist higher income and wealth taxes, while charitable giving is stagnant or declining. Minnesota could not escape these national trends, but it remains above average.
Another recent Star Tribune article assessing the state of corporate philanthropy found a decline in the aspirational levels of bygone days, measured as a percentage of profits devoted to charity and community. The article noted that a business group in the 1970s known as the “5 Percent Club” has effectively become a 2 percent club. But relative to a national decline in pre-tax giving from 2% to 1%, Minnesota philanthropy and involvement in civic affairs remains better, or less stingy. And by other measures, such as wealthy individual donations to charities and volunteerism, Minnesota by most accounts remains well above average.
In Newsweek’s 2023 list of America’s most socially responsible companies, Minnesota had 14, far out of proportion to its population size. Florida, with almost four times the population, had only nine on the list. States closest to Minnesota in population were Wisconsin (9), Colorado (8), South Carolina (3) and Alabama (1).
That level of social responsibility and philanthropy over many decades has produced one of the nation’s largest nonprofit sectors. This has become an increasingly important slice of the economy, often overlooked by analysts. Minnesota also has a strong century-old tradition of cooperative and not-for-profit enterprise, especially in farming and electricity generation. Some of the state’s largest agribusiness giants, Land O’Lakes and CHS, began as co-ops and still function that way, with democratic decision-making among their members. Minnesota now ranks 8th in nonprofit employees as a percentage of the workforce, almost 15% of total workers. Their wages and benefits tend to be comparable to for-profit workers, and many work in health care and human service jobs. [cms_ad:x103]
Analyses of business vitality too often isolate profitability and growth for owners and shareholders, overlooking the basic conditions of workers, without whom there would be no profitability or growth. Here again, by almost every measure, Minnesota’s workers and households, especially those below the median, do better than their counterparts in other states, with the glaring exception of wide disparities for Black and indigenous Minnesotans. (See Parts II, III and IV of this series).
Communitarian DNA, globalism and unions
From the founding of the nation and ratification of its Constitution in 1787, debate has raged over the comparative size and role of the private and public sectors. Conservatives argue for private good and capital and deferring to property owners, liberals for public good and labor and equitable uplift for people on the margins. Liberals have always had to overcome arguments that ending slavery and child labor, or being forced to pay higher wages and benefits, would imperil sacred property rights and destroy the economy. In the grand sweep of things, reformers have gradually prevailed, and Minnesota has long been a leading state on the liberal and reform side of that argument. (See Part III of this series). Like most other progressive or “blue” states, it has higher incomes, better outcomes on education and health care, and at least comparable business indicators to states that brag about being “pro-business.”
Minnesota’s status for more than a century as a hotbed of Farmer-Labor Party activism has played an important part in improving the wellbeing of middle- and low-income families. Unions have lost membership and power since 1973, and in Minnesota, too, but the state still ranks 10th in union members as a percentage of workers. Union power produces not only higher wages and benefits in negotiations with employers, but labor leaders also wield influence on public policy that builds more economic security for folks who are not unionized.
Those union members also are increasingly progressive and more focused on racial equity, compared to 1973, when membership was more heavily white, male and dominated by construction and labor trades. Union membership now is more female and of color, with rising numbers among service trades, health-care workers and teachers.
Minnesota’s public-mindedness and willingness to tax and invest in public goods also has produced a superior system of physical infrastructure, not only transportation, transit and sewer and water systems but also better internet connectivity than most. These assets are crucial for business development. Minnesota ranked 5th on a 2020 multi-factor ranking of overall infrastructure quality.
Yet another subtle and overlooked asset is a more sophisticated global awareness and a willingness to learn from and trade with other nations. Going back to railroad tycoon James J. Hill’s establishment of ties with China, Minnesota’s bi-partisan spirit of internationalism has served its economy well. DFL Gov. Rudy Perpich in the 1980s elevated global trade as an economic priority and often was criticized for frequent trade missions. But Republican Gov. Arne Carlson and others strengthened efforts to find export markets. Organizations such as Global Minnesota and dozens of other civic and business associations nurture this spirit.
Partly through progressive public policy and partly luck, Minnesota has been blessed with an unusually diverse economy. A fairly even mix — between agribusiness, manufacturing, services and retail — helps even out booms and busts, in contrast to states that are overly dependent on a single sector. Having no single dominant sector also has spared Minnesota the suffocating political influence of oligopolies that have wielded overwhelming power in places like Texas (oil) Michigan (automobiles), Nevada (gaming), and most of the farm states in the Plains and Midwest (Big Ag).
Syndicated columnist Neal R. Peirce, in his 1983 “Book of the States,” noted this happy circumstance. “Minnesotans appear, in fact as well as theory, to control their own destiny. No single industrial cabal, no bank group, no patronage-hungry courthouse, no single liberal or conservative interest group or labor union controls the state. Ask Minnesotans who “runs” their state, and you get a blank stare in response.”
Although the “bad for business” screed often captures the headlines and public attention, many of the state’s more responsible business voices consistently offer a more positive and accurate view of things.
The business-funded Minnesota Center for Fiscal Excellence (once called the Minnesota Taxpayers Association) continues to produce thoughtful policy analysis that recognizes the business value of foundational public investments in education, health care, infrastructure and economic security. The Federal Reserve Bank of Minneapolis recently became so involved in racial education equity that the national parent organization ordered it to pull back from direct policy advocacy.
Greater MSP, a relatively new alliance of corporations and urban core city governments, has become a strong cheerleader in promoting the Twin Cities as a superior place to do business. The venerable Minnesota Chamber of Commerce and the Minnesota Business Partnership (the latter is comprised of the state’s 100 largest employers) continue to complain about taxes and regulation. But the chamber also has produced valuable research showing the enormous benefits of international immigrants to the state’s economy, and both organizations serve an upbeat message on the state’s overall business vitality. Even the arch-conservative Center of the American Experiment, a think tank that has been relentless in portraying Minnesota liberalism as Public Enemy #1 of free enterprise, recently produced a thoughtful essay on the importance of “social capital’’ as a factor that can override economic levers in producing prosperity and quality of life.
Maintaining an “intelligent equilibrium”
Time in 1973 used the term “intelligent equilibrium” to describe how Minnesotans were creating a better place to live and work and do business. That smart balance has been threatened, but still holds firm. A majority of Minnesotans tends to believe that the business of Minnesota is not just about maximizing profits and driving to the bottom with cheap labor and low taxes. They stick with a Minnesota Model that’s about maximizing human potential and talent to drive innovation and productivity. It’s also about building and maintaining high-quality physical infrastructure. And it’s about providing the kind of physical health and economic security that allows all households to buy the goods and services that the private sector produces.
Meanwhile, passionate new challenges to corporate power and demands for greater racial equity are growing among young people who are building a New Left in Minnesota. The rise of a Democratic Socialist Party movement in Minneapolis and St. Paul city politics has become the talk of the towns. A close look at the DSM websites and policy positions reveals more of an attitudinal change rather than comprehensive plans to destroy the private sector and replace it with the classic model of government ownership and control of the means of production. This space bears watching, obviously.
In their defense, Minnesotans’ liberal and egalitarian tradition has always been one of confronting capitalist elites and challenging the concentration of wealth and power. In other more conservative states, those elites get what they want most of the time, while Minnesotans have opted for a more liberal democracy that helps business succeed because more people have what they need to develop their potential. This foundational investment has created a remarkably productive workforce and stable consumer demand. And despite constant complaining about the business climate and having to pay more in personal income taxes than other states, Minnesotans have an economy and a society that continue to exist in a relatively intelligent equilibrium.
Rankings on Economy and Business
#2 Top States for Medical Device Manufacturing, The top 10 medical device states: Everything you need to know – Medical Design and Outsourcing
#2 Most Generous States, 2023, The Most and Least Generous States – Forbes Advisor
#5 America’s Top States for Business, 2023, CNBC, https://www.cnbc.com/2023/07/11/top-states-for-business-minnesota.html
#5 Value of Agricultural Products, 2019, Visualizing Top Agricultural Products by State (howmuch.net)
#5 Quality of Physical Infrastructure (transportation, sewerage and water systems, high-speed internet), States With the Best Infrastructure – 2021 Edition – SmartAsset | SmartAsset
#6 Fortune 1000 Companies Per Capita, States Where Top Companies Have Headquarters | US News Best States
#7 New Business Applications, States Ranked by Rate of Increase in 2023, Mapped: America’s new business hotspots (axios.com)
#7 Most Inventive Residents (patents per capita), 2022, 15 U.S. States With the Most Inventive Residents | ClickUp
#8 Most Diversified Economies, 2018, Measuring Economic Diversity: The Hachman Index, 2018 (d36oiwf74r1rap.cloudfront.net)
#8 States Ranked by Greenest Economies, Greenest States 2024 (worldpopulationreview.com)
#8 Nonprofit Employment as Percentage of Total, 2016, (15% of total, 360,000 out of 2.4 million workers) Nonprofits account for 12.3 million jobs, 10.2 percent of private sector employment, in 2016 : The Economics Daily: U.S. Bureau of Labor Statistics (bls.gov)
#9 Top States for Workers’ Rights, 2019, Virginia Ranked Worst State for Workers’ Rights (usnews.com)
#10 Long-term Fiscal Stability, Rankings: Long-Term Fiscal Stability – Best States (usnews.com)
#10 Union Membership as Percent of Workforce, 2022, (14.2%, highest in the Midwest), Union affiliation by U.S. state – Wikipedia
#11 Per Capita Income, Ranked by Gini coefficient, (#1 in MIdwest), 2022 List of U.S. states and territories by income – Wikipedia
# 12 Income Equality List of U.S. states and territories by income inequality – Wikipedia
#13 State Science and Technology Index/Rankings State Technology and Science Index | Rankings (statetechandscience.org)
#14 Per Capita Gross Dometic Product, (#2 in Midwest, behind oil-rich North Dakota) 2023, List of U.S. states and territories by GDP – Wikipedia
#15 Housing Permits Per Capita (2nd most in Midwest, behind S.D.), 2023, Housing Permits Per 100,000 Population, Where we build homes helps explain America’s political divide – The Washington Post
#15 Best Economy, 2022, multi-factor ranking for employment, growth and business environment https://www.usnews.com/news/best-states/rankings/economy
#17 Millionaire Households Per Capita, 2019, List of U.S. states by the number of millionaire households – Wikipedia
#18 Best States To Work in America, 2022, Best and Worst States to Work in America 2022 | Oxfam (oxfamamerica.org)
#20 States Ranked by Favorability of Liability Laws for Business, 2019, 2019_Harris_Poll_State_Lawsuit_Climate_Ranking_the_States.pdf (instituteforlegalreform.com)
#21 Best Economies (multi-factor ranking: innovative potential, economic health, economic activity), https://wallethub.com/edu/states-with-the-best-economies/21697
#21 Best States to Start a Small Business in 2024, Top 10 States to Start a New Business in 2024 (fool.com)
#43 Best States to Start a Business in 2024, The Best States to Start a Business in 2024 – Forbes Advisor
Sources and Links:
Minnesota was once a leader in corporate philanthropy. Is that still true? (startribune.com)
America’s Most Responsible Companies 2023 (newsweek.com)
What are Minnesota’s most notable inventions? (startribune.com)
A Robust & Diverse Economy / Join Us MN
Economy of Minnesota – Wikipedia
2024 Business Benchmarks.pdf (mnchamber.com)
Minnesota Business Partnership/On the Issues
Minnesota Center for Fiscal Excellence: A Closer Look at Migration Concerns
Fortune Global 500 – Wikipedia
$5 billion redo of Mayo Clinic’s campus will reshape Rochester skyline (startribune.com)
50 Minnesota innovations that changed the world | MinnPost
Real Median Household Income in Minnesota (MEHOINUSMNA672N) | FRED | St. Louis Fed (stlouisfed.org)
WaterTechnologyIndustry2015WEB.pdf (state.mn.us)
Labor Unions and the U.S. Economy | U.S. Department of the Treasury
The history of labor organizing in Minnesota | MinnPost
Red-State, Blue-State Divide on ESG Legislation (lexisnexis.com)
