Behind the Scenes: Jennifer Granholm
Jennifer Granholm, 57, Governor of Michigan from 2002 – 2010, now teaches courses in law and public policy at University of California Berkeley (UC Berkeley), where she serves on the faculty. She is co-chair of Hillary Clinton’s 2016 presidential campaign transition team and an occasional television commentator.
What is the relationship between government and business?
Each has an important role. You can’t have one without the other. Government has to be there to set the rules of the road, for businesses to thrive in the United States. The big debate is; what is that role? What is the lane that government occupies? I would be in the camp that says government needs to work with business to formulate that role.
That includes investment and talent, in infrastructure, in making sure that there is access to capital for businesses to be able to expand and in all of the wraparound services that make businesses successful.
I should say that government perhaps has a stronger role in investing in sectors and businesses at the point where they know the growth potential.
What would be a good investment?
Let me use energy as an example. If there is a desire for us to really break through on getting electric vehicle batteries that go 500 miles to the charge, government has a role in encouraging companies and universities to invest in the research to get us there, because the private sector wants an immediate return.
Sometimes that might mean failures, but most early stage research done by government has been successful.
As Michigan’s Governor, you implemented that philosophy. Our current governor rejects the idea of picking “winners and losers.”
I think government ends up picking winners and losers all the time. They may not expressly call it that, but if the oil and gas industries get subsidies, you might call that a winner because they get what economists term “rent transfers.”
I don’t think there is a problem with the government deciding that it wants more exports for products built in the USA. I don’t think it’s a problem, if you want to invest in sectors that will employ people. You just have to make sure that it’s carefully circumscribed, that the process is fair and open. Funding research and tech-transfer at universities is one way of going about that.
It’s to the benefit of the U.S. to invest in the research to make that happen, and sometimes even giving loans to companies to do that. As long as the loans are paid back, I see no problem with it. But you can’t put all of your eggs in one basket.
As a public policy matter, if we want investment in infrastructure, we need a contract, and someone is going to get picked. Is that picking winners? I think that kind of nomenclature is really kind of antiquated. What is going to get people employed and make the U.S., and businesses in the U.S., successful?
Reflecting on your tenure, how would you characterize the relationship with Michigan’s businesses?
I had a great business council, a great relationship with the businesses that advised and worked with the MEDC. I know that the business community was pushing for lower taxes. We devised a way of doing that which was different from what the Michigan Chamber of Commerce wanted.
Talk about some of the successes.
There are lots of examples of great partnerships that ended up helping companies in Michigan. We started this Michigan Energy Innovation Council which had all of these clean energy businesses. It was very helpful, an initiative to let businesses shape policy to create supply and demand.
When we were going through the auto meltdown I had a very strong relationship with the industry and suppliers. We were trying to work through ways to get the White House to provide access to capital so that they would not have to completely shut down everything. That restructuring proved to be very beneficial.
Do you think Michigan’s term limits enhance the business community’s ability to influence policy?
Yes, I think it does. Lobbyists in Lansing are great, many of them very good people, very smart people and so the new members of the legislature have to rely on the advice they are given by whomever they meet with, including lobbyists. Obviously, the business community is one of their constituencies. But for the legislature, term limits in Michigan are just too short to allow legislators to develop very much expertise on their own.
But I do think that on the governor’s side, two terms are enough.
Based on your personal experience?
Yes, I think it is. You leave everything you have on the floor after two terms. You need some fresh perspective.
Jobs and business are intersecting with national issues of income inequality. What can government do to help?
I tie the growth of income inequality directly to the decline in middle class jobs through globalization and to productivity increases through robotics, with Michigan having experienced a disproportionate share of that.
Some of this is tied to international trade agreements which need to be enforced. And government has a role in that. As I said in my book, “A Governor’s Story: The Fight for Jobs and America’s Economic Future,” we’ve been a pussy cat and not a tiger at the WTO (World Trade Organization).
The question is, how government can partner with businesses to make the U.S, the states and regions, irresistible locations to create economic clusters? Some of it involves the states thinking strategically about what policies we can adopt to attract clusters that are a natural fit.
For example, if you’ve got significant supply chain potential in an area, and you have a resource base to support that supply chain and an anchor university that does supply chain research, you can start to see the beginning of a supply chain cluster.
You have to identify the products for the U.S. to be competitive in a global economy. We are not going to choose products that require repetitive motions. Rather, we need to focus on extremely complex products; products that are too heavy to ship or products that require a level of skill that you are not going to find globally.
Without a manufacturing strategy, I think we will continue to see that inequality exacerbated.
You were governor when the economy collapsed. As you look back, are there things you would have done differently to cushion the fall?
If we had had a legislature that was more cooperative, we could have made sure we accelerated infrastructure investments and all that.
We had a debate on taxes (about replacing the Single Business Tax with the Michigan Business Tax). The idea was to lower taxes for those who were providing middle class jobs. If I had to do it again, I would have simplified that.
But we didn’t always have a partner in the legislature. The efforts to invest in education were the right efforts; to get people to complete their degrees. And our efforts on diversification were the right thing.
People can blame me for the fall of the auto industry, but that is just obviously ignorance.
This conversation with Jennifer Granholm has been edited for space and clarity.