It wasn't hard to spot the beast. He was the lumber mill, the aluminum plant, the mine.
You just took all your economic development eggs, stacked them in a single basket, and gave it to the gorilla for lunch.
Swanson heads the Regional Economy Program at the Missoula-based O'Connor Center for the Rocky Mountain West, and believes Montana towns need a new understanding of the new economy if they are to find new and successful ways to attract quality jobs.
"Today," Swanson said, "the way to go after it is to find ways to steadily improve and develop your work force. You need to pay attention to the amenity factors - the good schools and the open space. Twenty years ago, they liked to say 'you can't eat the scenery.' But now the scenery, the environment surrounding your town, has become the setting for your economy. The setting is the reason the economy is here."
Swanson has been tracking national and statewide economic trends for years, and what he's seen has convinced him a "sea change" took place in the late 1990s, altering forever the way the economy is shaped.
It started in the 1980s, he said, back when big companies were "vertically integrated." That is to say, they owned the entire operation from top to bottom. They owned the forest and the logging operation and the trucking outfit and the mill and often the retail lumber yard. They had their own advertising departments, their own legal departments, and they were big and cumbersome, with hundreds and thousands of employees.
"But in the mid-1980s," Swanson said, "all that began to change." Big business found itself struggling to maneuver in a rapidly changing global economy. All those employees were expensive, and all those company tentacles tangled the process of doing one thing and doing it well.
And so began the layoffs. Companies consolidated, found ways to outsource much of the work. They shed tentacles, focused on one thing and hired out the rest.
But oddly, even as companies laid off hundreds of thousands of workers, employment numbers grew. Those laid-off employees, Swanson said, became the small-business owners who did that outsourcing work for their former big-business bosses.
"The vertically integrated mega-corporation was replaced by the flexible manufacturing network," he said.
No longer was a car made in Detroit. Instead, it was made in 100 towns around the world. One firm built the dials and knobs. Someone else built the handles and latches. Others built other parts, and the company that used to do it all focused only on putting the parts together.
Jobs were outsourced, and people fled big-business centers such as Detroit.
"That fed small-business development," Swanson said. "As we moved from vertical integration to flexible networks, we created hundreds of thousands of companies. And they can be anywhere. They've spread out around the world, and that's fundamentally changed the way we do business."
Nowadays, you can make the machines that make computer chips, and you can make them in Kalispell. You can build one tiny part for the F-22 jet, and you can do it in Helena.
"Just look at the Gallatin Valley," said Rena Carlson, information officer for the Helena office of the U.S. Small Business Administration. "There's a half-dozen companies down there, and they all do a slice of the work for one another. Together, they make a whole pie. They all rely on each other. It's happening in every town. Small business is the growing business, and small business can set up anywhere."
"All the employment growth, all the expansion, is coming from small business," Swanson agreed. "It's absolutely not coming from big business." Add to this "sea change" a few key demographic shifts, he said, and a whole new economy emerges.
There was a day not so long ago, Swanson said, when Montana towns saw three-quarters of their income come from labor earnings.
But the population is aging, he said, and the flexible networks have allowed a whole new breed of income earner to live in Montana. More people are of an age where they enjoy some amount of investment income, and more are collecting retirement and Social Security checks.
Increasingly, the income from labor earnings is slipping toward a 50-50 split with other income sources.
That, combined with the spread of small business, has made for a much more mobile population, he said.
In today's world, Swanson said, the jobs follow the people, and the people follow the local amenities.
"They make quality-of-life decisions," he said, "and they bring the economy with them."
Which brings us back to that new way of doing economic development.
"Some towns are still looking for that next big company," Swanson said. "They're willing to gamble it all on that next big player. That's a backward way of looking at things, a rear-view mirror approach. They need to find ways to attract lots of different kinds of small business, not one big business."
How to do that?
"Develop and train a skilled work force," he said. "Build an infrastructure so workers can continually train and retrain."
Then, he said, offer those skilled workers a nice place to live, with open space and good schools and bike paths and quality health care and a clean environment. Build some growth-management guidelines for your town, and protect what makes it appealing.
"Unfortunately, most places will just flat-out kill their economies by destroying the amenities," he said. "It's all coming - the good, the bad and the ugly. Communities have to figure out how to get the good, limit the bad, and avoid the ugly. I mean, if you trash it, what do you have to work with?"
The folks in local and statewide economic development offices need to "find a way to put themselves in the path of the new economy," he said.
In Montana, 83 percent of all jobs and 83 percent of all payroll comes from small- (one to 49 employees) or medium-sized (50 to 250) businesses, or that 99.8 percent of all business in the state are small- or medium-sized. Since 1980, small and medium sized businesses saw employment and payroll grow as a percentage of the whole, while big business jobs and payroll shrank as a percentage of the whole.
"If you want to put your economic-development resources where they'll do the most good," Swanson said, "then you'll put them in small business. That means throwing out the rear-view mirror and accepting the reality of the economic present and future."
Carlson at the SBA agrees.
"Small business is absolutely a much bigger slice of the pie than it's ever been," she said. "We need to think about ways to bring in small business and not always focus on some big business promise. Small business keeps money in local economies - one thing just spurs another."
Carlson also agrees that one way to attract tomorrow's jobs is to protect the things that make Montana towns special.
"It makes sense to protect your amenities," she said. "That's the kind of thing that would certainly attract me if I was looking for a place to do business. I mean, why go to a place you don't want to be to open a business? Who would do that in today's economy?" "We need to look at the economy in a whole new way," Swanson said. "What's driving our economy today is the attractiveness of the area. The world is looking for a nice place to do business, and the world wants to know, what do you have to offer?"
Reporter Michael Jamison can be reached at 1-800-366-7816 or at mjamison@missoulian.com
If you're interested
This is a condensed version of a story that appears in the summer issue of Western Montana InBusiness, the Missoulian's quarterly business publication. Economic development and taking stock of Montana's economy are the themes of the summer issue. For information about subscribing to Western Montana InBusiness, call Nancy Ludemann at 523-5285. For more information, visit http://www.mtinbusiness.com/current on the Web.
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