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Sunday, March 22, 2009

Elkhart's Sin

In investing there is a very simple and important concept, diversification. It of course means approximately that no one should put all of their money into one investment. That's essentially what Elkhart did with its employment opportunities. Elkhart, Indiana is the capitol of RV manufacturing. They are a manufacturing hub altogether. Since both RV's specifically and manufacturing in general are in decline so Elkhart is now the nation's leader in highest unemployment rate.



A similar situation happened to Youngstown, Ohio which saw an economic explosion when the steel industry was booming. With steel in decline, Youngstown has suffered in economic stagnancy ever since. This is of course a great balancing act for towns like Youngstown and Elkhart. They don't necessarily get much industry going through them. So every chance they get to see economic growth they must take advantage.



Yet, often towns like this are almost destined for failure. They have their boom when they are lucky enough to have the right industry finds its way through there. Then, when the market no longer is fruitful, towns like Elkhart and Youngstown are crushed.

In fact, to find long term growth these towns must be able to diversify their employment opportunities just as one industry is booming. Such is not an easy thing but the alternative is eventual economic malaise.

1 comment:

Jason Gillman said...

To some extent agree. But underlying the ability to diversify is the typical small/medium/large government types who have created the roadblocks to fast changes and recovery when one industry goes bust.

From the inability of corporate entities to hold cash reserves without penalty from year to year, to wholesale restrictiveness on how yuou manage your help, zoning etc..

Its amazing ANY business survives through tough times.