Utah and the wealth of states
Utah is frequently touted as one of the best states for business, and as we take stock of the past year, we can reflect on what makes it so. In 1776, the economist Adam Smith published his seminal work, “The Wealth of Nations,” which outlined his view on the nature and causes of national wealth. Key elements of this are present in Utah and guide the success of our state’s economic and business health. The state’s success during the pandemic and hereafter comes down to several key elements we must continue.
Targeted industry or cluster strategy
Central to Smith’s claim was that self-interest and division of labor in the economy would build mutually beneficial interdependence, leading to stability and prosperity in the market. In today’s competitive business environment, intentional private sector efforts can support the invisible hand of the market to work things out—industries need to be cultivated and built up. Industry clusters form a network of relationships that provide an overall competitive advantage for those firms.
In Utah, we support Silicon Slopes as a tech cluster along the Wasatch Front and the buildup of Tech Ridge in St. George. The technology industry has been one of the fastest-growing sectors in Utah since the Great Recession. Other targeted industries expanding the state’s economic footprint are aerospace and defense, manufacturing and distribution, life sciences, and financial services. Collectively, these industries create multiple effects around productivity, innovation, partnerships, and entrepreneurship.
A subcategory of this is fostering economic diversification. The Hachman Index measures a state’s economic diversity compared to the overall United States. Utah ranks among the top in the nation with a score of 97.1 on the index (100 represents the perfection of national diversity in the broader economy). This economic diversity, built in part upon a cluster strategy, helped provide the state the stability to bounce back quickly during the Great Recession and the pandemic.
Tax and regulatory policy
Second is the avoidance of government over-regulation in market activities, as it only acts by coercion—not free market principles like supply and demand and buying and selling through consumers and producers. Unfettered interaction allows an economic system to optimize organically. Of course, guardrails are necessary to perform a market function for order and balance, but one that bends toward free market principles.
Utah’s tax and regulatory policy continue to lead the nation in business friendliness. During the pandemic, leaders advocated for a moratorium on new regulations, and taxes were lowered during the 2022 Legislative Session. Low taxes and stable regulations are key drivers for commerce growth. The state’s economy is successful because we have calibrated these constraints toward opportunity and progress in our entrepreneurial business ecosystem.
Education and labor
Lastly, Smith did not address modern education; however, he did believe people should practice thrift, hard work, and enlightened self-interest. Nowadays, it is hard to fathom a public built for enlightened self-interest if that public did not espouse a commitment to education and learning. Thrift would lead to investment and capital to fund more commerce and innovation, and hard work is necessary for success. These concepts he advocated for are built into the fabric of Utah’s nervous system.
High-quality education, major universities, and technical colleges provide the intellectual foundation to continue building our economic might. This infusion of knowledge into the system through education advances the skills of the labor force. Utah was the fastest-growing state demographically, with a medium age much younger than the national average. These big trends enhance our chances of growing the economic pie and serving some to others.
The wealth of our state is from its people and businesses that call it home. Companies provide jobs that allow families to educate and raise the next generation of problem solvers. From cluster strategy with stable regulations and an enlightened workforce, we continue to experience innovation, skills development, and spillover into the entire economy. Adam Smith was monumental in outlining how nations can calibrate for success, and Utah leaders are modeling his thesis.