MSU Texas: The little engine that could

University remains a small but mighty economic driver for area

MSU's cheerleaders run across the field with the MSU flag after scoring against Simon Fraser on Saturday, September 24, 2022 at Memorial Stadium.
MSU's cheerleaders run across the field with the MSU flag after scoring against Simon Fraser on Saturday, September 24, 2022 at Memorial Stadium.

With respect to the local economy, Midwestern State University (MSU) is at present a relatively small, though vital economic engine. Currently, the region’s dominant economic engines are the oil and gas sector, Sheppard Air Force Base (SAFB), and the overall manufacturing sector. However, when peering into the distant future – perhaps 20 to 30 years from now – the relatively small economic engine that MSU currently embodies is likely to be among the primary locomotives on which the economic fortunes of the region will depend.

Future economic development depends on growth of the knowledge economy

The employment structure of a region is composed of its primary, secondary, tertiary, and quaternary sectors. Primary jobs involve getting raw materials from the natural environment (e.g. mining, farming, and fishing). Secondary jobs involve making things (e.g. manufacturing cars, steel, etc.). Tertiary jobs involve providing a service (e.g. sales, nursing, lawn care).

The quaternary sector is the intellectual aspect of the economy also known as the knowledge economy. It includes education, training, the development of technology, and research and development. It is the component of the economy based on human capital such as information technology, knowledge, and education. Without the growth of technology and information, economic development would likely be slow or non-existent.

MSU President Dr. JuliAnn Mazachek speaks with former MSU President Dr. Jesse Rogers during her Investiture as the Twelfth President of Midwestern State University on Thursday, November 3, 2022.
MSU President Dr. JuliAnn Mazachek speaks with former MSU President Dr. Jesse Rogers during her Investiture as the Twelfth President of Midwestern State University on Thursday, November 3, 2022.

While the trajectory of economic development does not always follow a straight-line, linear path from primary to quaternary, there is little doubt that future progress for any region will generally come to rest more on its tertiary and quaternary sectors.

What constitutes an economic engine?

Any sale of locally produced good or service that results in an inflow of income from outside sources is referred to as export activity. The production of flat glass in the Wichita Falls area is an obvious case in point.  Most of the flat glass produced locally is sold outside the area, though some is consumed locally through the indirect purchase of new vehicles.

While manufacturing and mining (primarily oil and gas exploration and production) are typically considered prime examples of an export operation, the various training programs provided at Sheppard Air Force Base are funded almost exclusively from external dollars and are just as much a form of “export” activity. While not a major export sector, most agricultural products are also sold outside the region.

The key concept of economic base theory is that export activity is the engine of growth.  Goods sold outside the region are called “basic” while those sold within the region are defined as “non-basic” or “service.” However, within this classification scheme, “non-basic” activity should not be interpreted as less important.

Could anything be more important than the services rendered by a dentist or physician when relief from excruciating physical pain is critical? A recent personal experience of one of the authors attests to this fact. Without the timely and dedicated services rendered by Dr. Avera of North Texas Ophthalmology Associates, one of the authors most likely would have lost vision in one eye.

It is because of its primary role in determining the economic health of an area that so-called “export” activity is thought to be “basic.” When sales and earnings from export activity rise or fall, sales and earnings from local markets will generally follow in the same direction, but the reverse does not necessarily follow.

The existence and growth of export industries give rise to the development of economic activities that are supportive in character. Sectors such as retail trade, transportation, and construction are generally considered “non-basic” or “service” since their output is usually consumed locally. The same is true for public education, K through 12. It is primarily consumed by local residents even though it is one of the most important support services provided in the region.

Since they are typically provided to non-local customers, the services of state universities and prisons should also be classified as export activities. For example, MSU sells most of its services to non-residents with payments received primarily in the form of tuition and fee revenues.

Current export or basic engines are sputtering

From 1900 to 1960, demographic and economic growth in Wichita Falls was relatively robust. The post-WWII expansion of Sheppard Air Force Base and ample mineral deposits meant capital investments, and a strong workforce naturally gravitated to this region. As a result, the population of the Wichita Falls metro area (comprised of Archer, Clay, and Wichita counties) grew almost seven-fold (686%), or by a whopping 3.3% annually.

Much has changed in recent years as growth has not come so easily. Since 1960, the area has experienced some population growth but nothing comparable to the previous growth period. From 1960 to 2020, the average annual growth rate for the metro area population was only a fraction of a fraction of the rate experienced in the prior 60 years.

If the local area is to see a resurgence of its earlier economic growth, the existing economic base will need to be supplemented with a potentially new and robust economic engine.

Externally directed strategies to promote future economic growth

Community leaders have relied primarily on two externally directed strategies to promote local economic growth. The first is the provision of tax incentives to attract outside businesses to the area. The second is to secure external funding, primarily by lobbying to bring state and federal dollars to the area.

Undoubtedly, such strategies have served us well in the past. However, an exclusive reliance on an external focus will not likely be sufficient for future growth and development. This does not mean that local policies are irrelevant. To the contrary, area leaders have been relatively effective in reacting to the storm and stress of events that have hit the Wichita Falls economy over the past couple of decades. Local economic development funding measures have kept the area economy from falling into a deep chasm.

However, moving forward, there is danger with an exclusive reliance on externally directed strategies. Any adverse threat to local economic performance in coming years will most likely come from factors outside our immediate influence, primarily from national and global demand shocks. As an empirical validation of that claim, just over 80 percent of local employment volatility in recent years can be traced to external forces (i.e., world demand for oil and gas, manufactured goods, and federal budget constraints).

Future economic development will come to depend on quaternary activities

As previously noted, future growth will increasingly come to depend on internal factors of control (i.e., promoting human capital as an economic development strategy). Therefore, what is needed is an internally directed growth strategy that focuses on increasing local physical infrastructure developments (i.e., roads, public schools, bridges, and recreational facilities like bike paths, trail ways, parks and lakes).

More importantly, what is needed is an internally directed growth strategy that focuses on the region’s human resource base. Human capital – the education and skills of a region’s workforce – will become increasingly important as an essential driver of local economic growth. There is a strong and well-established statistical correlation between a region’s investment in human capital and its subsequent growth in employment and earnings. This association will most likely grow stronger over time.

To be more specific, it is paramount to invest more and more physical and financial resources in higher education if local growth is to be re-invigorated. It’s important to remember that higher education is basically an export activity.

Whether the support for higher education should come from 4A and 4B economic development funds or from other financial resource options is an open question. What is not open for debate is the need for the patient commitment of capital and time by individuals, organizations, and the various local charitable foundations to our higher educational infrastructure.

Summary and Conclusions

The great conservative political philosopher Edmund Burke, once observed, "You can never plan the future by the past." While that is certainly wise counsel, past economic developments can, within limits, give us a clue about what future course of actions may hold the most promise.

As noted earlier, the trajectory of economic development is not a linear process. Nonetheless, amid the “Sturm und Drang” (storm and stress) of economic change there does appear to be deep, underlying economic forces marching inexorably from primary to quaternary development.

If that is indeed the case, then several decades from now, MSU Texas (along with the region’s other primary economic engines) has the potential to be an augmented force in helping pull the local economy over the next big mountain, or whatever hurdles may lie ahead.

But, it won’t happen simply because we will it to be so.

This article originally appeared on Wichita Falls Times Record News: MSU Texas: The little engine that could