High human capital is critical to future success. Forty years ago, Montana’s per capita income ranked in the middle of the states. Now we are near the bottom. Here’s why.

Montana’s traditional economic base of agriculture, forest products, and metals has dramatically declined and has no prospects for future growth. This is the result of global long-term economic trends. For primary products and most material goods, productivity grows faster than demand. Hence, these products command a declining fraction of consumer dollars.

Concurrently, as America becomes ever more wealthy, the demand for quality education, high-end services (accounting, architecture, art dealers), and leisure all increase. On these fronts Montana has great potential -- especially if the state’s leaders recognize it and foster a favorable environment.

America has changed dramatically since MSU professor Carl F. Kraenzel published The Great Plains in Transition in 1955. He identified the major problem afflicting our region as the “social cost of space.” Markets were remote and travel expensive in both time and money.

Essentially, absentee owners treated Montana as a colonial economy. While many did well producing and exporting primary products, that time is gone. No policies can bring it back. How may we progress?

First, we should recognize that today the great resource is human capital. What attracts and retains it? Here are a few hints.

Progressive Farmer ranked Gallatin County as one of the top ten rural places to live in the West. They evaluated quality of life, scenery, and culture. ePodunk, a web site that ranks cities, placed Bozeman as the second best small college town in the country. In 2002 Men’s Journal ranked Bozeman number seven among America’s best places to live. The list goes on.

While we may resent this attention and long for times gone by, Americans traditionally seek better places to live. We become wealthier, the cost of distance continues its decline, and tastes shift toward amenities and luxuries. Meanwhile, the risks and congestion costs of large metro areas increase. These forces present great opportunities for our success.

The alternative to attracting and developing high human capital is to become an amenity-shed where locals and foreigners service wealthy outsiders. We can do better. Here are two examples.

TransAria is a local company that leverages the Internet to provide data networking solutions to businesses. It offers rural businesses state-of-the-art data communications. This fosters economic development by attracting leading-edge, “mind-based” companies. Thus, a company with high-tech needs can efficiently operate nationally and internationally from a small town like Livingston.

Another comes from Forbes publisher Rich Karlgaard. “Did I say Web entrepreneurs? Yes.... Web entrepreneurs in the boonies.” PrintingForLess.com, in Livingston, Montana, “may have unlocked the secret of successful Web commerce amid the darkest gloom of the dot-com bust.” The sales of this online printing service have grown more than ninefold over the last four years.

What if we view MSU as the “University of the Yellowstone”? I refer to much more than the Park. If you follow the Yellowstone River to Montana’s Dakota border, and trace the Yellowstone-to-Yukon habitat corridor, MSU is near the intersect. Worldwide, “Yellowstone” has unambiguously positive connotations. And if I-90 from Missoula to Billings becomes a hi-tech corridor, MSU is the logical center.

America has major universities with huge momentum and legions of wealthy alums, e.g., Berkeley, the Big Ten, and the Ivies. If others are to advance, they must exploit niche advantages. Yellowstone writ large is ours, from Anthropology to Zoology.

My recent column describing the use of global positioning systems to utilize snowcats more efficiently and safely promoted one such project emanating from MSU. There are scores of others, not all technological. Our area is a magnet for writers and historians. We’re awash in unrealized potential.

As knights sought the silver chalice, and miners the mother lode, politicians seek to redistribute wealth and opportunities. This is dangerous when it promotes waste and destruction.

There is an ethically and economically superior alternative to courting with subsidies. Recognize that the future lies in minds, not mines and primary products. Those with high incomes and social capital to invest are always drawn to locations rich in quality. Education, environmental amenities, civility, and culture attract the most productive citizens. This fact, not trolling subsidies for business, should guide public policy.