What If Indiana Developed Beyond Manufacturing Earlier?

The Actual History

Indiana's economic evolution over the 20th century closely parallels the broader narrative of America's industrial heartland. The state established itself as a manufacturing powerhouse in the early 1900s, with numerous industries taking root across Indiana's cities and towns. By the mid-20th century, manufacturing dominated Indiana's economy, employing nearly a third of the state's workforce.

The automotive industry played a particularly pivotal role. Cities like Anderson, Kokomo, and Muncie became manufacturing hubs, hosting major operations for General Motors, Chrysler, and their suppliers. Gary and northwest Indiana developed around the steel industry, with U.S. Steel's massive Gary Works becoming one of the largest steel production facilities in the world after its establishment in 1906. Indianapolis, the state capital, diversified somewhat earlier but still depended heavily on manufacturing, with companies like Eli Lilly providing some diversification into pharmaceuticals.

Indiana's economic fortunes followed the trajectory of American manufacturing – prosperous growth from the post-World War II era through the 1960s, creating a strong middle class and stable communities built around factory employment. The 1970s, however, marked the beginning of significant challenges. Global competition, particularly from Japan and Germany, began eroding America's manufacturing dominance. The oil crises of 1973 and 1979 accelerated these trends, as American manufacturers struggled to compete with more fuel-efficient foreign products.

The 1980s brought even more profound disruption. The recession of 1981-1982 hit Indiana particularly hard, with unemployment reaching nearly 13% statewide, and even higher in manufacturing centers. This began what economists later termed "deindustrialization," characterized by factory closures, automation replacing workers, and companies relocating production overseas seeking lower labor costs.

Cities like Anderson exemplify this trajectory. In 1973, General Motors employed approximately 27,000 workers in Anderson; by 2006, the last GM facilities in the city had closed. Similar stories played out across Indiana's industrial cities, leaving economic and social scars that persist to this day.

Indiana's response to these challenges was relatively slow compared to some neighboring states. While Michigan began significant economic diversification efforts in the 1980s and Ohio invested heavily in healthcare and education starting in the 1990s, Indiana maintained its manufacturing focus longer. The state's economic development strategies continued to emphasize attracting and retaining manufacturing jobs well into the 2000s, with relatively less investment in technology, research, and service sectors.

Only in the early 2000s did Indiana begin substantial diversification efforts. Under Governors Frank O'Bannon, Joe Kernan, and particularly Mitch Daniels (2005-2013), the state implemented more aggressive economic development strategies. Daniels created the Indiana Economic Development Corporation in 2005 to replace the Department of Commerce, emphasizing a more business-oriented approach to economic development. His administration also invested in transportation infrastructure and pursued tax reforms aimed at making the state more attractive to diverse businesses.

The results of these belated efforts have been mixed. Indiana has experienced some success in attracting new industries, including technology companies to Indianapolis and life sciences firms around the state. However, manufacturing still accounts for nearly 17% of Indiana's gross state product as of 2024, substantially higher than the national average of about 11%. The state continues to rank among the most manufacturing-dependent in the nation, making it vulnerable to sectoral downturns and automation trends.

Economic indicators reflect this reality. Indiana's per capita income remains below the national average, ranking 35th among states in 2024. Educational attainment also lags, with Indiana ranking 42nd in the percentage of adults with bachelor's degrees. These factors have limited the state's ability to fully capitalize on the knowledge economy that has driven growth in more diversified regions.

The Point of Divergence

What if Indiana had begun diversifying its economy beyond manufacturing decades earlier? In this alternate timeline, we explore a scenario where Indiana recognized the vulnerabilities of its manufacturing-dependent economy in the late 1960s and early 1970s, initiating comprehensive economic diversification strategies that fundamentally altered the state's development trajectory.

The point of divergence centers on Indiana's response to early warning signs of manufacturing vulnerability between 1967-1973. Several plausible triggers could have catalyzed this earlier shift in economic strategy:

One possibility involves visionary leadership at the state level. In our timeline, Republican Governor Edgar Whitcomb (1969-1973) maintained relatively conventional economic policies focused on industrial growth and fiscal conservatism. In this alternate timeline, Whitcomb might have recognized early indicators of manufacturing vulnerability – including increasing international competition and the first signs of automation reducing factory employment – and launched a comprehensive economic diversification commission with significant authority and resources.

Alternatively, the divergence could have emerged from Indiana's business community. In this scenario, pharmaceutical giant Eli Lilly – already representing a different economic model than traditional manufacturing – might have taken a more assertive role in state economic planning. The company could have partnered with Indiana University and Purdue University to propose a comprehensive life sciences corridor spanning central Indiana, securing state backing for this vision as early as 1970.

A third possibility involves an earlier response to regional economic shocks. The recession of 1969-1970, while relatively mild nationally, could have affected Indiana more severely in this timeline, creating an urgent impetus for economic reimagining. This crisis might have prompted state leaders to study diversification models from other regions nationally and internationally, implementing lessons from places like North Carolina's Research Triangle (established 1959) much earlier than occurred in actual history.

The most comprehensive scenario combines elements of all three: a governor with unusual economic foresight, prompted by troubling economic indicators during the 1969-1970 recession, partners with forward-thinking business leaders like those at Eli Lilly, resulting in Indiana's "Economic Future Initiative" launching in 1971 – almost 35 years before similar comprehensive efforts began in our timeline.

This initiative would have represented a fundamental rethinking of Indiana's economic identity, not merely adjusting existing manufacturing strategies but deliberately cultivating entirely new industry clusters in technology, life sciences, advanced services, and education – sectors that would prove critical in the late 20th and early 21st centuries.

Immediate Aftermath

Political Realignment and Resource Allocation (1971-1975)

In the immediate aftermath of Indiana's paradigm shift, the state experienced significant political and budgetary reorientations. Governor Whitcomb's Economic Future Initiative required substantial capital investment, prompting contentious debates in the Indiana General Assembly over funding priorities. The initiative ultimately secured bipartisan support through a carefully crafted compromise: traditional manufacturing regions would receive transition assistance and infrastructure improvements alongside investments in new economic sectors.

The 1972 gubernatorial election became a referendum on this new economic vision, with Democratic candidate Matthew Welsh (who had previously served as governor from 1961-1965) defeating his Republican opponent by campaigning as a "New Economy Democrat" embracing the diversification strategy while promising not to abandon manufacturing communities. This created political continuity for the initiative across administrations.

By 1974, the state had established the Indiana Economic Development Fund with an initial capitalization of $250 million (approximately $1.5 billion in 2025 dollars) – an unprecedented commitment for a Midwestern state at that time. The fund was structured to make strategic investments in four priority sectors: life sciences, information technology, advanced energy, and professional services.

Educational System Transformation (1972-1977)

The initiative recognized that economic diversification required a dramatically different workforce than traditional manufacturing. Within 18 months of the program's launch, Indiana's higher education system began substantial reforms:

Research University Enhancement: Indiana University and Purdue University received significant additional state funding specifically targeted at expanding research capabilities in computer science, biotechnology, and advanced materials. Both universities established industry partnership offices in 1973, decades before such structures became common nationally.
Regional Campus Specialization: Indiana's regional university campuses were assigned economic development specialties aligned with their regions: IU Northwest (Gary) focused on environmental remediation and urban renewal; Ball State (Muncie) on urban planning and telecommunications; Indiana State (Terre Haute) on logistics and transportation technology.
Community College System: Most significantly, in 1973, Indiana established a comprehensive statewide community college system – Hoosier Community Colleges – almost 40 years before the actual Ivy Tech Community College achieved this status in our timeline. The system was explicitly designed to offer both technical training and pathways to four-year degrees, with campuses strategically located in communities facing manufacturing disruption.

First Wave of Industry Development (1973-1978)

The initiative's early results demonstrated both promising successes and inevitable challenges:

Life Sciences Expansion: Eli Lilly's partnership with the state accelerated dramatically. Rather than gradually expanding its Indianapolis presence as in our timeline, the company made a strategic decision to develop a distributed research and manufacturing model across central Indiana, establishing new facilities in Bloomington, Lafayette, and Muncie between 1974-1977. This approach intentionally combined university research partnerships with employment opportunities in communities facing manufacturing losses.
Technology Corridor Development: The state designated a "Technology Corridor" along Interstate 65 from Indianapolis to Lafayette, offering tax incentives for technology companies. By 1976, this corridor had attracted three notable computer firms: an IBM research center near Lebanon, a Digital Equipment Corporation facility in northwestern Indianapolis, and several smaller software development companies founded by Purdue graduates. This represented a modest but significant technology presence decades before Indianapolis's actual tech boom of the 2010s.
Manufacturing Adaptation Challenges: Not all efforts succeeded immediately. Programs designed to help existing manufacturers pivot to advanced production techniques faced resistance from both management and labor. Of the 55 large manufacturing firms that participated in the state's "Future Manufacturing" initiative between 1973-1975, only 17 successfully implemented substantial operational changes in this period. Labor unions, particularly the United Auto Workers, initially viewed diversification with suspicion, though this began changing as early layoffs demonstrated the vulnerability of the status quo.

Energy Crisis Response (1973-1974)

A crucial test for Indiana's new economic direction came with the 1973 oil crisis. While in our timeline this primarily emphasized the vulnerability of American automobile manufacturing, in this alternate timeline it became an accelerant for economic diversification:

The Welsh administration rapidly expanded the Economic Development Fund's energy innovation program, establishing the Indiana Energy Research Institute in West Lafayette in early 1974.
Previously skeptical manufacturing executives, now facing energy cost pressures alongside growing foreign competition, became more receptive to state-supported modernization programs.
Most significantly, communities that had already begun implementing diversification strategies proved noticeably more resilient to the economic shocks of 1973-1974 than those that had resisted change, providing compelling evidence for the initiative's approach.

Social and Demographic Patterns (1974-1978)

The diversification strategy began altering Indiana's demographic trends within five years:

Indianapolis and the central Indiana region experienced accelerated population growth, reversing what had been a stagnant trend.
University communities like Bloomington, West Lafayette, and Muncie began retaining significantly more graduates, creating nascent knowledge-economy clusters.
Most notably, Indiana began experiencing modest net in-migration of college-educated workers from other states by 1977, particularly from Illinois and Ohio – a striking reversal of the "brain drain" that characterized the actual timeline.

However, these benefits remained unevenly distributed. Cities that fully embraced the new direction (particularly Indianapolis, Bloomington, and Lafayette) showed substantially better economic indicators than those maintaining a primary focus on manufacturing attraction and retention (like Gary and Elkhart).

Long-term Impact

Economic Structure Transformation (1980s)

By the early 1980s, Indiana's economy demonstrated significantly different characteristics than in our timeline. When the severe recession of 1981-1982 struck, the impact revealed both the progress made and remaining vulnerabilities:

Manufacturing Evolution

Manufacturing remained important but occupied a different position in the state's economy:

Reduced Dependency: Manufacturing employment represented approximately 22% of Indiana's workforce by 1982, compared to nearly 30% in our timeline – still higher than the national average but substantially less concentrated.
Advanced Manufacturing Focus: The manufacturing that remained was increasingly specialized and technology-intensive. The state's early investment in advanced manufacturing techniques had allowed approximately 35% of its manufacturing base to transition toward higher-value production by 1983, particularly in precision components, medical devices, and specialized equipment.
Geographic Redistribution: Manufacturing employment became more distributed and diversified. Rather than concentrated masses of workers at large facilities like the Delco Remy operations in Anderson (which employed over 20,000 in our timeline), this alternate Indiana developed more numerous but smaller manufacturing operations averaging 250-700 employees, often producing specialized components for multiple industries.

New Economic Sectors

The planned diversification into new sectors showed substantial results within a decade:

Life Sciences Cluster: Central Indiana established itself as one of the nation's leading life sciences corridors by 1985. Beyond Eli Lilly's expanded presence, the region hosted over 120 biomedical companies by this point, many spun out from university research or founded by industry veterans. This sector employed approximately 28,000 workers in 1985 compared to fewer than 10,000 in our timeline.
Technology Development: The technology corridor along I-65 expanded substantially, with additional nodes developing around Bloomington and South Bend. By 1984, technology companies employed approximately 35,000 Hoosiers in software development, advanced electronics, telecommunications, and information services – sectors virtually absent in the actual Indiana economy of this period.
Professional Services Growth: Indianapolis developed as a regional hub for financial services, insurance, and business services much earlier than in our timeline. The city's downtown underwent revitalization in the late 1970s (rather than the mid-1990s as actually occurred), with major investments in office developments and cultural amenities designed to attract service sector employers.

Economic Resilience Testing

The 1981-1982 recession served as a critical test of Indiana's diversification strategy:

Differential Impact: The recession's effects varied dramatically by region and sector. Cities with more diversified economies experienced unemployment rates 3-5 percentage points lower than manufacturing-dependent communities.
Recovery Patterns: Most significantly, the recovery from this recession demonstrated the strategy's value. While Indiana's recovery in our timeline was protracted and incomplete (some communities never fully recovered), the alternate timeline showed substantially faster rebounding, particularly in regions that had embraced the new economic model.
Policy Reinforcement: This differential performance during economic crisis reinforced the diversification approach. Governor Robert Orr (1981-1989) expanded the Economic Future Initiative rather than scaling it back during budget constraints, recognizing its role in mitigating the recession's impact.

Educational Transformation (1980s-1990s)

Indiana's early investment in education restructuring yielded profound long-term changes:

Higher Education Evolution

Research Leadership: By the 1990s, both Purdue and Indiana University had climbed significantly in national research rankings. Purdue established itself among the top 10 engineering research institutions nationally by 1992, while IU's life sciences research funding tripled between 1980-1995 compared to our timeline.
New Educational Models: The Indiana higher education system pioneered several innovative approaches that would later be adopted nationally. These included the Integrated Technology Degree (combining liberal arts with technical training) introduced at Ball State in 1985, and the Community Innovation Partner program linking community colleges directly with local economic development initiatives starting in 1988.

K-12 Education Reform

Perhaps most significantly, Indiana implemented comprehensive K-12 education reforms much earlier than occurred nationally:

In 1986, Indiana introduced the "Education for Innovation" initiative, establishing specialized STEM academies in each congressional district – nearly 20 years before such approaches became common nationally.
By 1992, Indiana ranked among the top 15 states in math and science education outcomes, compared to its typical position in the bottom half of states in our timeline.
Teacher preparation programs at state universities were redesigned around inquiry-based learning methods starting in 1987, creating a pipeline of educators equipped for the knowledge economy.

Geographic and Urban Development (1980s-2000s)

Indiana's alternate economic trajectory reshaped its urban landscape and regional development patterns:

Urban Revitalization

Indianapolis Transformation: Indianapolis underwent its urban renaissance decades earlier than in our timeline. The city implemented its sports strategy (attracting major sporting events and organizations) alongside rather than instead of economic diversification, creating a multifaceted growth model. By 1995, Indianapolis had established itself as both a sports center and a significant life sciences/technology hub.
Second-Tier City Evolution: Cities like Bloomington, Lafayette, and Muncie developed distinctly different characters than in our timeline. Rather than experiencing the dramatic decline seen in many similar-sized Midwestern cities, these communities developed as technology and education centers with growing populations and rising income levels. By 2000, these cities more closely resembled Ann Arbor, Michigan or Madison, Wisconsin than typical Rust Belt communities.
Manufacturing Community Transitions: Even communities that remained more manufacturing-focused experienced different trajectories. Elkhart, while still centered on recreational vehicle production, diversified into advanced materials and design services. Anderson, following the inevitable downsizing of its General Motors facilities, developed a significant presence in electronics manufacturing and logistics services rather than experiencing the catastrophic decline seen in our timeline.

Regional Balance

Economic diversification created a more balanced regional development pattern:

Central Indiana still emerged as the strongest economic region, but growth was more distributed around the state.
The north-central region (South Bend/Elkhart/Warsaw) developed as a medical device and advanced manufacturing cluster.
Even southern Indiana, historically the state's most economically challenged region, benefited from expanded educational access and targeted development programs, particularly in advanced materials and furniture design/manufacturing.

Political and Social Evolution (1990s-2025)

The alternate economic model fundamentally altered Indiana's political and social development:

Political Transformation

Indiana's politics evolved somewhat differently in this timeline:

The state maintained its generally conservative orientation but developed a distinctive "pragmatic growth" political model that transcended traditional partisan divisions.
Economic policy consensus emerged around supporting innovation, education investment, and targeted economic development, even as social issues remained divisive.
Most notably, Indiana avoided the extreme partisan polarization that characterized many states in the early 21st century, as economic success provided a shared foundation that moderated political extremes.

Demographic Patterns

By 2025, alternate Indiana's demographic profile differs substantially from our timeline:

Total population stands approximately 15% higher at around 7.8 million (compared to approximately 6.8 million in our timeline).
Educational attainment shows the most dramatic difference: 42% of adult Hoosiers hold bachelor's degrees or higher (compared to about 27% in our timeline).
The state has attracted significantly more international immigration, particularly of skilled workers in technical fields, creating more diverse communities, especially in university towns and Indianapolis.

Economic Indicators

The cumulative effect of these changes is reflected in key economic metrics as of 2025:

Per capita income stands approximately 18% higher than in our timeline, ranking Indiana 16th nationally rather than 35th.
Economic inequality, while still present, is less pronounced, with stronger middle-class opportunities in technology, healthcare, and professional services.
Manufacturing still represents an important economic sector at approximately 12% of gross state product (compared to 17% in our timeline), but is predominantly advanced manufacturing with higher productivity and wages.

Regional Position

Perhaps most significantly, Indiana occupies a different position in the national economic landscape:

Rather than being considered a typical "Rust Belt" state managing manufacturing decline, Indiana is recognized as a Midwestern success story in economic adaptation.
The state's early diversification model has been studied and partially replicated by other Midwestern states facing similar challenges.
Indianapolis has emerged as a significant second-tier technology hub, sometimes described as "the Austin of the Midwest," with a thriving innovation ecosystem that rivals much larger metropolitan areas.

Expert Opinions

Dr. Rachel Morowitz, Professor of Economic History at the University of Michigan's Institute for Regional Economic Innovation, offers this perspective: "Indiana's alternate pathway represents a fascinating counterfactual to the actual Rust Belt experience. What makes it particularly instructive is the timing – the early 1970s represented a crucial window when manufacturing vulnerabilities were becoming visible but before deindustrialization had progressed too far to manage effectively. By recognizing and responding to these signals decades earlier than actually occurred, this alternate Indiana didn't avoid manufacturing disruption entirely, but rather managed it as a controlled transition rather than an economic emergency. The diversification strategy's success would have depended on visionary leadership willing to make politically difficult investments in future growth rather than attempting to preserve an unsustainable status quo – something remarkably rare in American regional economic policy."

Dr. James Harrington, Director of the Center for State Economic Competitiveness at Georgetown University, provides a more cautionary analysis: "While this alternate timeline for Indiana presents an appealing vision, we should recognize the immense challenges such a transition would have faced. The 1970s economic context featured stagflation, energy crises, and fiscal constraints that limited public investment capacity. Moreover, the early knowledge economy lacked many of the technological foundations that later enabled digital transformation. Indiana's alternate path would have required not just foresight but extraordinary political consensus to sustain investments through multiple electoral cycles and economic downturns. The state would have faced resistance from entrenched interests in manufacturing, labor, and traditional education. That said, even partial implementation of this strategy would have positioned Indiana markedly better for the inevitable economic transitions of the late 20th century."

Former Federal Reserve economist Dr. Kayla Washington notes: "The Indiana counterfactual highlights how path dependency shapes regional economic trajectories. Small differences in timing and approach to economic transition can compound over decades into dramatically different outcomes. What's particularly notable about this alternate timeline is how early intervention could have mitigated the social dislocation that accompanied manufacturing decline. By initiating diversification before crisis forced it, this version of Indiana could have preserved community cohesion and social capital while building new economic foundations. The lesson for today's policymakers facing technological disruption in industries like retail, logistics, and even knowledge work is clear: proactive transition strategies, even if initially more costly, ultimately produce better outcomes than reactive crisis management."