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P o t

/

Address by
Frederick L. Denting
President, Federal Reserve Bank of Minneapolis
at the
Dedication of The School of Business Buildi w
State University of South Dakota
ytxl 19, 19 s*

It is a great pleasure for to to be with you today on the occasion
of dedica-4. i the new School of Business Building.
g

If I read the calendar

correctly, the School of Business was established by action of the Regents
of Education just thirty years and eleven months ago today, and the first
gradual.i

class to receive the Bachelor of Science in Business Administration

got its diplomas on June 3, XS29 » just about 29 ^ears a^o. While some of the
students here may feel that this is ancient history, actually neither of these
dates

is very lar back in time.

And yet

t to the period between the establish­

ment of this school and tiis dedication ceremony today have beeo packed sow
tremendously

Important events.

the underlying forces leading to the Great Depression of the lio ‘
s
were wo stag when

this School of Business was founded.

The stock market crash

ease just alter tie first class of graduates went out to get jobs,
broke out a decade later.

The atomic

Jor*w

Mar II

bomb, the whole question of nuclear weapons,

the cold war, the great post-war boom, and now the current recession all have
com m the last half of the period. The World, the united States, and South
Dakota are far different from what they were

years ago, and they live u^der

far different conditions.
T is new buildi ig which is being dedicated here today is symbolic of
I
a new order in the State of South Dakota, a new order in which business and
resource development is to play an increasingly iroportant role. Agriculture,
of course, continues to be ihe most important single industry in the State,
but Lie iwahQT



of people engaged in farming is becoming smaller.

On the other

-

lu d,
ii

2

-

the niaabsi of people interested in non-agricultural business pursuits

is rapidly expanding.

Thirty

years fttm now the agricultural-Industrial pattern

in South Dakota is not lively to resemble very closely the pattern that exists
today.
It

is significant, I think, that Governor Foss started an accelerated

industrial program in 1955 with his IDEA - the Industrial Development Expansion
Agency.

this agency has already emphasised that South Dakota has the things

which industry

needs * resources, people, power, and vision, When this IDEA

is linked with such fine n m facilities as the one being dedicated here today
It say veil

play an important part in achieving your objectives for growth and

development.
The contribution

which the South Dakota School of Business can make

to economic development is substantial.
by this

This

has been demonstrated already

school and by the other 92 Schools of Business in this country.

I

aote that of ail the colleges which make up the University of South Dakota,
the school of Business is the largest
to

of the professional schools.

It seems

me significant that oi a total enrollment of 2,300 students, 14 per cent

are enrolled in the School of Business, because it seems to indicate that
the young wmt and women of South Dakota seas© the importance of business
development opportunities here in this State.
themselves

The

students should consider

fortunate that the State has provided them with such first class

educational

facilities as are demonstrated here in this new building. They

should be thankful, too, that the school is small enough that personal contact
between the stude t and che faculty can be quite close.

I

am sure that

Bean Patterson and the faculty recognise the advantages of new facilities and
size

of school in the teaching process.
This aorning I stopped to look at the words on the bronze plaque

near the west entrance of
any

the building.

1 read that "There is no future in

job, the future is in the man who holds che jo b ."




If this is the philosophy

3

*

-

of Dean Patterson, the faculty and the students, as 1 am sure it is, then
the eumomic potential of South Dakota is bright indeed.
I became
than

a reside it of this Upper Midwest area Just a little more

a year ago, and over the past year I have tried to leam as much as I

could about the region

se-ved by the Federal Reserve Bank of Minneapolis,,

the Kinth Federal Reserve District,

I

am still a relative newcomer, of course,

and I know that one cannot learn all about an area as vast as the Ninth District
n. i lifetime, let alone a year.

S till, so w c Im s newcomers can get a sense

of broad outlines, fclie panorama as it were, of a region in a short time, partly,
1 suspect, because their vision is not distorted by a lot of things which used
to be so but no longer are.
The Minth Federal gaserve District, as you may know, coders a
considerable

east-west distance - over 1600 miles from the Great Lakes to the

Columbia Basin, Central to this vast region lies South Dakota.

South Dakota

occupies a unique position within the Ninth Disttict's agricultural economy

spanning as it does two major and contrasting agricultural areas - the midwestem
Cora Belt on t i east and the Great Plains wheat and rangeland on the west.
le
1 d as such it shares» from an agricultural standpoint

the problems and the

promise of each area.
A
study

good part of «gr learning efsor*. during d*e past year lias gone into

of the economy of the region, the trends that have shaped it , and the

problems of fostering optiism development over the years ahead. You know, of
co rse,

’t a 1 have learned*
sot

agricultural of all states.

from agriculture.

that South Dakota

is among the moat heavily

Almost a third of South Dakota's income arise*

In a sense perhaps, South Dakota personifies the agricultural

heartland of the American interior plains. Mash of what has occurred and much
of

what will occur will be strongly imprinted with the progress of and the

developments in



the agriculture of the Great Plains.

m t »•
%
Yet
industry

tt la becoming increasingly clear that another element -

- will be much taore oi a factor to the bouch Dakota xuture than it

has bees in the p«st*

State and private groups working together and singly

have taken fresh steps to encourage the establislaraenu aud growth of industry
in South Dakota*

Two benefits

of an agricultural area.

The

are usually ascribed to the Industrialisation
first of these is the promise of greater

.•stability by virtue of lessened dependence 0,1 one taajor sovrce of income.
The
m

second comes in the fona of expanding job opportunities for young people,
^ of whom typically emigrate in large numbers fro® fam-heavy areas to

other areas where opportunities are taore plentiful. One of this University's
own

studies, through the Business Research Bureau* lias identified this situa­

tion as an "imbalance of incase sources*', pointing out that agricultural
income in
paystents

a recent year accounted for raore of South Dakota's total income
than it did in any other state.

Agricultural income, in

fact, m s

the direct source of 32.5 per cent of the State’ s income paymnts conquered
with a national average oi only 5.3 per cent, while
l

i

manufacturing payrolls

South Dakota comprised only 4 .5 per cent of the total Income as coispared

with a national average of 25.7 per cent.
evidenced the

Other

statistical reports have

heavy out-migration from South Dakota and the actual loss of

population that has occurred during some recent decades.
This outflow of population, while

it has cost South Dakota the ser­

vices of a lot of very good people, has been the result of an underlying

economic development that lias worked to the benefit of the nation's standard
of

li\ing overall.

The rapid evolution of a taore efficient, more productive

fara economy has resulted in the transfer of many persons fro© farm and small
farm commnities to manufacturing centers, where they could aid did contribute
most effectively
that this has



to the product of our national economy,

While we recognize

been a useful economic trend, it has want difficult social

adjustments

for some Individuals.

It would be desirable on both economic and

social grounds to speed the day when some of the growing manufacturing centers
will be located within oar own area.
Industrial

promotion has received a new vigor In South Dakota.

the Industrial Development

Both

Scansion Agency, as a coordinating and research

agency, and th© Industrial Development Credit Corporation, as a financing
agency,

a eat to this fact.

The former

emphasises research and information

while the latter provides a channel through which capital loans may be made
to ;>~osuSing sew enterprises in the State.

This type of credit unit, incident­

ally, ha® been essployed with success to other parts of the country, notably in
the tJew England States, although it is a relatively new development here.
There

seean* to oe good evidence that the accelerated indvStcial

developme it program
of IDEA indicated
in

the State.

started in 1955 h s begun to pay o ff.
a.

The

recent report

that in 1957 alone, twenty-two new industries were established

These have an estimated plant investment

of $30.8 million, over

400 employees* and an annual payroll of $1.4 million,
I think it is particularly significant that research and information

functions receive the attention they do, both within the state IDEA organization
and here at the University's School of Business Administration where the
Business Research Bureau has distinguished itself with

studies of various aspects of the South Dakota economy.
work of free enterprise,

a number of informative
For within the frame­

the basic usefulness of industrial development promo­

tional groups is their contribution toward improving and clarifying Information
from which the decisions of enterprise are made.
We mi^ht distinguish two types of research in which state agencies

frequently play a part.

Physical

research into raw materials and processes

is one uype of research that has paid dividends in cases where it demonstrated
the possibilities of economic use of existing resources previously unprofitable



to « pioit.

A case in point is the research carried on at the University of

Minnesota which Has materially contributed to the successful exploitation of
taconite, already resulting in a half-billion dollar private investment
program

and the promise of eventually doubling this figure.
But another kind of research is economic research, and one which

is duly etaphasined by both IDEA and the Business Research Bureau nere at the
University,

This

type of research seeks to describe the econotfty and identify

i s strengths and weaknesses.
t*
and localities which nay

development in

It can provide

factual inforraation about states

be used both by agencies seeking to promote industrial

the state and for comparative purposes by industries which are

analysing prospective locations.

it can provide also a basic yardstick, which

aay, over periods of f t s be used to measure the effectiveness of industrial
ee,
programs

and the intact o£ growing industrialisation on the state economy.
Ot '«r fields of economic research include the more subtle areas of

analysis of economic growth and decline, and the coap'lex interflows of goods
and money paytaents between the regional economies. In this area of regional
research the
same

Federal Reserve Ba- has strong interest.
w*

o u hope that

of the work of our own research staff may co^pl«wmt the efforts of

various state and local
sooe

It is

ageacies to essawlae* in a regionally-oriented way,

of the same problem you are concerned with on a state level.
Based on past research we have a better

understanding of the forces

which shape our eeaaoay * those that mist be accounted *or in examining the
*
potentials of a

state or local economy.

evaluate factors inportant
One

We also are in

better position to

to future economic growth in South Dakota.

such factor, of course, is natural resources.

South Sakata has

some extensive mi.ieral resources not now exploited (including lignite,
and other

low grade ores) « > also smm procoising possibilities in oil production
;d

as a part of tne vfiilistou Basin.



manganese,

While

the inaaediate future of these and other

•

7

“

resource possibilities is uncertain, they m y in time support sotae measure of
industrial development by virtue of the locational advantages such resources
may offer.
Another factor is population, important both in terms of increase
and training.

You know, of course, that the United States is experiencing a

strong uptrend in population and that the worsting force is becoming steadily
better educated and better trained.

Despite this latter fact, there is con­

siderable emphasis now being placed on even better education and training.
Generally speaking, more people with better training should produce more goods
and services.
When we couple the above developments with the trends toward greater
industrialization and greater decentralisation of industry, we have a very
important potential growth factor for this general region.
brought rauch new industry into our area.

It has already

As a matter of fact, the efforts of

promotional groups in demonstrating the advantages of a state such as South
Dakota have been furthered appreciably by this factor.
While we stay expect over the course of tirae some shift from agriculture
to industry in South Dakota, agriculture will remain a highly important, perhaps
the most important, determinant of growth in the State.

Thus the progress and

probleas of Great Plains agriculture holds a large share of the answer to South
Dakota's potential.

This agricultural factor is important for two reasons.

The technological revolution in farming seems bound to proceed further in the
direction of larger and more efficient Caras.

This should lead to a stronger

agriculture with a higher per capita income base.

It also should lead to a

continuation of the trend to smaller rural population and hence to the release
of store people to man expanding nonfarct activities.

I would hope that much of

that expanding nonfar© activity could be located here, because then the State
could keep its people as well as have higher per capita income.



-a Superimposed on this fundamental trend in agriculture is a contrast­
ing movement of currently uncertain but conceivably significant dimensions.
The introduction of the Missouri Basin water conservation and development
program may have an important impact in many large areas where semi-aridity
holds agriculture to dry land cropping and grassland ranching.

The

introduc­

tion of irrigation units, if carried to the full scale now envisioned, will
directly involve a greater density of fans operators, and could lend greater
flexibility and diversity to the agricultural product of the State.

1 note

that in areas proposed for new or supplemental irrigation in the Missouri
Basin 34,000 farms are located presently, but an additional 1 9 ,out farms
might be expected with the introduction of the smaller, more intensively-farmed
irrigation tracts.

This would augpent materially the number of earning and

spending units in some areas, and would moderate the trend to a smaller farm
population.
Just as these factors may alter former dependencies on a traditional
rainfall-sensitive type of agricultural enterprise, another large scale project
may alter other traditional relationships in the interior plains.

The St.Lawrence

Seaway may well have considerable impact on transportation and marketing rela­
tionships.

South Dakota, at the geographic center of the continent, will soon

lie within 300 miles of a full-fledged ocean port.

And while it is not at all

obvious from our usual concepts, Duluth is actually some 500 miles closer by
water to England, Belgium and Germany than is the port of Hew Orleans.

Prelim­

inary studies, while at this time merely suggestive, indicate substantial savings
on shipping costs on some commodities; for instance, wheat may move from South
Dakota to Europe through the Seaway at a substantial cost saving.
I think the important thing to be gained fro® these observations is
simply the fact that forces of change are now strongly at work, and that these
forces can and probably will alter the former patterns of South Dakota's economy.



.

9

-

It seems to me then after sty brief survey that the outlook for South Dakota
is a favorable and a promising one pointing in the direction of greater diver­
sity and stability - all of this of course predicated upon a favorable environ­
ment on a national scale.

And this brings me to the final point I wish to

discuss today - the general subject of economic growth and economic stability.
It is important to recognise that of all the factors making for
economic growth in South Dakota the key factor is the state of national
economic health.

You know, of course, from your experience that a strongly

expanding national economy does not assure a strongly expanding state economy.
You know also, because you can see it at present, that for a time the state
economy can grow sobs even though the national eco iooy is level or declining.
But I am sure that no region or state can attain its full potential unless the
national economy is strong and prosperous.
At present we are in the midst of economic recession in production
and employment.

This decline set in during the latter part of 1957 and has

continued so far in 1958.

To date the decline reflects mainly two factors:

decreased expenditures for inventory and for new plant and equipment.
I believe that it may be said that the current recession had many
of its roots In the inflationary situation that prevailed during much of the
postwar period.

The same two factors that now are weak were very strong

during the big boom of 1955, 1956 and most of 1957.

In fact, I believe that

they were too strong during that period and that is why they have adjusted
downward in recent months.

Buying for inventory and spending for plant was

both fostered by and contributed to the rising price trend of the past three
years.
I do not believe that the present recession will be a long recession.
It does not seem to be feeding upon itself much more than did the other two
postwar dips of 1948-49 and 1953-54, although it has gone deeper, faster than



10

-

either of those two.

-

But I do not intend to analyse the causes, nor predict

the course of the present downturn.

I note it because it poses questions

relating to the subject of growth with stability.
The economic record of the whole postwar period shows three major
trends, two favorable and one unfavorable.

Me have had tremendous economic

growth with high emplojraaent and high income and consequently have enjoyed a
rising standard of living.

Me have seen an acceleration of the rate of

productivity gain which, if it can be Maintained, promises an even more
sharply rising standard of living in the future than we have had In the
past dozen years.

But we also ham experienced a considerable rise in prices

which has eroded the purchasing power of the dollar and thereby robbed us of
some of the gains that rising productivity and rising output should have
brought.

"Hie great domestic economic question for the future is: can we have

full employment of men, machines and materials, can we have steady economic
growth and a rising standard of living,, and at the same time preserve a stable
dollar.
My own feeling is that

we have to strive for attainment of all three

economic goals - growth, high employment and price stability, or we have little
chance of attaining any of them.
can employ our

In essence they are inseparable.

Unless we

human and material resources at a high level we experience

economic waste and consequently retard the optimum rate of economic growth.
Unless we maintain reasonable price stability we create conditions that lead
to overful employment of resources, or to inefficient use of those resources,
or both, and consequently
present.

to painful readjustments similar to those we see at

This also is a wasteful process and retards economic growth.

And

finally, to go right around the circle, unless we have economic growth we
cannot employ fully

the human and material resources that we have available.

So my answer to the original question 1 asked is that we not only can have



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11

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growth, full maploynent and price stability, but that we have to have them
a ll.

And this point is as important to South Dakota as it is to the nation

as a whole.

Unless these goals are attained

at-ionally, the prospects for

growth and development in South Dakota are dim.
The federal Reserve Bank of Minneapolis has a deep interest in the
growth potential of South Dakota because South Dakota is an important part
of the llitifch Federal Reserve District,

The Federal Reserve System, of which

the Minneapolis Bank is just one part, has an even deeper interest in this
whole question of growth and stability.

The central purpose of the System is

to influence the supply, coat and availability of money and credit so as to
prostoce a high level of ejaployment, a rising standard of living and a stable
dollar.

Thus we see these goals as inseparable.
1 wish to make just two points about the Federal Reserve System's

pursuit of these goals.

First, the fact that the System attempts to shape

its policies to their attainment cannot assure the goals.

The System is a

powerful force for growth and stability; good monetary policy is indispensible
in making for high employment, growth and stable prices, but it is not a
panacea for all economic ills .

It cannot do the whole job all by itself.

Second, effective monetary policy means flexible monetary policy.
The System leaned heavily against inflation la 1955, 1956 and much of 1957.
It followed a restrictive monetary policy and this led to so-called "light
money" and rising interest rates.
turned from restriction to ease.
plentiful and cheaper.

Since last fa ll, monetary policy has
It has sought to make bank reserves more

But just as the restrictive policy, by itself, could

not prevent all excesses on the inflationary side, neither can the policy of
ease, by itself, assure recovery.
conducive to and necessary for




It has, however, created credit conditions

recovery.

-

12

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Insofar as Che Federal Reserve is able to contribute toward national
stability, the System plays a part in fostering tt*e kind of environw.it in
which your State may best achieve its desired goals of economic growth a id
diversification,

tod it is only within a broade” franvwork of national growth

and stability that the institution to be housed in this fine, new structure we
are here dedicating can realize to the utmost its high promise of a useful
role in the future progress of South Dakota.




STATE UNIVERSITY OF SOUTH DAKOTA
75th Anniversary

Z&edicatiotx^
of the

^School o} zBudinedd




<
^Buildincf

Saturday, April 19, 1958
Dedication Address Delivered by
FREDERICK L. DEMING
President Federal Reserve Bank
Minneapolis, Minn.

Vermillion, South Dakota

FOREWORD
The academic year 1957-58 marks the 75th anniversary of the
establishment of the State University of South Dakota. As a part of
the observance of this historic year, the dedication of the new School
of Business building was held on April 19, 1958.
The School of Business was established by the Regents of Educa­
tion in 1927. The dedication of the new $650,000 building was an ap­
propriate climax to thirty years of growth and development in colleg­
iate education for business at the State University of South Dakota.
The principal address on this occasion was delivered by Frederick
L. Deming, President of the Federal Reserve Bank at Minneapolis. An
economist by training, Mr. Deming came to the presidency of the 9th
Federal Reserve District bank in 1957 after being associated with the
Federal Reserve Bank in St. Louis since 1941.
Mr. Deming’s address was most appropriate to the occasion and
demonstrated a keen understanding of the economic problems and po­
tentialities of the plains region. W e are happy to make this outstanding
speech available to a wider audience.




R. F. P A T T E R S O N
Dean of the School of Business

South Dakota's Economic Future
It is a great pleasure for me to be with you today on the occasion
of dedicating the new School of Business Building. If I read the calen­
dar correctly, the School of Business was established by action of the
Regents of Education just thirty years and eleven months ago today,
and the first graduating class to receive the Bachelor of Science in
Business Administration got its diplomas on June 3, 1929—just about
29 years ago. While some of the students here may feel that this is an­
cient history, actually neither of these dates is very far back in time.
And yet into the period between the establishment of this school and
this dedication ceremony today have been packed some tremendously
important events.
Th underlying forces leading to the Great Depression of the 1930’s
were working when this School of Business was founded. The stock
market crash came just after the first class of graduates went out to
get jobs. World W ar n broke out a decade later. The atomic bomb,
the whole question of nuclear weapons, the cold war, the great post-war
boom, and now the current recession all have come in the last half of
the period. The World, the United States, and South Dakota are far
different from what they were 30 years ago, and they live under far
different conditions.
This new building which is being dedicated here today is symbolic
of a new order in the State of South Dakota, a new order in which
business and resource development is to play an increasingly important
role. Agriculture, of course, continues to be the most important single
industry in the State, but the number of people engaged in farming is
becoming smaller. On the other hand, the number of people interested
in non-agricultural business pursuits is rapidly expanding. Thirty years
from now the agricultural-industrial pattern in South Dakota is not
likely to resemble very closely the pattern that exists today.
It is significant, I think, that Governor Foss started an accelerated
industrial program in 1955 with his ID E A —the Industrial Development
Expansion Agency. This agency has already emphasized that South
Dakota has the things which industry needs— resources, people, power,
and vision. When this ID E A is linked with such fine new facilities as
the one being dedicated here today it may well play an important part
in achieving your objectives for growth and development.
The contribution which the South Dakota School of Business can
make to economic development is substantial. This has been demon­
strated already by this school and by the other 92 Schools of Business
in this country. I note that of all the colleges which make up the Uni­
versity of South Dakota, the School of Business is the largest of the
professional schools. It seems to me significant that of a total enroll­
ment of 2,300 students, 14 per cent are enrolled in the School of Busi­
ness, because it seems to indicate that the young men and women of
South Dakota sense the importance of business development oppor­
tunities here in this State. The students should consider themselves
fortunate that the State has provided them with such first class educa­
tional facilities as are demonstrated here in this new building. They
should be thankful, too, that the school is small enough that personal
contact between the student and the faculty can be quite close. I am
sure that Dean Patterson and the faculty recognize the advantages of
new facilities and size of school in the teaching process.
This morning I stopped to look at the words on the bronze plaque
near the west entrance of the building. I read that “There is no future
in any job, the future is in the man who holds the job.” If this is the




—

3

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philosophy of Dean Patterson, the faculty and the students, as I am
sure it is, then the economic potential of South Dakota is bright indeed.
I became a resident of this Upper Midwest area just a little more
than a year ago, and over the past year I have tried to learn as much
as I could about the region served by the Federal Reserve Bank of
Minneapolis, the Ninth Federal Reserve District. I am still a relative
newcomer, of course, and I know that one cannot learn all about an
area as vast as the Ninth District in a lifetime, let alone a year. Still,
sometimes newcomers can get a sense of broad outlines, the panorama
as it were, of a region in a short time, partly, I suspect, because their
vision is not distorted by a lot of things which used to be so but no
longer are.
The Ninth Federal Reserve District, as you may know, covers a
considerable east-west distance— over 1600 miles from the Great Lakes
to the Columbia Basin. Central to this vast region lies South Dakota.
South Dakota occupies a unique position within the Ninth District’s
agricultural economy spanning as it does two major and contrasting
agricultural areas—the midwestem Corn Belt on the east and the Great
Plains wheat and rangeland on the west. And as such it shares, from
m agricultural standpoint, the problems and the promise of each area.
A good part of my learning effort during the past year has gone
into study of the economy of the region, the trends that have shaped it,
and the problems of fostering optimum development over the years
ahead. You know, of course, what I have learned: that South Dakota
is among the most heavily agricultural of all states. Almost a third of
South Dakota’s income arises from agriculture. In a sense perhaps,
South Dakota personifies the agricultural heartland of the American
interior plains. Much of what has occurred and much of what will occur,
will be strongly imprinted with the progress of and the developments
in the agriculture of the Great Plains.
Yet it is becoming increasingly clear that another element— in­
dustry—will be much more of a factor in the South Dakota future than
it has been in the past. State and private groups working together and
singly have taken fresh steps to encourage the establishment and
growth of industry in South Dakota. Two benefits are usually ascribed
to the industrialization of an agricultural area. The first of these is
the promise of greater stability by virtue of lessened dependence on
one major source of income. The second comes in the form of expand­
ing job opportunities for young people, many of whom typically emi­
grate in large numbers from farm-heavy areas to other areas where
opportunities are more plentiful. One of this University’s own studies,
through the Business Research Bureau, has identified this situation as
an “imbalance of income sources,” pointing out that agricultural income
in a recent year accounted for more of South Dakota’s total income
payments than it did in any other state. Agricultural income, in fact,
was the direct source of 32.5 per cent of the State’s income payments
compared with a national average of only 5.3 per cent, while manu­
facturing payrolls in South Dakota comprised only 4.5 per cent of the
total income as compared with a national average of 25.7 per cent.
Other statistical reports have evidenced the heavy out-migration from
South Dakota and the actual loss of population that has occurred dur­
ing some recent decades.
This outflow of population, while it has cost South Dakota the ser­
vices of a lot of very good people, has been the result of an underlying
economic development that has worked to the benefit of the nation's
standard of living overall. The rapid evolution of a more efficient,
more productive farm economy has resulted in the transfer of many
persons from farms and small farm communities to manufacturing




—

4

—

centers, where they could and did contribute most effectively to the
product of our national economy. While we recognize that this has
been a useful economic trend, it has meant difficult social adjustments
for some individuals. It would be desirable on both economic and social
grounds to speed the day when some of the growing manufacturing
centers will be located within our own area.
Industrial promotion has received a new vigor in South Dakota.
Both the Industrial Development Expansion Agency, as a coordinating
and research agency, and the Industrial Development Credit Corpora­
tion, as a financing agency, attest to this fact. The former emphasizes
research and information while the latter provides a channel through
which capital loans may be made to promising new enterprises in the
State. This type of credit unit, incidentally, has been employed with
success in other parts of the country, notably in the New England
States, although it is a relatively new development here.
There seems to be good evidence that the accelerated industrial de­
velopment program started in 1955 has begun to pay off. The recent
report of ID E A indicated that in 1957 alone, twenty-two new industries
were established in the State. These have an estimated plant investment
of $30.8 million, over 400 employees, and an annual payroll of $1.4
million.
I think it is particularly significant that research and information
functions receive the attention they do, both within the state ID E A
organizations and here at the University’s School of Business Adminis­
tration where the Business Research Bureau has distinguished itself
with a number of informative studies of various aspects of the South
Dakota economy. For within the framework of free enterprise, the
basic usefulness of industrial development promotional groups is their
contribution toward improving and clarifying information from which
the decisions of enterprise are made.
W e might distinguish two types of research in which state agencies
frequently play a part. Physical research into raw materials and pro­
cesses is one type of research that has paid dividends in cases where it
demonstrated the possibilities of economic use of existing resources
previously unprofitable to exploit. A case in point is the research
carried on at the University of Minnesota which has materially con­
tributed to the successful exploitation of taconite, already resulting in
a half-billion dollar private investment program and the promise of
eventually doubling this figure.
But another kind of research is economic research, and one which
is duly emphasized by both ID E A and the Business Research Bureau
here at the University. This type of research seeks to describe the
economy and identify its strengths and weaknesses. It can provide fact­
ual information about states and localities which may be used both by
agencies seeking to promote industrial development in the state and
for comparative purposes by industries which are analyzing prospective
locations. It can provide also a basic yardstick which may, over periods
of time, be used to measure the effectiveness of industrial programs
and the impact of growing industrialization on the state economy.
Other fields of economic research include the more subtle areas
of analysis of economic growth and decline, and the complex interflows
of goods and money payments between the regional economies. In this
area of regional research the Federal Reserve Bank has strong interest.
It is our hope that some of the work of our own research staff may
complement the efforts of various state and local agencies to examine,
in a regionally-oriented way, some of the same problems you are con­
cerned with on a state level.
Based on past research we have a better understanding of the




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forces which shape our economy— those that must be accounted for in
examining the potentials of a state or local economy. W e also are in
better position to evaluate factors important to future economic growth
in South Dakota.
One such factor, of course, is natural resources. South Dakota
has some extensive mineral resources not now exploited (including lig­
nite, manganese, and other low grade ores) and also some promising
possibilities in oil production as a part of the Williston Basin. While
the immediate future of these and other resource possibilities is un­
certain, they may in time support some measure of industrial develop­
ment by virtue of the locational advantages such resources may offer.
Another factor is population, important both in terms of increase
and training. You know, of course, that the United States is experienc­
ing a strong uptrend in population and that the working force is be­
coming steadily better educated and better trained. Despite this latter
fact, there is considerable emphasis now being placed on even better
education and training. Generally speaking, more people with better
training should produce more goods and services.
When we couple the above developments with the trends toward
greater industrialization and greater decentralization of industry, we
have a very important potential growth factor for this general region.
It has already brought much new industry into our area. As a matter
of fact, the efforts of promotional groups in demonstrating the ad­
vantages of a state such as South Dakota have been furthered appre­
ciably by this factor.
While we may expect over the course of time some shift from
agriculture to industry in South Dakota, agriculture will remain a
highly important, perhaps the most important, determinant of growth
in the State. Thus the progress and problems of Great Plains agricul­
ture holds a large share of the answer to South Dakota’s potential.
This agricultural factor is important for two reasons. The techno­
logical revolution in farming seems bound to proceed further in the
direction of larger and more efficient farms. This should lead to a
stronger agriculture with a higher per capita income base. It also
should lead to a continuation of the trend to smaller rural population
and hence to the release of more people to man expanding nonfarm
activities. I would hope that much of that expanding nonfarm activity
could be located here, because then the State could keep its people
as well as have higher per capita income.
Superimposed on this fundamental trend in agriculture is a con­
trasting movement of currently uncertain but conceivably significant
dimensions. The introduction of the Missouri Basin water conservation
and development program may have an important impact in many
large areas where semi-aridity holds agriculture to dry land cropping
and grassland ranching. The introduction of irrigation units, if carried
to the full scale now envisioned, will directly involve a greater den­
sity of farm operators, and could lend greater flexibility and diversity
to the agricultural product of the State. I note that in areas proposed
for new or supplemental irrigation in the Missouri Basin 34,000 farms
are located presently, but an additional 19,000 farms might be expected
with the introduction of the smaller, more intensively-farmed irrigation
tracts. This would augment materially the number of earning and
spending units in some areas, and would moderate the trend to a
smaller farm population.
Just as these factors may alter former dependencies on a tra­
ditional rainfall-sensitive type of agricultural enterprise, another large
scale project may alter other traditional relationships in the interior
plains. The St. Lawence Seaway may well have considerable impact




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on transportation and marketing relationships. South Dakota, at the
geographic center of the continent, will soon lie within 300 miles of a
full-fledged ocean port. And while it is not at all obvious from our
usual concepts, Duluth is actually some 500 miles closer by water to
England, Belgium and Germany than is the port of New Orleans.
Preliminary studies, while at this time merely suggestive, indicate sub­
stantial savings on shipping costs on some commodities; for instance,
wheat may move from South Dakota to Europe through the Seaway
at a substantial cost saving.
I think the important thing to be gained from these observations
is simply the fact that forces of change are now strongly at work,
and that these forces can and probably will alter the former patterns
of South Dakota’s economy. It seems to me then after my brief survey
that the outlook for South Dakota is a favorable and a promising one
pointing in the direction of greater diversity and stability—all of this
of course predicating upon a favorable environment on a national
scale. And this brings me to the final point I wish to discuss today—
the general subject of economic growth and economic stability.
It is important to recognize that of all the factors making for
economic growth in South Dakota the key factor is the state of national
economic health. You know, of course, from your experience that a
strongly expanding national economy does not assure a strongly ex­
panding state economy. You know also, because you can see it at
present, that for a time the state economy can grow some even though
the national economy is level or declining. But I am sure that no re­
gion or state can attain its full potential unless the national economy
is strong and prosperous.
At present we are in the midst of economic recession in produc­
tion and employment. This decline set in during the latter part of
1957 and has continued so far in 1958. To date the decline reflects
mainly two factors: decreased expenditures for inventory and for new
plant and equipment.
I believe that it may be said that the current recession had many
of its roots in the inflationary situation that prevailed during much
of the postwar period. The same two factors that now are weak were
very strong during the big boom of 1955, 1956 and most of 1957. In
fact, I believe that they were too strong during that period and that
is why they have adjusted downward in recent months. Buying for
inventory and spending for plant was both fostered by and contributed
to the rising price trend of the past three years.
I do not believe that the present recession will be a long recession.
It does not seem to be feeding upon itself much more than did the
other two postwar dips of 1948-49 and 1953-54, although it has gone
deeper, faster than either of those two. But I do not intend to analyze
the causes, nor predict the course of the present downturn. I note it
because it poses questions relating to the subject of growth with sta­
bility.
The economic record of the whole postwar period shows three
major trends, two favorable and one unfavorable. W e have had tre­
mendous economic growth with high employment and high income and
consequently have enjoyed a rising standard of living. W e have seen
an acceleration of the rate of productivity gain which, if it can be
maintained, promises an even more sharply rising standard of living
in the future than we have had in the past dozen years. But we also
have experienced a considerable rise in prices which has eroded the
purchasing power of the dollar and thereby robbed us of some of the
gains that rising productivity and rising output should have brought.
The great domestic economic question for the future is: can we have




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full employment of men, machines and materials, can we have steady
economic growth and a rising standard of living, and at the same
time preserve a stable dollar.
M y own feeling is that we have to strive for attainment of all
three economic goals— growth, high employment and price stability, or
we have little chance of attaining any of them. In essence they are
inseparable. Unless we can employ our human and material resources
at a high level we experience economic waste and consequently retard
the optimum rate of economic growth. Unless we maintain reasonable
price stability we create conditions that lead to overfull employment
of resources, or to inefficient use of those resources, or both, and con­
sequently to painful readjustments similar to those we see at present.
This also is a wasteful process and retards economic growth. And
finally, to go right around the circle, unless we have economic growth
we cannot employ fully the human and material resources that we
have available. So my answer to the original question I asked is that
we not only can have growth, full employment and price stability, but
that we have to have them all. And this point is as important to South
Dakota as it is to the nation as a whole. Unless these goals are attain­
ed nationally, the prospects for growth and development in South
Dakota are dim.
The Federal Reserve Bank of Minneapolis has a deep interest
in the growth potential of South Dakota because South Dakota is an
important part of the Ninth Federal Reserve District. The Federal
Reserve System, of which the Minneapolis Bank is just one part, has
an even deeper interest in this whole question of growth and stability.
The central purpose of the System is to influence the supply, cost and
availability of money and credit so as to promote a high level of
employment, a rising standard of living and a stable dollar. Thus we
see these goals as inseparable.
I wish to make just two points about the Federal Reserve Sys­
tem’s pursuit of these goals. First, the fact that the System attempts
to shape its policies to their attainment cannot assure the goals. The
System is a powerful force for growth and stability; good monetary
policy is indispensible in making for high employment, growth and
stable prices, but it is not a panacea for all economic ills. It cannot do
the whole job all by itself.
Second, effective monetary policy means flexible monetary policy.
The System leaned heavily against inflation in 1955, 1956 and much of
1957. It followed a restrictive monetary policy and this led to so-called
"tight money” and rising interest rates. Since last fall, monetary policy
has turned from restriction to ease. It has sought to make bank re­
serves more plentiful and cheaper. But just as the restrictive policy,
by itself, could not prevent all excesses on the inflationary side, neither
can the policy of ease, by itself, assure recovery. It has, however,
created credit conditions conducive to and necessary for recovery.
Insofar as the Federal Reserve is able to contribute toward nat­
ional stability, the System plays a part in fostering the kind of envir­
onment in which your State may best achieve its desired goals of
economic growth and diversification. And it is only within a broader
framework of national growth and stability that the institution to be
housed in this fine, new structure we are here dedicating can realize
to the utmost its high promise of a useful role in the future progress
of South Dakota.