On the second night of the Midwest Governors' Conference here, the band at the reception in the historic Grand Hotel swung into "The Tennessee Waltz."
It was a cruel reminder that Tennessee had won General Motors' coveted Saturn plant over every major midwestern state. This meeting, the first regional gathering since the frantic bidding war, was shadowed by defensiveness about the big one that got away.
The session's slogan was "The Midwest on the Move." But Monday's keynote speaker, William L. Weiss, chairman of Ameritech, the Chicago-based Bell system spinoff for this region, felt called upon to explain that "it doesn't mean we're moving out to the Sun Belt; it means we're moving up."
In a similar vein, the conference chairman, Indiana Gov. Robert D. Orr (R), told his colleagues that they should abandon the "Rust Belt" label for a more upbeat term, the "Water Belt," promoting their abundant supply in the Great Lakes.
"We have to overcome an unfortunate attitude that prevails today that tends to emphasize those things in the Midwest that are not good," Orr said.
It is not just a public relations problem, however. The Midwest was hit harder than any other region by the 1981-82 recession and has recovered more slowly. Five of its 13 states have unemployment rates above the national average of 7.5 percent.
Dependence on smokestack industries has made the region particularly vulnerable to the continuing loss of manufacturing jobs to foreign countries, a loss accelerated by the overvalued dollar.
Agriculture, the regional economy's other mainstay, has been hammered by the dollar's damage to export markets. Iowa Gov. Terry E. Branstad (R) told his colleagues today that the farm-credit crisis -- the forced bankruptcy of deeply indebted farm operators -- "will be two or three times worse next winter than last."
Nevertheless, state officials and the many business executives who joined them here are pointing to signs that a turnaround strategy is beginning to work in their region.
Weiss said his company has turned in a better financial performance than has any of the other regional telephone firms created by the Bell system breakup. "We regard this as a great market," he said.
Orr said Indiana has picked up $1 billion in auto industry investment in the past 90 days, and host Gov. James J. Blanchard (D) said Michigan, which won Saturn's headquarters and research and engineering center, came away with a more valuable asset than Tennessee's assembly plant.
More fundamentally, interviews here turned up evidence that many of these states are making long-term investments in education, training and technology that are spurring growth of a more diverse and recession-resistant economy.
Blanchard said that, much as he regretted losing the Saturn plant, GM's decision to move 8,000 high-tech jobs from Texas in its newly acquired Electronic Data Services subsidiary "means more to the future of Michigan."
Blanchard speaks of the corridor between Detroit and the University of Michigan in Ann Arbor as "automation alley," the site of "one-third of the robotics and machine-vision companies in the country."
Almost all the midwestern states have developed some cooperative venture, using their universities and a modest amount of public money to leverage private funds for new technology-based companies or the stepped-up application of new technology and worker-training in old firms.
These public-private partnerships have produced what Weiss called "unconventional alliances" and have begun to change the politics of a region long polarized between labor-backed liberal Democrats and conservative, business-supported Republicans.
Blanchard, who had the all-out backing of the United Auto Workers in 1982 when he became the state's first Democratic governor in 20 years, has developed increasing support in auto industry executive offices and the business community.
"I thought I was a moderate when I was in Congress," he said, "but when you're a governor, you've got to get things done, so maybe I have become more practical and conservative."
Orr represents the other side of the coin. A former businessman in a state that has long resisted spending and government intervention, he was forced to raise taxes in the depths of the 1982 recession.
With recovery, he has plowed the additional revenue into state-financed education, training and technology-transfer programs and in his second term has made Indiana perhaps the region's most innovative state in linking the university system to economic development.
Orr makes it clear that the recession's severity scared his state into action. "When I started as lieutenant governor [in 1972], no one could see the need. Indiana had always grown without depending on government," he said.
James Fish, executive director of the Great Lakes Commission, an eight-state organization, said the Indiana story is typical.
"Things were so good for so long in this region, people thought they didn't have to go out looking for business or for customers," Fish said. "They just sat there and let other regions promote themselves as the place to be. Now they realize they have to compete -- and cooperate -- if they're going to survive."
Regional cooperation was a recurrent theme at the session, but the working examples of it are rare. Ten states have pledged modest financial support for a Minnesota-based Midwest Technology Development Institute, but the director has just been hired and the first projects are months away.
The agriculture departments at Iowa State University and the University of Missouri have formed a Food and Agriculture Policy Research Institute, whose economic analyses have gained credibility as a basis for policy debates. There is also talk of a joint trade mission by several Great Lakes governors to Pacific rim nations next year.
But when a Saturn project comes along, Michigan, Ohio, Indiana, Illinois, Minnesota and Missouri all compete fiercely with each other -- and suffer together when it goes to Tennessee.