Prior to the late 1960s, the economy in Houghton and Keweenaw Counties was dominated by natural resource extraction including copper mining and forestry. Most local manufacturing businesses devoted the majority of their productive capacity to providing products and services to these two industries, yet neglected to expand their customer base either geographically or by industrial sector. Furthermore, the local wood products industry performed only a very low level of value-added manufacturing activities. Most harvested roundwood was shipped out of the area as pulp or saw logs, or was cut into green lumber by local sawmills. These low value products were, and to some extent still are, sent to other areas primarily in the Upper Midwest to be processed into higher value-added products, thus allowing those areas to capture the economic benefits.

    From 1968, when the last copper mine closed, until the mid 1980s the local economy underwent a readjustment in which many manufacturers either closed their doors or downsized. The Keweenaw experienced severe annual business cycle swings and was very susceptible to downturns in the national economy. Tourism provided some employment in the summer months, but the winter months saw unemployment rise to double digits, sometimes as high as 20% or more.

      In this economic environment, few companies were willing to take on additional debt as the economy went into periodic upswings since they were afraid of being unable to pay off that debt during the inevitable economic downturns. Even had manufacturers been willing to expand, local lending institutions were hesitant to lend to either existing businesses or to new ventures, even with the availability of federal loan guarantee programs, due to economic uncertainty and to past business failures. Nor had local governments created local revolving loan funds or other instruments that could be used to induce business expansion.

      During the mid to late 1980s, the Keweenaw Peninsula's economic fortunes began to change due to an improving national economy and to the efforts of local governments as they took a more aggressive approach to economic development. In particular, the Keweenaw Industrial Council (KIC), a private coalition of local municipalities, businesses, banks and utilities that had been largely inactive since its creation in the late 1960s, was reinvigorated in 1985, when Michigan Technological University (MTU) and the local community joined together to provide long-term operating funds to the KIC. The KIC has since taken the lead on providing retention, expansion and start-up assistance to local companies and has, together with the Keweenaw Peninsula Chamber of Commerce, the Western Upper Peninsula Planning and Development Region and Northern Initiatives led efforts to strengthen and diversify the local economy.

     The local community decided to concentrate its economic development resources on retaining and assisting local companies to expand, and to encouraging and assisting local entrepreneurs to start-up new businesses, including the spin-off of research products from MTU. Since the mid-1980s three revolving loan funds have been created. Local development organizations have successfully provided direct business and financial packaging assistance to base industry firms, local lending institutions and investors have provided an increased amount of capital to local business ventures and telecommunications companies have extended high speed Internet access to most areas of the community.

      This strategy has paid off handsomely: most local manufacturing companies have undertaken significant expansions in the past five years; a large number of new home-grown businesses have started up, including the spin-off of new technologies from MTU; wood products companies are performing a higher level of value-added activities; and in general, the local economy has made itself less susceptible to local or national economic downturns because of increased sector diversification and extension of customer markets.

      Most recently, the State of Michigan has designated Houghton County as a tax free renaissance zone. Consequently, the Keweenaw Peninsula has begun business attraction efforts promoting its competitive advantages including the technical resources available through MTU, a first rate telecommunications network, an available labor force including MTU engineering graduates, a commitment by the local community to provide continuing assistance to local industry and a quality of life that provides some of the best outdoor recreation in the Midwest.