There's been plenty of talk in recent days about a possible "alliance" between General Motors Corp. and Renault/Nissan. That is fascinating stuff -- and big news if anything ever comes to pass.

But the solidly significant story last week was Google's announcement it plans to locate its AdWords unit in Ann Arbor. AdWords is the pay-per-click advertising division that generates much of the giant Internet search engine provider's revenue.

And Google says it expects to hire something like 1,000 people over the next five years, paying them an average of $47,000 a year, with generous benefits thrown in.

State economic development officials estimate this project will generate 1,200 spin-off jobs, $2 billion in personal income and $165 million in new state revenues over the next two decades. More important than those numbers, however will be the impact this has on the lives of people -- and in stimulating related economic activity.

Imagine a venture capitalist who suddenly sees opportunity for profit by funding an information technology start-up firm adjacent to Google's operation. Think of the University of Michigan graduate who had been planning on moving to Chicago realizes her career could best be started with Google. A ninth grader who suddenly realizes being a computer engineer in Michigan is a very real possibility. The retired couple that, encouraged by all this, decides to stay in Michigan rather than move to Florida.

Beyond the jobs themselves is the powerful, positive message it sends about our future. First, Google's commitment to Michigan sends the message to other high-tech, non- manufacturing companies that we're not just another down-in-the-dumps "rust belt" state. Our assets include great research universities like the U of M, a wealth of engineering and technical talents, and thousands of bright and ambitious graduates looking for fulfilling careers. We also have some communities like Ann Arbor or East Lansing that are "cool" by any standard. And overall, the quality of life in Michigan is pretty darn good: The commute is quick; housing prices are low, and lakes, streams and woods are wondrous, nearby and easy to get to.

For years, I've been one of many who have been arguing that we need to build a "knowledge economy" in Michigan beside our evolving manufacturing base. Google's announcement confirms that hopes of building such an economy are not just pie in the sky.

U of M President Mary Sue Coleman said last week that "Google's decision to choose Michigan is a milestone in our state's transformation." She's absolutely right -- especially if we seize the opportunity to build on it.

What this also should do is make blindingly clear the importance of thriving research universities to our economic prosperity. Tax cut or no tax cut, they wouldn't have come otherwise. This has not always been obvious to our elected leaders in Lansing.

Over the past quarter-century, for instance, state support for universities has dropped by nearly a third. Nor has anybody had the guts to say out loud that not all universities are of equal importance.

Specifically, there is a big difference in mission and economic importance between our serious research universities and the rest.

Doug Rothwell, president of Detroit Renaissance and one of the smartest economic development types around, noted in a recent Detroit Free Press article that, "North Carolina invests heavily in its universities, especially its flagship research universities. In turn, the universities diversify the state's economy."

By contrast, "In Michigan, the model is quite different. We treat higher education as an expense rather than as an investment."

Rothwell is right on. We need to change our approach to higher education. Our thinking should shift from an appropriation-based model to an investment approach. We should make support for higher education a key part of Michigan's economic development strategy and, in particular, recognize that our research universities play a vital role in the innovation-based science and technology that lie at the core of building the new economy.

Fortunately, there are signs even folks in Lansing are getting the message. Even before the Google announcement, a budget agreement was reached between Gov. Jennifer Granholm and legislative leaders to increase state spending for universities by three per cent. That's a great start. But much more needs to be done.

I wouldn't want to overemphasize the importance of the Google announcement, especially in the short run. There are many, many thousands of manufacturing jobs at risk in Michigan today, far more than in the information technology sector for the foreseeable future.

We need many, many more Googles. Here's the bad news: Just last week United Van Lines reported that in the first half of 2006, the company handled 4,482 moves in Michigan. Nearly two-thirds of those were moves out of state. That represents the highest percentage of out-of- state flight recorded in any state in the nation.

Google's announcement is a great start, but only time will tell if it's a real deal. Still, you have to think of Winston Churchill's famous line: "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

Phil Power is a longtime observer of politics, economics and education issues in Michigan. He would be pleased to hear from readers at ppower@hcnnet.com. These opinions and others expressed in Phil Power's columns are individual opinions and do not in any way represent official policy positions of the Center For Michigan.