In my presentations on economic growth, I’ve pointed out that, given the new rules of the 21st century economy, the typical incentives that government uses to get corporations to bring new jobs to their area are rapidly declining in effectiveness. Yet these incentives add up to a huge number – now estimated at $80 billion a year.
Instead, I’ve suggested that at least a fraction of that money be spent in more effective, future-oriented ways. These alternative ways include connecting local entrepreneurs to global partners, resources and markets, as well as efficient lifelong learning opportunities for adults so they can increase their potential incomes as individual players in the economy.
Some of these ideas are parallel to the small, but growing, movement of local officials called “economic gardening” in contrast to the industrial era “economic hunting” strategy that is still the normal approach.
So it was with great interest to see the front page of the New York Times this Sunday, which began a three part series on the “UNITED STATES OF SUBSIDIES – A series examining business incentives and their impact on jobs and local economies”.
Part 1 was entitled “As States Vie to Lure Companies, the Winners Are Often the Losers” and began with this story:
Today, General Motors’ Willow Run plant in Ypsilanti Township, Mich., stands empty and silent. The storied facility made bomber planes during World War II and then automobiles after being bought by G.M. Ypsilanti gave G.M. more than $200 million in incentives for Willow Run and another plant there — which has also been closed.
In the end, the money that towns across America gave General Motors did not matter. When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves G.M.’s business partners were among the targets.
Other highlights included:
A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies.[The combined amount federal and state governments give up for incentives each year is $170 billion.]
The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.
“If you’re looking at the competitiveness of a region, the most important thing a region can do is to focus on education. And this use of incentives is really transferring money from education to businesses.” Donald J. Hall Jr., Hallmark C.E.O.
Workers are a vital ingredient in any business, yet companies and government officials increasingly view the creation of jobs as an expense that should be subsidized by taxpayers, private consultants and local officials said.
For towns, it became a game of survival, even if the competition turned out to be a mirage.
© 2012 Norman Jacknis