Governments offer companies nearly $50 billion a year in location incentives, designed to convince them to either stay put or move, Thomas says. Greg LeRoy, executive director of the research center Good Jobs First, which tracks corporate subsidies, describes the “subsidy industrial complex” of site-location consultants, industry groups and industrial realtors who track, arrange and promote deals between companies and governments.
The result doesn’t create any new jobs, but merely moves existing jobs around while fostering economic war between the states. Earlier this year Ohio was on the losing end of a bidding war over Chiquita, the produce company that’s moving to Charlotte, N.C., based largely on a $22 million relocation offer. In New Jersey earlier this year two companies—Panasonic and Pearson Educational—accepted a total of $184.5 million to move jobs from one part of the state to another.
“It’s job blackmail—threatening to leave and shaking down states and cities to stay,” says Thomas, whose book, Investment Incentives and the Global Competition for Capital, examines the subject. “Collectively governments are giving away all this money but it doesn’t affect the location of investment overall. There isn’t any possibility you’re creating new jobs. Ohio might get 6,000 new jobs (from the Sears deal), but Illinois loses them.”
Both the Tea Party and the Occupy Wall Street movements should oppose these deals as well:
There is also a libertarian argument against incentive packages, since the offers place governments in the position of choosing economic winners and losers instead of allowing the market to determine corporate success. “It’s economically moronic, even though it tracks a nationwide trend of Big Government handing over money to selected big businesses,” writes Thomas Patterson, chairman of the Goldwater Institute. “The subsidies are touted as necessary for job growth, to stimulate depressed regions and promote economic development. Unfortunately, they just don’t work.”
Thomas adds that the Occupy movement and concern over income inequality is shedding light on how tax policy often favors corporations. “You have average citizens and taxpayers subsidizing wealthy corporations,” he says, “and a lot of people object to that upward redistribution.”
For some alternative economic development strategies focusing on supporting and preferring locally-owned businesses, see the following:
- Are Alabama economic development packages windfalls instead of merely incentives
- Large employers create “jobs” but locally-owned businesses create wealth.
- City of Richmond strives to be an Ownership Society
- ADO Greg Canfield promises AL will continue to pay extortion demands.
- Does Alabama want 27,500 jobs & $4.2 billion in new economic output? Then revive local food production
- Hello, McFly! Effective economic development emphasizes local.
- At least we did not score an F.
- Employing the power of anchor institutions
- Oregon enacts bill to empower locally-owned businesses
- Let’s stop begging to be exploited.