News came out here recently that the citizens of our nearby town are going to have to come up with millions of dollars the city handed over to a couple of corporations as subsidies, on some pie-in-the-sky promise that they were going to locate here and generate jobs. The jobs never happened, the businesses are belly-up (or never even materialized) and now the citizens are out a couple of million bucks.
Sadly that seems to be a fairly regular occurrence around here. Our powers that be are enchanted by the dream that high tech businesses are going to locate here, bringing with them high-paying jobs and economic prosperity. Nevermind that we don’t have a workforce here with the education needed for such jobs. About the only thing that would make this area attractive to industry is our large unskilled workforce willing to work for low wages. That is what attracted the company that once employed about half of the people around here–one of the largest cotton mills on earth. All that’s left now of that once booming company are abandoned buildings–the corporation having declared bankruptcy several years back after years of decline. It’s remaining assets were bought by a company in India and moved there. Those jobs are gone and they ain’t coming back, as Mr. Springsteen said. But our industrial legacy, such as it is, is what our political leaders seem to be fixated on.
Our area’s greatest resource is our farmland. But while politicians here routinely promise that they will “create jobs,” I’ve never heard one say a word about agricultural jobs. The vast majority of that work is now done by imported seasonal labor, despite our very high unemployment rate. Our policymakers ignore agriculture, while flushing tax dollars down the toilet in pursuit of some industrial messiah.
The problem certainly isn’t limited to our part of the world. Yesterday I read a blog post noting that nine states (Virginia is not among them) dole out 58% of the state subsidies to private businesses. The states doling out the most corporate welfare are both red and blue. It seems to be something the two sides agree on.
The post quotes a study by Veronique de Rugy, an economist at George Mason University. Her conclusions make a lot of sense to me:
Targeted state subsidies to private businesses are often promoted as a “market-friendly” means to boost growth, jobs, and development. However, the empirical studies on state subsidies find that these programs have little to no effect in producing their intended goals.
What’s more, as Christopher Coyne and Lotta Moberg write in their recent Mercatus working paper, “The Political Economy of State-Provided Targeted Benefits,” these subsidies are often ultimately damaging. Targeted state subsidies misallocate scarce public resources while encouraging rent-seeking, regulatory capture, and cronyism. To encourage sustainable state economic growth, policymakers should shift their focus away from tailoring policies to benefit specific firms toward policies that create a general environment in which all can flourish. The first step is to end the practice of targeted state subsidies.
With all the money our community has wasted on corporate handouts and now-abandoned “industrial parks” we could have put in high speed internet, for example, expanding the opportunity for home businesses and telecommuting, and creating “a general environment in which all can flourish.” And for a small fraction of what’s been wasted on phantom “high tech” businesses, our community could be promoting and developing our local food resources. Better yet, they could have just left all that money in the pockets of those who earned it.
I’ll keep dreaming.
Here’s an amusing sketch Cherie brought to my attention that is relevant.