Pat McCrory has a slightly endearing habit of bouncing from one enthusiasm to another. First it was centralized infrastructure, then rural roads. He warned of a “very, very tight budget,” then demanded that we “fund his priorities,” and finally signed a massive, revenue-negative tax shift. Shockingly, his latest pet rock–“economic development incentives”–is ill-advised.
The bankruptcy of JDIG is Even the biggest “deals” hardly register relative to the overall jobs base. And by placing other companies at a government-sponsored disadvantage, corporate subsidies may even force cuts at homegrown firms. Thus, the so-called “job incentives” snake eats its own tail.
But that’s just the general point. Of more immediate concern, McCrory is proposing two policies that deserve serious questioning.
His new budget allocates five million dollars to the “One North Carolina Small Business Program.” Modeled on venture capital funds, the program would give grants to companies in new technological fields. The scheme closely resembles Rick Perry’s Emerging Technology Fund, a cesspool of graft and favoritism. If you think McCrory is a significantly more ethical man than Perry, you’ll be more optimistic about the Small Business Program’s future than I am.
Moving from new industries to old, McCrory wants to “recruit” an auto plant. The idea seems to be that auto plants are uniquely suited to bring a state prosperity. But there’s evidence to suggest this is not true. The states with large auto industries–Michigan, South Carolina, Alabama–are poorer than average. Moreover, as economists Enrico Moretti and Per Thulin have shown, manufacturing plants create only one-third as many ancillary jobs as companies in high-technology sectors. Developing innovation jobs is a far smarter approach than chasing car-factory smokestacks .
So, corporate welfare is bad policy. Let’s hope McCrory’s next hobby horse is moving away from “incentives” toward clean government and sound economics. That really would be endearing.
Alexander Jones is an original contributor to PoliticsNC.
The McCrory gust must go. NC is suffering and losing under this regime.
I believe that it is true that the incentives are just icing on the cake for companies doing business in NC. NC is a particularly blessed with desirable attributes. There are some significant issues with the RR last mile at the seaport. Further Morehead City is deep enough and more suited for the huge containers. However I have long long pushed for maturing the motion picture and television industry. My suggestion was to put on a Televised Golf and Disc Golf Invitational Tournament paid for with some of those monies that come from taxes on hotel rooms. Cultural issues and fears of the creative classes whose folkways my not conform to those of the natives do more damage to the industry than incentives can make up for.
As far as auto plants and South Carolina I think we can say that the UpCountry has benefited tremendously from the BMW plant. Were we to see an auto plant in the Catawba Valley or one of the former textile hubs I believe it would be a shot in the arm for the regional economy.
My concern is that they’re placing too much faith in state planning. If all the plants have gone to SC, TN, etc. rather than here, there is probably a market signal behind that. Commerce Dept. bureaucrats and legislators lack access to this “local knowledge,” so in arbitrarily deciding to bring in one auto plant I fear they’ll create a White Elephant of the kind that litters other attempts to plan the course of industrial development. Rather than spark the growth of a cluster, the plant seems as likely to just sit there operating alone, while the auto industry continues to expand in areas where it is already agglomerating. At least that’s what the history would suggest. (See attempts to generate a biotech industry in central Ontario, to make Vegas a high-tech center, and so on.)
I have no objections to helping the textile belt. But let’s do it more cheaply and in a way that has a greater chance of success. In that regard, it’s worth noting that textiles still employs thousands and thousands of NC workers. It seems to me wiser to diversify into advanced textiles manufacturing, leveraging capacity that is already here, than to try to replicate the alluring assets of other states.
Thanks for your comment.