Perhaps Yorkshire terriers dream each night of being ferocious wolves. If that should be so, and if even tiny dogs imagine themselves as mighty predators, then there may be a natural explanation – in animals and people – for the yearning of smarmy local development men for gigantic corporate welfare schemes.
Of those men and those schemes, however, one should take the firm stand of Noah Smith when he writes that Amazon HQ2 and Foxconn Should Never Happen Again:
One big problem with business incentives is that even when they’re successful at luring companies, they often aren’t worth it. A number of studies have found that the local economic benefits of paying for a factory or office tend to be fleeting or nonexistent. A new paper by economists Cailin Slattery and Owen Zidar confirms these findings.
But the biggest drawback that Slattery and Zidar found is that the incentives don’t seem to stimulate additional economic activity. Cities and states that offer incentives usually hope that a big new factory or office will be an anchor for a regional economic expansion that draws in other companies in the same industry, creating even more jobs. Every city probably wishes it could become a self-sustaining industrial cluster like Silicon Valley or New York. But this hope is rarely fulfilled. Slattery and Zidar found that outside of the very narrowly defined industry category of the company that relocates, places that offer incentives see no job growth. In other words, incentives can bring in one company but others don’t often follow.
What’s worse, the authors found that low-wage locations tend to offer bigger subsidies. That suggests that poor, desperate places are shelling out money they can’t really afford to chase the elusive dream of creating an economic cluster. Companies that get to sit back and watch as cash-strapped governments ply them with gifts are the only real beneficiaries of this rat race.
Small towns like Whitewater are not, and have no need to be, self-sustaining industrial clusters. What a shame, truly, that in so many rural communities years and millions have been wasted on projects little better than the grandiose dreams of pampered pups.