The Wrong Starting Point for Economic Development

The advice is wise, I’d say, for states to focus on economic development activities that benefit a broad range of businesses, rather than one or two big catches, but the experts in the field begin from the wrong perspective:

Creating sustainable new jobs is complicated, and states will need help from the federal government, says Robert D. Atkinson, president of the Information Technology and Innovation Foundation in Washington, D.C., who in 1996 was the first head of what was then the Rhode Island Economic Policy Council.
“First, the idea that states can fight and win the competitiveness battle on their own is simply wrong,” Atkinson says. “Unless Washington gets in the game, it will be very hard for states to grow their economies.”

Indeed, the economy is so complicated that it is folly to place its operation in the hands of politicians and bureaucrats. The more responsibility and risk can be distributed to individuals whose livelihoods depend on their being able to work and expand, the better.
The false starting point is the notion that government operatives “create sustainable new jobs” at all. At best, they help or hinder private citizens in their efforts, and by meddling they are more likely to hinder them. The article centers around a solar panel plant that recently left Massachusetts for China, thus illustrating the point: extra incentives and breaks offered to Evergreen Solar had to be forcefully withdrawn from the economy, somewhere, and now, in effect, they’re going to China. Moreover, the hip ambiance that’s been painted on green technology surely jaded Massachusetts officials’ judgment, with the end result that opportunities, considered as broadly as possible, were constrained.
In other words, the policies that drained money and effort for the benefit of a company playing in an industry that every state and nation is eying as the wave of the future should have been refocused to lighten the burdens of taxes, regulations, and mandates.
The closing moral of the linked article is that public negotiators should “write a good clawback,” so that they can force companies to repay taxpayer contributions, should they depart, but that misses the larger lesson — namely, that policymakers should stop pretending to be economic masterminds.

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13 years ago

So Atkinson has never been to Texas, South Carolina, or Washington.
What a maroon.

Warrington Faust
Warrington Faust
13 years ago

I noted a headline in the on line Attleboro “Sun Chronicle” this morning. The city is being lauded for granting a “tax break” to attract two businesses to the city. “Creating” 147 jobs (actually 97 jobs are simply moving from a neighboring town “beggar thy neighbor”). Since the company is moving from another town, I don’t know why the workers will not simply commute.
What causes me difficulty is that “granting a tax break” is a tacit admission that taxes are too high. If they were not, why would a “tax break” be necessary?

13 years ago

“Atkinson says China’s manipulated and undervalued currency plays a role, giving that nation an immediate 40-percent economic advantage.”
This is total bunk and nonsense. It is appalling that a former RI Economic Policy Council head could fall prey to such a basic myth and misunderstanding of how international money markets and trade work. It’s illustrative of how these so-called “economic experts” government touts are no better than your average cab driver when it comes to their forecasting ability and understanding of what is going on in the global economy.
For a rational discussion of why Atkinson is a total nincompoop for believing that a country can gain a competitive advantage through manipulation of its own currency, listen to:
If these are the kinds of reactionary, ignorant people that informed RI’s economic policy in the 90’s, it is no wonder that the state is going bankrupt today. Somebody pushing the China currency manipulation myth should have the same credibility as somebody claiming to have seen bigfoot or the loch ness monster. It makes no rational sense.
“Stop listening to these people! They don’t know what’s going on!” – Nassim Taleb

13 years ago

My understanding of the Evergreen Solar story was they had the Devens manufacturing facility but they themselves tested the Chinese solar market by opening a wafer facility in Wuhan, China and found out it was a lot cheaper to manufacture the wafers there.
There was no direct Chinese against American solar competition involved. It was Evergreen Solar competing with itself foreign wages and taxes against American wages and taxes and turned out it was cheaper to build out of country.
Link to why Evergreen Solar was shutting down Devens manufacturing facility:

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