Wednesday, May 6, 2009

Legalized Bribery

Rocky Marcoux, commissioner of the City of Milwaukee's Department of City Development, couldn't be more wrong in his Milwaukee Business Journal op-ed, City Should Offer Incentives.

"In the past, developers have criticized Milwaukee officials for being reluctant to provide incentives to get a development to occur in the city," states Marcoux.

So what? This whole incentive game is blackmail and is terribly inefficient. It makes cities bid-up giveaways to corporations dangling jobs in front of city leaders. It leads to less-than-optimal locational decisions, and often cities never recoup the subsidies. Local leaders, legislators, and public servants should be cooperating with national leaders to enact federal legislation banning such zero-sum games.

$5 million to Astronautics? $1 to $20 million to Boston-Power? What is the cost-per-job? How much does the subsidy offset the supposed tax-base maintenance? Are there any clawbacks in the agreements? Is there a minority or prevailing wage clause in any construction agreement? Are there any provisions that protect the taxpayers?

Marcoux declares, "Milwaukee must make sure it is offering whatever makes sense to retain and lure new business." Now there's a concrete development policy to get behind.

During the last presidential campaign all the candidates talked about small business being the incubators, the place where job growth occurs. Yet, for development policy we are supposed to subsidize large companies to lure and retain jobs, no matter what the cost? Why not just make more funding available for small businesses and small business entrepreneurs? [Although it must also be noted, small businesses aren't quite the job machines politicos make them out to be.]

The more large companies we base our economy on, the greater chance for catastrophic consequences when the economy experiences downturns and these large companies layoff workers, offshore jobs, or go out of business. Just as we've seen with the "too big to fail" problems of the present.

These policies are blackmail and bribery. Often the only ones benefiting are the company executives receiving the subsidy and the city development cadre strengthening their private sector connections.

For Further Reading:
Corporate Blackmail
Doing Development Right
Foreign-Owned: Yes. American-Owned: No.
Great American Jobs Scam
Investment Incentives
Miller Pork
Pabst Farms Mirage
Public-Sector Economic Development
This Is Economic Development
Walmart Propaganda

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