Team Trump’s shakedown of United Technologies – owner of the Carrier Corp. plant in Indiana that has recently decided, with a big handout from Indiana taxpayers, to keep some jobs in Indianapolis – has now turned the economic development cycle 180 degrees.
From “Crooked Hillary” and the accusations of “pay for play” leveled at the Clinton Foundation, we’ve moved to “Threatening Donald” and a game of “Stay or be punished.” Only this game is being played not by a presidential hopeful’s foundation, but by a president-elect’s country. George W. Bush may have looked into Vladimir Putin’s eyes and seen a soul, but Donald Trump has seen a business plan.
Forget, for a moment, that our president-elect disclosed last spring in a campaign finance report that he owns a small (for him) amount of United Technology bonds. Mere personal conflict of interest is child’s play compared to the international bidding war for jobs that “deals” like the one now playing out in Indiana will invite.
It has always been a fool’s errand for a state to try to bid for jobs in competition with 49 others. One estimate indicates through tax subsidies to corporations, over $30 billion has been transferred among the various state governments during the last 30 years in order to attract jobs to and keep jobs in the United States.
Expanding that game to sovereign wealth funds from Saudi Arabia to China pushes the game from foolish to deluded fantasy. Turning economic development into zero-sum games with winners and losers (sound familiar?) does not advance anyone’s best interests. It returns the world to 16th-century imperial mercantilism, the godfather of crony capitalism.
Bribing Carrier Corp. to keep a few hundred jobs in Indianapolis for a few years won’t provide those workers with any new equipment; won’t make a single one of them more productive; won’t provide them a long-lasting competitive advantage that will make their employer want to stay in Indianapolis. In a few years, the squeakiest wheel will be somewhere else, the local tax bribe will have worn out, and Carrier will quietly do what is in its business self-interest at the moment.
As reported by the Brookings Institute, Donald Trump won more than 2,600 counties across the U.S. in last month’s election, compared to fewer than 500 for Hilary Clinton. But those 2,600-plus counties that Trump won accounted for only 36 percent of the nation’s economic activity, while the less than 500 counties that Clinton won accounted for 64 percent.
Call this “geographic inequality” if you will, but trying to force the country back to its 1955 geographic structure is as foolish a pipe dream as is the fantasy that taxing “the rich” can re-establish the “middle class,” whatever those terms may mean. The only effective way forward for Maine and the U.S., is not a new form of taxpayer-funded crony capitalism – especially when it entails competing with much larger nations in which taxpayers have no voice in the matter.
Our future, rather, lies in finding ways. – i.e., education, tax and regulatory policies – to inform entrepreneurs in the economically active counties that they can expand their enterprises in neighboring counties with less expensive housing, less stressful commutes, more family-friendly cities and a more environmentally balanced lifestyle.
It is interesting to note that the most recent State Technology and Science Index, published by the Milken Institute, ranks Massachusetts first and Maine 41st. Massachusetts’ score (83.66) is more than double Maine’s score (38.39).
Certainly, Maine as a whole is a far cry from Massachusetts. (And who would wish it otherwise?) But Maine could go a long way toward modeling the path forward for many of the 2,600-plus low-production counties across the country by studying the expansion criteria for growing companies in the Boston area and using them as blueprints for community development strategies in our southern counties.
Consulting economist Charles Lawton, Ph.D., can be contacted at:
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