Economic Development

In my last article, I explained the failures and consequences of welfare programs for the so-called “poor” or “less fortunate” members of society. But there are also various welfare programs, mostly state and local, for the rich corporate giants. They are

frequently touted as “economic development” or “economic incentives.” These come in various forms—outright grants, land, site development, roads, tax breaks, and various other freebies.

Alabama is no exception. Practically everybody who doesn’t have his head buried in the sand has heard our politicians brag about the new jobs created by Mercedes, Honda, Toyota, Hyundai, and various others. Why did we shell out hundreds of millions of dollars to entice foreign corporations to come here? Did the Alabama people really get their money’s worth?

Just do the math. Our taxpayers shelled out $330 million for Mercedes to create about 1500 jobs. That’s $220,000 for each job. Hyundai cost us $250 million for about 1000 jobs--$250,000 per job. In addition, we must ask ourselves, “How many of these jobs went to the local people?” and “How many were given to people they brought in from elsewhere?”

Now let’s compare these figures to a Mom and Pop business that is hiring four employees. Could anybody imagine asking for a million dollars to start up? A politician would just laugh, “Give you a million dollars to hire 4 people?” But once the numbers are crunched, the cost per job is exactly the same as Hyundai. And all 4 jobs would go to the local people.

I doubt any of our small businesses have asked for a handout of any kind to start up or continue operating. Everybody knows that people do it with their own money or by borrowing it by putting up something of value as collateral. They take their own risks and ask little or nothing from government—except to be left alone.

But unfortunately, government does not leave them alone. Most businesses face multitudes of taxes and regulations that have continued to get worse and worse over the years. They are frequently penalized and sometimes put out of business for trivial infractions, especially those involving safety and the environment. They are largely treated with disdain by the same politicians who worship and coddle the foreign corporate giants.

Individuals and small businesses are the backbone of our economic system. Depending on the local areas, these are the ones who hire anywhere from three quarters to over nine tenths of the workforce. In the future, the smaller entities will gain even larger percentages while the corporate welfare recipients need fewer people as they continue with automation and state of the art robots.

In other words, rational economic development policies are turned upside down. Why is a job provided by foreigners valued so much more than one provided by the local people? Why do we have to heavily tax and regulate the small, local enterprises and hand it over to the multi-billion dollar giants? Why can’t our public leaders understand this and give everybody an equal opportunity to hire himself in a laissez faire environment?

There is a simple solution to this travesty: Just stop the handouts. If outsiders want to start up here in Alabama, fine. But just tell them “You do it at your own expense; you buy your own land; you develop it yourselves; and you build your own roads and infrastructure. If another state offers incentives and we don’t, go there and knock yourselves out. We aren’t going to penalize our local people to give you a free ride.”

If Alabama wants to do some serious economic development at a small cost, just leave the people alone. Get government out of the way. Let them do their businesses as they choose. Minimize and simplify regulations, and get rid of every last one that is not proven to be absolutely essential. Get rid of the use tax, business property tax, licensure, and other obstructions that generate little revenue that is largely consumed by bureaucracy but generate hardships onto our entire population.

The key to economic development is very simple—a free market and the absence of government meddling and interference. Economic development of any other kind is not a legitimate government function.