Let the Economy Work
The sad truth about the business of luring business
Good reading for one's inner-Proxmire, coming on the heels of Texas being ranked the most business-friendly state according to Site Selection magazine.
Government economic development programs, no matter how well intended, operate counter to fundamental economic principles.The Government Accountability Office in Washington has attempted to measure the impact of economic development programs using sophisticated econometric modeling. The agency (then called the General Accounting Office) reported nearly a decade ago, in 1996, that it was "unable to find any study" by any reputable organization "that established a strong causal linkage between a positive economic effect and an agency's economic development assistance."
Yet, the spending continues.
Unsatisfying as it may be to the many proponents of economic development programs, government can best promote economic growth and prosperity by sticking to the basics: protecting private property rights, enforcing the law, providing basic services, and keeping taxes and regulations to a minimum.
It should then do one final thing: Get out of the way and let the economy work.
I know it's not Sunday anymore, but ... Amen!
Comments
"Unsatisfying as it may be to the many proponents of economic development programs, government can best promote economic growth and prosperity by sticking to the basics: protecting private property rights, enforcing the law, providing basic services, and keeping taxes and regulations to a minimum."
Yep. That explains why high-tax high-reg CA, NJ, CT are near the bottom of the economic development ladder and low-tax MS, AL are so bloody prosperous.
Sarcasm over. I agree that it is stupid to bribe business into a state. It always costs more than you get. But the business climate these days has little to do with taxes and regulation. The wealthy areas all seem to have lots of gay folk, and pretty good universities. When you think of it, few of the red states are particularly prosperous, and the wealthy parts of the few prosperous red states are a lot bluer than the rest of these states (e.g., Atlanta, Austin, Salt Lake).
Posted by: Joe S. | December 28, 2004 12:23 PM
Sarcasm aside, you lose out the comparison with MS & AL on the point of "providing basic services."
Posted by: Greg Wythe | December 28, 2004 12:52 PM
Joe,
One could also point to the fastest growing states (Nevada, Arizona, and Colorado) and they are not particularly agressive regulators and taxers to say the least. One might ask themselves why those states are growing faster (and all three, incidentally, less Republican). It's not too much of a stretch to argue that the states are attracting businesses and less regulation may play a pretty key role in that. As far as the cities being bluer, that part is true and why they are becoming less Republican by bringing in liberals from out-of-state, but the fact that red states are growing and blue states are not is significant. I doubt people move to New Mexico and Arizona for their wonderful beaches or on a whim. They move there cause that's where the jobs are. Yes, they may be in more bluish parts of the state (Phoenix, Santa Fe), but that could just as easily prove that companies are more worried about state regulations than local ones rather than the notion that companies like (or are indifferent to) taxes and regulation.
(or course, ironically, a lot of the employees these states are attracting are more liberal and pulling the state away from the mindset that could have attracted the businesses there to begin with).
Posted by: R. Alex | January 2, 2005 12:52 AM