Friday, February 22, 2019

Economic development or economic cannibalism?

It’s not often that you’ll find me celebrating the loss of an economic development project that would have created 200 jobs in Western New York. But, I did just that a few years back when a deal to bring a Canadian plastics manufacturer to the Buffalo waterfront fell through at the eleventh hour.

That company would have been in direct competition with mine. Even though news reports and press releases identified them as a “furniture manufacturer” – which they are – they also produce products that we do, like kayaks and spa cabinets.

As a free market capitalist I typically welcome competition. But I don’t when competitors, especially those new to a region we’ve called home for 45-plus years, are given special privilege by my government. To bait the Canadians, the Cuomo Administration and the NFTA would have given them, among other incentives, $2 million in Excelsior tax credits, a super-sweet deal on publically-owned real estate, and 3.7 megawatts of cheap electricity produced by the New York Power Authority.

Had the Canadians pulled the trigger on the offer, the State would have enabled our competitor to produce the same products we do with considerably lower cost factors than us, all while operating in what’s basically our backyard. It would have been disastrous to the 230 families that I work with as we could have lost clients to the local and cheaper alternative. While the region might have gained 200 jobs from the new company, it could have lost a bunch due to disadvantageous competitive factors that were of the government’s doing.

This sort of economic cannibalism, in which economic developers sacrifice their own to bring in the next big deal, is not unique to Confer Plastics -- it negatively impacts every business, every home across the state. In order to prop up newfound businesses, they are allowed – and encouraged – to feast on the fruits of labor of existing ones.

Consider everything state officials did to bring silicone chip manufacturer GlobalFoundries to the town of Malta. In 2008-2009, at the height of the Great Recession and while the state was facing a $15 billion budget gap and small businesses were struggling to stay afloat, New York officials brokered a $1.3 billion incentive package of which $650 million was cold hard cash.

Then, the state gave multibillionaire and so-called entrepreneur Elon Musk a sweet deal to open up a factory for SolarCity (also known as Tesla and Panasonic at various times) in Buffalo. The Cuomo Administration spent $750 million of taxpayer funds to build and equip the plant.

And then we have the recently-deceased Amazon deal. Had the internet retail giant stayed with their plan to open a headquarters in New York City the state would have kicked in $500 million in cash incentives.

That’s just 3 projects totaling nearly $2 billion in state funds – my money, your money. There are countless more projects undertaken every year, much smaller in size, through which start-ups are given tens of thousands and sometimes hundreds of thousands in grants.     

Getting their mitts on free money gives them special privilege over all existing New York-based businesses still dealing with, unabated, what makes it difficult to do business in the Empire State and it puts the burden of funding those deals on taxpayers and businesses attempting to survive what has become decades of socioeconomic malaise in New York which, not coincidentally, was caused by the same state government brokering these deals.

While the GlobalFoundries and SolarCities of the world break ground and grow, they do it using the money made on the backs and risks-undertaken of others. This brand of economic development ends up cannibalizing jobs in one place to make jobs in another. In that case, economic value isn’t created, it’s only shifted, from your business or your household to another economic enterprise -- at the whim of government.

It’s not fair. It’s not just.

It is dangerous. It is time for a change.  

While you can certainly appreciate the efforts and intent of some economic development officials who want to fairly make the economy in their community, region or state better, too many of their peers are overzealous and reckless. To make economic development work properly they need to drop the blinders and abandon their love affair with corporate welfare and approach things with a collective, regional and truly entrepreneurial view and ask some critical questions: Who wins and who loses? Why are the winners winning; are they doing so on their own merit?

They’d be surprised by the answers. 

From the 25 February 2019 Greater Niagara Newspapers and Batavia Daily News

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