I reiterated that when I spoke before City Council that night that while I was in-fact against the incentives I couldn't oppose them because I believed Proctor and Gamble had our city and county governments over a barrel. Greensboro and Guilford County, like so many places around the world, are forced by corporations into paying incentives they simply don't want to give away. And I can honestly say that at least some of the yes votes on council that night came from Council members who did not want to say yes but feared a loss of jobs if they said no. Thus the reasons for the ideas in my last post, Incentives In Greensboro: Part 31: A Different Light, where I outline a new way of doing incentives that:
"...focuses on the long term unemployed, builds small, locally owned businesses and supports existing locally owned small businesses-- an infrastructure designed to jump start the local economy from the bottom up instead of from the top down."
Today I want to share a letter from economist William Heasley that was sent to me in response to my post, Downtown Marriot Owner Says Layoffs Imminent, which points out yet another problem with one of Greensboro's latest incentive packages, that being the $1.975 Million Dollar Incentive Grant to the Downtown Wyndham Hotel Project. In other words: An incentive package designed to help one business is putting competing businesses out of business. Mr Heasley writes:
"Politicos, upon normal occasion and in the main, frame "economic incentives" [taxpayer money] as creating jobs and additional tax revenue. The rosy picture painted is aided by the use of economic impact studies which are no more than a guess and many, many times tainted with confirmation bias.
The Marriot situation, a consequence of "economic incentive", is in fact a consequence related to the exercise of picking winners and losers by politicos. If the Wyndham was built with private money and competed with Marriot, that is a story of competition. If one player is subsidized with taxpayer money an uneven playing field occurs and that is a story of crony capitalism based on picking winners and losers.
Please take a look at the attachment (scroll attachment as it is two pages) courtesy of The Nussbaum Center for Entrepreneurship. Please take a moment and review. Please note that circa 1983 Wake County and Guilford County had virtually the same population and number of jobs. Further, circa 1983, Wake and Guilford were within a reasonably close proximity to Mecklenburg regarding population and jobs.
After 1983 Mecklenburg and Wake, the population and jobs thereof, increased at an increasing rate. Guilford on the other hand had much different results. Note that jobs peaked circa 1998, flat-lined, then actually fell slightly in Guilford.
One might say that the massive gap between Wake and Mecklenburg vs. Guilford, as it stands today, could be viewed in terms of an output gap. That Wake and Mecklenburg represent the "potential" and the gap that has been produced 1983 through today is the potential not realized by Guilford. Please keep the massive gap in mind for a moment.
Many will say Guilford lost XYZ number of jobs in light manufacturing and hence this is a massive handicap. Maybe, maybe not. Consider for a moment Joseph Schumpeter's concept of creative destruction. That one technology and associated delivery system is constantly supplanted by another e.g. Sears to Wal-Mart to Amazon -or- cable enabled telegraph to land-line voice to wireless voice. That is to say, jobs are created AND destroyed as technology advances in an infinite series and new competitors appear that supplant old competitors. Hence there is no situation where current jobs become permanent jobs as Schumpeter's creative destruction is a known-known.
Moreover, textile manufacturing is a somewhat labor intensive type of manufacturing, relatively speaking. As a somewhat labor intensive form of manufacturing it chases cheap labor. Hence textile manufacturing which was massive in Great Britain migrated to the North Eastern U.S., later to the South Eastern U.S., then to China and now to Vietnam and other South East Asian countries. Given this known-known, and given that such textile manufacturing existed all over NC, not just in Guilford, then why the above mentioned output gap (potential not realized)? Did not Wake and Mecklenburg suffer creative destruction as well? Of course they did.
Pittsburgh, PA was a steel manufacturing center. It suffered from creative destruction within the steel sector. Yet today it is a technology hub where jobs recovered quite nicely. Pittsburgh, PA and Guilford, if one wants to make the argument of poor-old-me [loss of jobs], are similar given job destruction yet different in job creation.
The lesson is: jobs are created and destroyed simultaneously and it is a known-known. The key is to realize the destruction will occur and that created jobs are not a panacea as destroyed jobs must be accounted for as well.
Returning to the potential-not-realized gap depicted by the charts of The Nussbaum Center for Entrepreneurship, and concentrating on the shallow increase in jobs, then flat line, then slight decrease from circa 1983 to present in Guilford: what other phenomena occurred often during this period?
During the same period Guilford County and Greensboro politicos unleashed tons of "economic incentives" [taxpayer money] politically framed as a "for-certain way" of creating jobs and additional tax revenue. The result? Highest tax rate in NC, increased poverty and flat-line to a slight decrease in jobs. That is, the result is abysmal.
The Wyndham, Performing Arts Center, and other "economic incentives" handed out on a regular basis are merely a continuation of a failed stratagem. Politicos want you to forget about the past failure [see charts] and concentrate on yet another round of "economic incentives" that have in fact exhibited a failed track record.
Government is the only enterprise on earth, that when it fails, merely does the same thing over again, just bigger - Don Luskin, Trend Macro"
I think Bill Heasley just might be on to something. I encourage you again to take a look at my proposed smaller way of doing things, Incentives In Greensboro: Part 31: A Different Light, and talk about fine tuning it so that we can make it work for Greensboro.
Please continue reading Incentives In Greensboro: Part 33: How We Spend Money.
About William Heasley
W.E. Heasley, CLU, LUTCF
Chief Economist
Heasley Insurance Services, LLC. Since 1979
heasleyinsurance.com
Phone 336.859.4834
Toll Free 888.400.2608
Toll Free Fax 866.804.0904
info@heasleyinsurance.com
Heasley Insurance Services, LLC
Regional Operations Center
PO Box 1155,
Denton, NC 27239
Greensboro Location:
7800 Airport Center Dr., Suite 401
Greensboro, NC 27409
336.282.2608
We have insurance brokers and agents for the following states: NC, SC, VA, WV, and Ohio.
“The curious task of economics is to illustrate to men how little they really know about what they imagine they can design.” - F.A. Hayek
