Friday, November 24, 2017

Mathew Robane - Why Amazon Won’t Save Your Struggling Town

Mathew Robane says that many cities compete with each other by offering massive incentives to attract large corporations to set up businesses in their cities, but, he adds, when you do the math these financial incentives are terribly inefficient and wasteful of tax payers money.  Mathew Rohane says how these big corporations know exactly where they intend to place their new second headquarters, shop, warehouse, or offices, and are just pretending to be looking around so as to get the maximum subsidy they can from a city municipal government.

Over the summer, Apple, which is not only the most highly valued company at the moment, but of all time—and is sitting on another record $200 billion in cash reserves—announced plans to build a $1.3 billion data center in Iowa. Reuters reports that a combination of state and municipal incentives there is worth about $208 million. According to CNBC, 50 permanent jobs will be created. Do the math. $208 million divided by 50 positions results in a cost of $4.2 million per job. If you have a job making the GDP per capita every year, about $56,000, $4.2 million is what you would make after 74 years. There’s no way so few jobs will ever justify that much foregone tax revenue, especially if the new facility is a greenfield project that will need new infrastructure and other services.
Similarly, the Chinese company Foxconn got a $3 billion incentive package from Wisconsin for promising to create between 3,000 and 13,000 manufacturing jobs. That’s a cost per job of between $1 million and $230,769. According to CNN, Wisconsin won’t break even on the deal for 25 years.

All of these incentive deals—and most economic development agencies around the country—operate under the fallacy that growth can be bought. There’s this idea that it’s all a matter of building factories, widening roads, lowering taxes, and suppressing unions. But if that was the case, more economically stagnant places would be reaping the rewards of public spending.
The American Conservative


Ryan Harris said...

The people that wanted jobs in factories now have jobs in factories. They voted for it and demonstrated government has the power to influence where and how people work. Mission accomplished. There is no magic hand.

What enlightened city dwellers and university waste-oids think of the policy is totally irrelevant.

I'd just reverse the nouns in the think piece to talk about Brexit and Finance in London. EU Remain won't save your jobs in Finance and any banks that promise to stay, those jobs make no difference to the country. Ditto for universities. There is no productivity improvement from universities -- it's a fallacy of composition. The data could not be clearer. Shut them down, the country doesn't need them.

Class warfare can go two ways here.

Matt Franko said...

No Ryan all we have to do is cancel all the student loan debt and the gravy train can continue....

Noah Way said...

Voting doesn't influence anything. Money, on the other hand, influences everything.

Tom Hickey said...

The reason that voting doesn't influence anything substantially is that moneyed interest control the selection process, which reduces to class structure and class power power determining a ruling elite and their cronies and minions.

The rest is noise and most of the discussion is about the noise.

Ryan Harris said...
This comment has been removed by the author.