by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor, John Locke Foundation
The headlines from Gov. McCrory’s announcement today seems promising:
McCrory plan seeks to get private sector more involved in NC economic development
Have we finally gotten a governor who understands the state’s real role in economic development — getting out of the way? That it’s the private sector’s role to produce economic development, under freedom protected by the state? We live in a state whose very constitution praises “the genius of a free state“; it’s about time we had leaders who believed in that genius instead of thinking that they are supergeniuses.
As Dr. Michael Walden wrote about Gov. Mike Easley’s economic incentives program in 2002,
At the heart of the argument for business incentives is the assumption that state officials can identify winning industries. The idea is to select companies of industries that will prosper in the future and then subsidize, with incentives, their location in North Carolina.
Sounds easy, right? Wrong! Although many economists, business analysts, and futurists may advertise they can pinpoint winning industries, in reality this is very hard, if not impossible to do.
Business formation doesn’t move on a straight and predictable line. Supply, demand, and markets are always changing. Only people at the “ground level,” such as entrepreneurs and venture capitalist investors, can even hope to keep track of the fast and unpredictable movements in the business world. Certainly academics in their ivory towers and bureaucrats at their downtown offices can’t, with any degree of certainty, determine what inventions and innovations will move the economy in the decades ahead.
Dr. Roy Cordato, writing about the same program, boiled it down to fundamental economics in his report “Socialism for Capitalists“:
The fact is that there is one proven way to attract investment, maximize job growth, and improve the economic well-being of the state’s citizens. Unfortunately for the people of North Carolina, it is a route that this governor and General Assembly has shown no interest in pursuing. It involves one simple principle — keep control of revenues and resources in the hands of those who earn it. Government bureaucrats cannot improve on the decisions of free individuals about how to invest and spend their own money. This is the reason why the allocation of resources through the processes of the free enterprise system has always generated more job creation, more economic growth, and more personal and social wealth than any other mechanism ever devised. For state economic policy this means that the best thing the government can do is to get out of the way. Taxes on businesses, consumers, and workers, should be lowered, not raised. Regulations should be reduced, not expanded, as was recently the case with the costly and ineffective Clean Smokestacks legislation. And government subsidies to business should be abolished, not expanded.
A little over a decade and two governors later, now there’s an executive in the state talking about the private sector being involved in economic development. Does it mean he will trust the genius of the free state — individuals making countless unobserved decisions in their own interests, the cumulative effects of which are indeed “more job creation, more economic growth, and more personal and social wealth than any other mechanism ever devised”?
Well, let’s see:
It would basically gut the state’s Commerce Department, shifting much of the work done there to a new public-private partnership tasked with negotiating corporate economic incentives packages, boosting the state’s imports and exports and promoting travel and tourism.
The partnership would use taxpayer money, and be governed by a board of directors that would be led by the governor and include several state legislators as well as businessmen. McCrory said the agency would make North Carolina both more nimble and more aggressive in pursuing jobs.
So … under the new governor’s plan for economic development, the State of North Carolina would still assume that economic development is driven and directed by the government, still use money taken out of the private sector via taxes, still use corporate welfare, still use public officials (who would no doubt be present at the ribbon-cutting ceremonies to be hailed as “job creators”), but because it would also include a few businessmen in the mix, it would supposedly qualify as “turning economic development over to the private sector”? Genius denied.