by Dr. Roy Cordato
Senior Economist, Emeritas
The press release below was sent out by the Governor’s office yesterday. It boasts that the Commerce Department is about to organize a $220,000 coercive wealth transfer [my language not the press release’s] from the taxpayers of North Carolina to a private company called bioMerieux as a payoff [again my language] for expanding its operations in Durham. The point is to create 44 new employment opportunities. (There is no mention of how many will be destroyed elsewhere in the economy because of the transfer.) This is being done under the umbrella of a state run corporate welfare program called the One North Carolina Fund. The fund is based on a central planning model of resource allocation where it is presumed that the state government has special knowledge that private investors do not have about a host of economic variables and therefore should be able to take money out of the hands of consumers and private investors via taxation and transfer it to where politicians and bureaucrats believe it will be better used. The stated purpose of the program is to “recruit and expand quality jobs in high value-added, knowledge-driven industries.” The definition of these terms is left up to politicians and bureaucrats.
The presumption is that political decision makers have special insight that is not available to private investors about the value added of industries. But in fact it is the exact opposite that is the case. In a free economy it is the role of private sector investors using their own money and looking at potential profits and losses to decide what kinds of investments will add the most value. There has never been any evidence that the government can improve upon this process. In arranging this, and other wealth transfers, which are not limited to amounts granted by the state because they are contingent upon more money being allocated by local governments (see press release), there is necessarily a dampening of economic activity in other parts of the economy. The problem is that there is no way to specifically identify these losses. So while governors and other politicians can point to all the “good” that their policies are doing, there is no way to identify the harm and therefore suffer any negative political consequences. From a political perspective they are the perfect government program, the benefits are obvious and the costs are hidden. While programs like this may benefit specific companies, localities, and politicians, they misallocate resources statewide and ultimately reduce economic growth and job creation.
The Governor’s Press Release
FOR IMMEDIATE RELEASE Contact: Crystal Feldman
Thursday, January 31, 2013 [email protected]
Raleigh, N.C. — Today, Governor Pat McCrory and Commerce Secretary Sharon Decker announced that bioMérieux Inc., a manufacturer of patient health diagnostics solutions, will expand its facility in Durham County.
The company plans to create 44 jobs and invest $48.3 million over the next three years in Durham. The project was made possible in part by a performance-based grant from the One North Carolina Fund of up to $220,000. The grant is contingent upon proof of job creation and receipt of a local funding match.
“Companies are choosing to invest in our state because of our state’s strong workforce,” said Gov. McCrory. “This announcement strengthens North Carolina’s position as a leader in bioscience and advanced manufacturing.”
A world leader in the field of in vitro diagnostics for 50 years, bioMérieux is present in more than 160 countries through 41 subsidiaries and a large network of distributors. In 2012, revenues reached $2 billion with 87 percent of sales outside of France.
bioMérieux provides diagnostic solutions (reagents, instruments, software) which determine the source of disease and contamination to improve patient health and ensure consumer safety. Its products are used for diagnosing infectious diseases and providing high medical value results for cancer screening and monitoring and cardiovascular emergencies. They are also used for detecting microorganisms in agri-food, pharmaceutical and cosmetic products. The company currently employs more than 630 people at its Durham facility.
“The N.C. Department of Commerce is committed to working with companies to spur job creation,” said Sharon Decker, N.C. Secretary of Commerce. “We congratulate bioMérieux for investing in North Carolina once again.”
Salaries will vary by job function, but the average annual payroll for the new jobs will be $2.2 million.
“bioMérieux has a long and treasured history with North Carolina, its skilled and educated workforce has enabled us to become a leading innovator and supplier of diagnostic equipment,” said Marc Mackowiak, president and chief executive officer of bioMérieux Inc. “I applaud the One North Carolina Fund, it is a forward thinking initiative that will drive infrastructure and economic development in our state.”
The One NC Fund provides financial assistance, through local governments, to attract business projects that will stimulate economic activity and create new jobs in the state. Companies receive no money up front and must meet job creation and investment performance standards to qualify for grant funds.
Other partners that helped with this project include: the N.C. Department of Commerce, N.C. Community Colleges, Durham County, N. C. Biotech Center and the Greater Durham Chamber of Commerce.