And for at least three decades, Louisiana along with the rest of the South, has insisted on following the same outdated industrial inducement policies first warned about in a 1986 report by MDC, Inc. (Manpower Development Corp.) of Durham, N.C.
One of the members of the MDC Panel on Rural Economic Development which produced the 16-page report Shadows in the Sunbelt was Dr. Norman Francis, then President of Xavier University and Chairman of Liberty Bank in New Orleans.https://gri.unc.edu/files/2011/10/Shadows-in-the-Sunbelt-86.pdf
That 1986 report was followed up in 2002 when MDC published a 44-page report entitled The State of the South.http://mdcinc.org/sites/default/files/resources/MDC_StateOfTheSouth_2014.pdf
Both reports said much the same thing: that the market had dried up. There were, the reports said, 15,000 industrial inducement committees in the South chasing 1500 industries—and if they relocated at all, it would be whether inducements in the form of tax incentives were offered or not. “At best, the states have assisted businesses in doing what they wanted to do anyway,” the ’86 report said.
“The factors which once made the rural South attractive (to industry) are now losing relevance,” it said. That’s because the South, which once boasted an abundance of low-cost labor, can no longer complete in the global market. Where American apparel workers would earn $6.52 an hour (remember, this was in 1986, but the numbers are still comparable), their counterparts in Korea and Taiwan earned $1 and $1.43, respectively, and Chinese workers made about 26 cents per hour.
Shadows in the Sunbelt called southern states’ tax incentives to lure business and industry a “buffalo hunt,” an analogy to the great buffalo hunts of the 19thcentury which nearly wiped out the North American bison population. “Yet the hunters (states) continue in their pursuit, hoping to bag one of the remaining hides,” the report said.
The stampede actually started in Mississippi 80 years ago through a program called “Balance Agriculture with Industry” whereby the state used municipal bonds to finance construction of new plants. That practice evolved into tax breaks offered to prospective industries as states began forfeiting property tax revenues to lure new jobs.
Today, Louisiana gives up about $3 billion each year in tax breaks and credits doled out in various programs, all of which are designed ostensibly to attract industry and raise the standard of living through more and better jobs but which in reality, do little of either.
What we’ve received instead are tax breaks for duck hunters, chicken plucking plants, Wal-Mart stores, fast food franchises and for industries that either (a) get the tax incentives but which soon shut down operations (Nucor Steel, General Motors) or (b) claim the creation of great numbers of new jobs but which actually are far fewer than announced.
In fact, the ’86 report said, a long-term study of job promises in South Carolina revealed that only 52 percent of the jobs promised actually materialized. In Louisiana, when Bobby Jindal ran for re-election in 2011, he claimed in TV ads that the Louisiana Department of Economic Development during his first term handed out incentives that brought 25,425 new jobs to Louisiana. The actual number, however, was only 6,729. That’s only 26.5 percent of the jobs promised.http://louisianavoice.com/2011/09/29/jindal-plays-fast-and-loose-with-jobs-claim-tv-campaign-ad/
The ’86 report said as much. “The costs of inducements offered to attract industry are also heavy—and in some cases counterproductive,” it said. Evidence showed that tax breaks did not significantly affect plant location decisions but states nevertheless open up the state treasury for companies to loot even though the benefits do not offset the costs. “Whatever the effectiveness of industrial recruiting in the past, current trends clearly indicate that its value as a tool for economic development is declining,” it said.
That was 30 years ago and we’re still giving away the store by adhering to a faulty ALEC-backed policy of favoring corporations over citizens.
As an alternative, the report recommended that in lieu of spending millions to attract out-of-state industries, states should implement programs to support local development and to encourage entrepreneurship.
The 2002 report, State of the South, only reiterated the recommendations of the study of 16 years earlier. It also should have sent a clear message to the Louisiana Legislature and to Bobby Jindal six years before he came to power. The latter report’s recommendations included:
Refocus state agencies responsible for economic development to pursue a broader, more strategic approach;
State governments should not measure success simply by the number of new jobs, but also in terms of higher incomes for people and improved competitiveness of regions within the states;
Modernize tax systems so that states have the fiscal capacity to provide excellent educatin, widely accessible job training, necessary infrastructure, and community amenities that enrich the soil for economic development;
Tighten performance criteria for industrial incentives—and encourage associations of Southern governors and legislators to reexamine the one-dimensional, incentives-driven recruitment strategy in favor of a comprehensive economic development strategy;
Dramatically expand efforts to erase serious deficits along the entire education continuum in the South, and bolster the education, health and well-being of children;
Draw on universities and community colleges to act as catalysts for state and regional economic advancement.
The 2002 report said high-poverty, sparsely-populated areas are last to get telecommunications infrastructure. More than 60 percent of the zip codes in the Delta areas of Arkansas, Mississippi and Louisiana have no broadband internet provider which further widens the competitive gap for these areas. Yet Jindal rejected an $80 million federal grant to install broadband in Louisiana’s rural areas.http://www.nola.com/politics/index.ssf/2011/11/80_million_grant_for_rural_bro.html
Because Louisiana, along with the rest of the South, made a commitment to low taxes, low public investment, and low education in return for jobs. That strategy trapped the state in a cycle of low-wage, low-skill industry “begetting more low-wage, low-skill industry,” and thus perpetuating the “Wal-Mart Syndrome.”
Mac Holladay, who served as head of economic development for three Southern states summed up the situation. “If we had put the vast majority of our economic development resources into incubators, small business services, export training, and existing business assistance instead of recruitment and overseas offices, it might have made a big difference.”
Tax abatements and other financial giveaways, the 2002 report said, “inevitably drain resources from schools, community colleges and universities—public investments that are crucial to long-term economic advancement. Incentives provide a better return on investment when they build a community’s infrastructure, provide workers with higher skills and attract jobs that pay markedly more than the prevailing wages.”
Even when Mississippi granted $68 million in incentives for Nissan’s assembly plant in Canton, a small town just north of Jackson, the company’s director of human resources told the Jackson Clarion-Ledger that he could not name any Canton resident likely to be hired for one of the 5,300 jobs starting at $12 per hour. He attributed that to the town’s 27 percent poverty rate, 76 percent of out-of-wedlock births and 44 percent of adults without a high school diploma.
Carley Fiorina, former chief executive for Hewlett-Packard and more recently an unsuccessful candidate for the Republican presidential nomination said, “Keep your incentives and highway interchanges. We will go where the highly skilled people are.”
“Not so long ago,” said the 2002 State of the South report, “the South sought to build its economy by enticing companies from afar to relocate with the bait of cheap land, low taxes, and a surplus of hardworking but undereducated workers. That old recipe no longer works to feed families and sustain communities.
“No comprehensive strategy would be complete without further efforts to bolster public schools,” the report said.
“There must be a recognition that the ultimate challenge lies in the educational and economic advancement of people who have gotten left behind,” it said. “We must get the message out to every household, every poor household, that the only road out of poverty runs by the schoolhouse.
“The line that separates the well-education from the poorly education is the harshest fault line of all.”
Yet, Louisiana’s leaders insist on doing the same thing over and over and expecting different results.
And we keep electing the same failed policy makers over and over and over…