fedgazette

Letter to the Editor

A reader responds to previous fedgazette issues focusing on local economic development incentives.

Published May 1, 2001  |  May 2001 issue

To the Editor:

Your articles of this past April and July [2000] in the Minneapolis fedgazette are certainly thought-provoking. You will not be surprised, I suspect, to learn that I do not agree with your conclusions generally.

I think the primary problem here is an issue of perspective. Yours is regional, even national, while mine and that of most economic developers is local. You see the relocation of businesses or their choices of expansion venues as a "zero sum game." If you expand that argument to the global economy then all location choices influenced by incentives are "zero sum competitions." You assert that there is no real winner, no set of beneficiaries other than the businesses themselves. At the community level, however, we see the benefits to our citizens of stable or thriving economies. Wage levels increase, jobs are more plentiful and the array of available careers is greater in our community when our programs are successful.

I understand your point that your disagreement with incentives is only with respect to those provided to a specific company simply in order to secure location or expansion in a specific community. You seem to laud general incentives which apply to all companies equally or those which target specific economic activities and then apply equally to all companies engaged in the region in those activities. I submit that both are important.

All employment activity occurs somewhere. It doesn't take place in the ether. That applies to Internet-based businesses just as much as it does to traditional ones. Employees go to work in buildings located in specific communities. There is a popular idea that's been around for some time which suggests the future will find all of us working from home or wherever we might choose. Where people work might change but they will, for the most part, still go to work in buildings located in communities.

Certainly, economies are complex and I do not want to oversimplify things overly much, but I think it is important to recognize that, fundamentally, state, regional and national economies are aggregates of the economies of the communities within their borders. If the economies of those communities are not stable or thriving neither will the economies of the larger political jurisdictions be so. Incentives are very much a part of the competition between states and communities for economic development projects. I have worked in community economic development in five communities in different parts of the country over the past 30 years and have only seen the use of incentives grow. And the argument you present has been presented by many others during that time. It is one that wishes for a perfect world, a perfectly functioning marketplace in an imperfect world. I would agree with your position if such a perfect world existed or might ever exist, but we who are in the trenches in this endeavor must deal with the world as it is. And that world requires location incentives in the vast majority of communities. My mother said it best (and often when I was a boy) when she said, "And people in hell want ice water too!"

Even though I disagree with your position I want to thank you for the work you have done on this important issue and commend you for your bravery in presenting your findings and position before economic development groups. I encourage you to continue to investigate and write about the use of incentives in economic development. Let me also compliment the Minneapolis Federal Reserve Bank on the quality of its publication. I have found several articles in the recent issues you have been kind to send to me of great interest and very well done. I found the [January 2001] issue on electric utility deregulation very informative and quite timely.

Michael R. Bourn, Executive Director
Amarillo (Texas) Economic Development Corp.

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