The Political Geography of Economic Development - Pacific Standard

The Political Geography of Economic Development

Japanese companies are bringing jobs to Alabama—and it's all too good to be true.
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(Photo: world of vector/Shutterstock)

(Photo: world of vector/Shutterstock)

Politicians love a good show. When it comes to economic development, a ribbon cutting for a new business beats greater investment in education any day of the week. The ribbon cutting provides a photo opportunity for tomorrow's newspaper. The human capital payoff will come years, if not decades, later and will certainly benefit other regions as well as the homeland. The latest economic development news out of Alabama is all flash and no substance:

Japanese companies are pouring resources into Alabama at a stunning rate in recent years, accelerating their growth, branching into new sectors of the economy and employing thousands of Alabamians along the way. According to several government officials Yellowhammer spoke with on Monday, that’s no accident, but is a direct result of Alabama’s right-to-work laws and low tax, low regulation business climate.

Foreign direct investment from Japan into Alabama is worth celebrating. Allegedly, 12,000 jobs resulted. However, why invest in Alabama instead of Tennessee? From the same article, here's Alabama Commerce Secretary Greg Canfield:

These Alabama-Japanese companies have found our state to be ideal as a right-to-work state; a state with a supportive governance and regulatory environment; a state whose workforce provides the dedication to quality, teamwork and innovation necessary to meet and exceed customer expectations; which all translates to market growth and success in the North American markets by choosing to locate in Alabama.

That makes for great copy, a verbal ribbon cutting. I don't believe a word of it. For the sake of political theater, states buy jobs. As for right-to-work legislation, that provides existing businesses greater leverage with labor. I understand such laws as subsidies, much like the millions of dollars those Japanese companies received to locate in Alabama.

The Taft-Hartley Act of 1947 opened the door for anti-union Southern states to implement right-to-work. Some academics think Taft-Hartley paved the way for both the Sun Belt boom and the demise of the region that would become the Rust Belt. Therein lies the problem with Alabama's economic development claim. There are plenty of other right-to-work states. Indiana recently joined the ranks. Why would Japanese companies choose one right-to-work state over another? The true cost of job creation in Alabama (emphasis mine):

Richard Shelby, the top Republican on the Senate Banking Committee, took to the airwaves over the weekend as the chief opponent of loans to Detroit automakers. His premise: This is a Detroit problem not a national problem and taxpayers shouldn't subsidize these poorly managed dinosaurs. ...

... Indeed, taxpayers 'round the globe, including those in your home state of Alabama, have been subsidizing automakers all along.

Shelby's state of Alabama is home to a trio of auto assembly plants and their affiliated auto suppliers. Alabama lured automakers to the state by dangling millions and millions of financial incentives in front of them in the form of infrastructure construction and improvement, job training for workers and tax breaks for the auto companies. In fact, in every case, Alabama outbid other states with its attractive offer, like the $30-million training center that Honda said clinched the deal for its choice.

Last time I checked, Honda is a Japanese company. And a $30-million training site doesn't look like a right-to-work lure. Unfortunately, Michigan didn't know the facts when it became the "24th state to pass Right to Work protections for its workers" in late 2012. Right-to-work, like most economic development efforts, is a boondoggle.

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