Boy, I wish I could act surprised at this one. After intense public criticism of the $305 million in incentives, between tax breaks, worker retraining, and flat cash grants to the massive computer maker, a scant five years later Dell is pulling up the stakes and decamping.
For the reading class on urban development I'm taking right now, I'm reading a fair bit of radical geographer David Harvey, but the one which comes to mind is his description and critique of the "entrepreneurial state," a mode of governance that started to come into vogue in the 1970s and has been growing ever since. (FWIW, "state" here refers to governmental entities in general, not US states specifically.) Rather than the previous New Deal model of the "caretaker" state, Harvey illustrates how state entities have reached the point of absurdity in some of these deals with the private sector. In the literature I'm reading, most geographers chalk this up to the school of thought of "neoliberalism," running from Hayek through Goldwater and Thatcher and Reagan and Giuliani and so forth. As irony would have it, though, some of the most vocal critics of these policies (at least in Durham) run in libertarian circles that venerate Hayek more than just about anyone. So, now we've got both the radical Leftist geographers like Harvey criticizing this, and Hayek's true heirs criticizing it too. What gives? If two such divergent political schools loathe them so much, why do we do them in the first place?
The answer, of course, is that you're damned if you do, damned if you don't in a lot of these cases. In the case of Dell, North Carolina was in the middle of the collapse of two of its most important, longest lasting, most durable industries: textiles and furniture. With the job losses mounting up, the reigning coalition of pro-business Democrats felt they had to do something, both out of political expediency and, I'll give the benefit of the doubt, out of no small concern for the good of North Carolina.
But now whatever money got paid out is up in smoke. (I should point out that I don't know how much of the incentives actually got paid out -- these deals usually have rider clauses on them that certain conditions have to be met over time.) And what is North Carolina left with? An empty shell of a factory and over a thousand folks who will have lost their jobs by early next year.
Again, I must point out the simple ease of the armchair critic. Harvey and his cohorts generally advocate something along the lines of old school egalitarian liberalism, from FDR-style employment programs to Great Society poverty amelioration programs. I certainly sympathize with this perspective, given my liberal upbringing, but even if I were to try to ignore the numerous failings of Left liberalism, politically it's quite apparent that the pure forms of mid-20th century liberalism are dead for good. On the other hand, the libertarian critique that what we really need is to get the government out of the economy in every way, shape, and form frustrates me even more. Look, I bristle at the amount we spend on highways these days, but it's impossible to look at any history or historical geography of North Carolina and not notice the dramatic improvements to the lives of its citizens that the investments in roads brought about.
So where does that leave us? An interesting website on North Carolina in the Global Economy over at Duke, which pretty evidently comes out of much more mainline economics and public policy analysis than my Harvey readings, puts forth a number of recommendations on doing this kind of economic recruitment better. Without endorsing the whole thing, it's an interesting read, and I certainly agree with a few points here. First of all, worker training is a good idea, but not just for massive corporations like Dell. There should be a standing offer for any business that's willing to pay half the price of work-related training for some small minimum number of its employees that some combination of the city, county, and state governments will cover the other half at a Technical school of some sort. This not only makes the city more attractive to the big guys, but also helps workers who are already here and already have jobs, and helps businesses across the board without playing favorites.
Second of all, and this is my personal hobby-horse, but instead of giving tax credits (which, as the Duke site points out, are only worth anything after you make a profit) or direct cash grants, I'd much rather see states put money into targeted infrastructure. Look, if the Dell project had worked out, it would have been a big help to Winston-Salem's economy, and I can see that it would have been worth a shot. But since it failed, North Carolina is left with nothing to show for its money. Instead of giving out $300 million in grants and incentives, what if we'd spent $500 million in transportation and energy improvements in Winston-Salem to make it easier to get raw materials in, easier to ship built systems out, and cheaper, more sustainable energy to supply the factory? What if Dell had an upgraded rail bed from W-S all the way to our fancy new shipping terminals at the coast? All of these would have benefited the Dell facility, and made it more competitive over the long run had the project worked out. But now that Dell's gone, if we had spent our money on infrastructure, rather than a bunch of broken dreams, there'd be a big shell with upgraded infrastructure sitting there waiting for whatever industry drove the next big economic expansion.
I find the notion that economic activity ever happens without at least some meaningful government-funded structures misguided and naive. However, the Dell deal should be a cautionary tale in the long and sordid saga of economic incentives. And if there's one lesson I wish we'd learn, it'd be this: don't ever just hand out cash, either in the form of tax breaks or grants. Instead, do the things that government does well, like building infrastructure and educating the citizens.