Let’s say you already have a business – big thumbs up to you from me. Operating a business or organization successfully is one of the most challenging things there is. And let’s also say that you want to expand your business or invest in new more efficient equipment or training or something that is going to make you run faster, jump higher, able to leap tall buildings and so on. Where do you go for the money? The bank?

Nope. Here’s what you do.

Call a press conference, get anyone and everyone there – all your local, county and state officials if you have any in your county and you know what you say?

“I’m here to tell you that I’m sick and tired of paying the high (fill in the blank – any of the following will do – income taxes, property taxes, workers compensation fees, permitting..etc. ) and I’m going to take my company and all my jobs and I’m going to leave.”

Now, perhaps you have never even considered leaving your area. Perhaps it’s the furthest thing from your mind. Maybe you love your area and your workers. But let me tell you that as someone who used to work in the EcoDev biz, if you live in a state that has challenges in terms of building business there, then this is a sure fire way to get yourself some attention because…it works. In my area, for example, a family that owned a food distribution warehouse (which was actually doing quite nicely, thank you) pulled this deal – twice and got millions of dollars in state and local support for it.

No elected official wants to be labeled ‘The guy who lost us xxx co. and their xxxxx jobs.”

The whole economic development thing is… a racket.

Did Bill Gates go to the Redmond, Washington Economic Development Agency and demand that they do something for him? No – he wanted to be there. He grew his company where he wanted to be. Corning Glass was originally the Brooklyn Flint Glass Company and in the 19th Century, they moved to Corning, New York because of the availability of water and raw materials. Steuben County did not come up with a package of ‘economic development incentives’ because that sort of thing did not exist … yet. That system of enticing employers to move jobs and companies from where they are to where YOU are did not happen until states in the South started doing it in the 1940s. Which is how the Northeast and MidAtlantic states lost a lot of their manufacturing first to states like North and South Carolina, then Mississippi, Alabama and Georgia.

Now, why am I bringing this up today? I’ve talked about economic development before. Well, with regard to Governor Sanford (bear with me here – it’s a bit convoluted but we’ll get there), CNN reported this today:

“At a local Chamber of Commerce breakfast in Cherokee County, GOP House members Lanny Littlejohn, Dennis Moss and Steve Moss each told the audience that Sanford has lost the credibility to steer the state’s economy through the final 18 months of his term following revelations of an extramarital affair….“When business leaders start moving to South Carolina, they want to see somebody they can have confidence in,” Littlejohn told CNN. “If you lie to your family and you lie to your friends, you lie to anyone.”

SC Repubs Want Sanford Gone

As someone who spent 5 years doing economic development for a regional gas and electric utility I can tell you that business leaders do not give a flying rat’s ass about the governor of a state they are targeting…they only care about whether or not the state will deliver on their incentive package. That’s it.

They don’t care about the governor’s personal character, his or her morality, his or her relationship with the spouse, children, the odd representative of countries in South America, etc. etc. They even don’t really care about items like workers compensation or the educational or efficiency levels of the workforce (because if those things actually counted, you would not see an auto industry in Mississippi or Alabama).

They only care about two items: First – is it a Right To Work State and Second: negotiating the most government graft for themselves as they possibly can. The common strategy is to use another state as a club to threaten and extract as much as they can. Unless they have a need (as in warehousing and/or retail in terms of serving a market) to be in a particular state which just so happens to NOT be a Right to Work State, the number one item on their lists is: Is this a Right to Work State – if yes, then include it; if no, then throw it out.

It doesn’t matter if they use an ED consultant (and I worked with many of those “professionals” when I worked in ED) or are doing it all in-house. The very first item on their check list is the issue of Right to Work. I know it is counter intuitive in terms of issues such as worker education, efficiency, access to facilities and so on, but that is the fact of it. There is a huge ‘wanna’ factor in Economic Development (as in “We wanna be here” and “We don’t wanna be there”). They may SAY that they want a workforce that is efficient and educated. They may SAY that they want a site that already has rail and fiber optic cables and access to an entrance and exit (or, as they say in the biz, a ‘diamond’) on an interstate highway. They may say that they want to be part of a cluster of industries that is in your state. All of those items are secondary, even tertiary.

If your state is a ‘Right to Work’ state, you are in the universe of possibilities. If your state is NOT, you are not even on the map. Your state might as well be in Siberia or Africa as to any sort of attractiveness it might have for business to move to you. For all the grousing about Workers Comp rates or income taxes or property taxes and so on, it really boils down, first to the issue of Right to Work. You can have the brightest, most hardworking workforce, people who show up on time, every day, put in 8 hours solid with no gold bricks and so on.

If your state is not Right to Work, that has no value. Your universities have no value. Your highways and facilities have no value. If your state IS Right to Work, no matter how poorly educated your workforce is…no matter how little research and development is being done by the universities in your state, no matter how poor the rail or highway systems are, no matter how little access there is to fiber optic cable…as long as your state does not blink when companies and their consultants bring our their laundry list of demands (free land, Greenfield property, installed rail, installed fiber optic cables, reduced prices on natural gas and electric power, state paid training for workers, facility built to their spec on a sale/leaseback arrangement and so on), then you are basically home free.

Unless a business has a big ‘wanna’ to be in your state, if you are NOT a Right to Work state, throwing money and resources at them is a worthless gesture. As a matter of fact, even if your state attracts them; even if your state has ‘job clawback’ legislation (that is, if the company doesn’t produce the number of jobs they promise within a certain period, they have to give back a certain percentage of the incentive money), the company will not care. There are companies that consider wherever they are as temporary. If they are in the back office or call center business, they can and will de-install their entire operation in 24 hours, pack up the tractor trailers in the middle of the night and will be gone before the first shift shows up on Monday morning at 7 a.m – all to take everything to the next state or community offering them ‘more and better’.

So, Mr. Littlejohn’s comments regarding Gov. Sanford’s perceived liability in terms of economic development are a pretty empty indictment; South Carolina has one of the highest unemployment rates in the country NOT because the state has not thrown a tremendous amount of economic development money out there – they play the game as hard as any southern state does. They have a high unemployment rate for the same reasons that other states that have manufacturing bases that appeal to consumers do – consumers are not spending money. They are not buying.

But if I had Mr. Littlejohn and his buddies here, I’d tell them this (and this is the same thing I said over and over again when I was doing ED but because everyone has so much invested in playing the incentives and consultants game that no one is brave enough to do it):

Never use incentives to get a company to bring in jobs from someplace else; you are cannibalizing other communities and put yourselves at risk for another state or community to do the same to you.

All those millions and millions of dollars that you are extracting from the pockets of the taxpayers of your state are going to help the company – not the people of the state. Better to use a good piece of that money to improve the schools of your state – unless of course your interest is in having poor public schools forever for race or class reasons.

Better to use some of that money to improve the infrastructure for the entire state rather than for small industrial clusters.

Better to use some of that money to invest in locally owned and operated companies. You won’t have to promise these folks the earth to get them to come into your state – they already want to be there. Help them to grow there.

South Carolina does not have 12.1% unemployment for the month of May because Governor Sanford is going through an extended Midlife Crisis. And trying to pin that on his extracurricular activities is just political game-playing.
(game board photo courtesy of Chris in SEA)