In the manufacturing chamber of horrors that is Massachusetts and New York and Connecticut and New Jersey, there are thousands of mysterious “manufacturers” that seem to employ little more than two or three guys in suits and an office administrator.
The real manufacturing, of course, is done elsewhere, but the guys in charge want to live within spitting distance of the bright lights of the Big City, whether it be Boston or New York.
And it’s not just the manufacturers, of course. The banks and insurers and, oh, yes, even the biotech boys, will often find their subsidiaries a happy home in the South Dakotas of this world, drawn by a mix of housing costs, low taxes, friendly regulation and docile workforces.
One of the jokes of the business-relocation professionals is that if you want to understand how such decisions are made, draw a 50-mile circle around the CEO’s home. It’s an old joke, which used to apply to the smokestacks, as well as the oak desk and the filing cabinets.
The variables that contribute to siting decisions, whether of existing or new businesses, are immense, complex and often murky. That, in part, is why government-inspired “economic development” is such a giddy, weird, frustrating and uncertain enterprise.
In Fashion
At the heart of the academic and intellectual criticism of economic development schemes is the notion of “picking winners” – of relying on government or shadowy nonprofits to decide which business or industry is worthy of subsidy or zoning flexibility or whatever enticement seems to work.
Now, of course, biotech and other hi-tech businesses seem to be all the rage. But, what about a new CHEEZ-IT cracker factory?
As one economic analyst put it years ago, one of the most successful, fastest-growing, popular industries in the nation for an extended period was nail salons in California. The nail-decoration craze took off, thousands of folks were employed, mediocre retail space in not-so-great strip malls became successful businesses, and tens of millions of dollars in revenue was generated
The point, of course, was that government had almost nothing to do with it. Could you imagine going to the economic development gurus and suggesting a nail salon initiative?
Another major complication for the industry-grabbing process is the clashing goals, objectives and enticement tools available from the various jurisdictions competing for business. While there is much brave talk about “regions” coming together in a big, group hug to be “internationally competitive,” much government-inspired economic development is a weird fistfight among state, county and municipal bureaucracies across the nation – none of which are willing to suggest that perhaps your business would actually be better off somewhere else.
Perhaps the most perverse piece of some of the economic development packages is to link the enticements to promises by the beloved business that it will hire a certain number of people, or will never lay off anyone until the Messiah returns; or will never sell themselves to a New Jersey drug company, because Massachusetts loves them very, very much.
No sane business executive, of course, could ever make such a promise and actually mean it, cross his heart and hope to die.
The carping critics tend to point out that venture capital firms and banks and angel investors are the folks who should be making “economic development” decisions – based on whether, in fact, a business is viable, not whether it would pretty up the vacant industrial park.
The most credible case to be made for much of the economic development planning is the theory of “industry clusters” – that it often takes some government planning to get similar industries together in an area, which, the theory goes, is beneficial to the businesses, as well as the locale.
The complementary theory is that the intellectual folks and the artsy folks and the surly newspaper columnists enjoy being near each other, so that they can bask in the glory of each other’s egos, without having to endure blue-collar people who actually do something.
Oh, by the way, Mayor Menino just announced a fancy new “Innovation District” economic development scheme for the Marine Industrial Park and the South Boston Waterfront. It will be terrific. Full of, you know, innovators.
