RALEIGH -- As state legislators were getting ready to come to town for a special session about incentive packages for a few manufacturers, another economic-development story was brewing: North Carolina's aggressive pursuit of Massachusetts and the latter's current status as a hotspot for startup companies in the biotechnology industry.
North Carolina has long had a piece of the biotech business, but as a host for someone else's business activities. Our state hasn't had the entrepreneurial culture that our Northern rival has, and North Carolina politicians are eager to replicate it.
The battle between the states heated up last week when a group called the North Carolina Biosciences Organization bought a full-page ad in The Boston Globe touting the Tar Heel State's offerings and questioning those of Massachusetts. "Come on down, the business climate is fine," the ad read. Previously, House Co-Speaker Richard Morgan had gotten into the act by writing a letter to several biotech executives in Massachusetts suggesting that they consider a move southward.
Last year, state leaders successfully pressed the directors of the Golden LEAF Foundation to devote $85 million of the public money they control to biotechnology assistance and training initiatives housed at North Carolina colleges. Millions more have been plowed over the years into the North Carolina Biotechnology Center in Research Triangle Park, including tax dollars destined for direct investment in biotech startups. Many politicians, including House Speaker Jim Black and Senate President Pro Tem Marc Basnight (scroll down), have mentioned on the hustings that they see biotech as a potential replacement for job opportunities being lost as textiles, furniture, and other traditional employers downsize or go out of business.
North Carolina is hardly alone in riding so hard toward what is assumed to be a biotech bonanza. The trail is well-worn. More than 40 other states have identified biotechnology as a key element of their economic-development strategy.
So if everyone else is doing it, the idea must make sense, right? Well, I'm not going to suggest that biotechnology isn't going to be among the most promising industries of the future. As scientists unlock the secrets of our genes and use their discoveries to develop new screening techniques and new therapies for a variety of human ailments, the possibilities for both the welcome amelioration of suffering and significant profits will present themselves. Similarly, the production of genetically engineered plants, animals, molds, bacteria, and other organizations will probably dazzle the mind -- and freak out lots of small-c conservatives on the Right and Left.
The problem, as I see it, is that while the business promise of biotechnology is obvious, its implications for employment are probably being dramatically oversold. Most biotechnology companies are currently in the research, design, and testing stage, with few actual employees and lots of contractors far away from home base, sometimes overseas. Once these firms get to the production stage, they will either sell out to larger companies that already had manufacturing capacity -- such as existing pharmaceutical firms -- or build plants where production costs are the most competitive, regardless of where their original business was based.
We are not, in all likelihood, talking about tens of thousands of blue-collar jobs for workers in North Carolina who used to running textile machinery or work on shop floors. Since I don't interpret economic value as having much to do with the number of positions created, this does not greatly concern me, and I hope to have some of my long-term investment dollars in biotech. But I'm not a politician promising unemployed workers the Next Big Thing.
Oh, and there's one more factor to consider about North Carolina's new marketing push in Massachusetts. While there are many attractive things about living and working in our state, there's a reason we may not be the place where many budding biotechnology entrepreneurs would want to invest and then earn a return on their investment. In North Carolina, they would pay an 8.25 percent state income tax on those investment earnings. In Massachusetts, the top -- and only -- income tax rate is 5.3 percent, but if the investor takes his return in the form of a capital gain, the tax rate is probably . . .
... Wait for it. . .
Hood is president of the John Locke Foundation and publisher of Carolina Journal.