This week’s “Daily Journal” guest columnist is Geoff Lawrence, research intern at the John Locke Foundation and a Ph.D. candidate in economics at N.C. State University.
They call it economic development. I’ve never understood the concept. At least not until this week, that is. The state legislature gave a resounding, convincing answer to a question that has puzzled me for years.
As an economist, I’ve always been perplexed as to why people would want to pay their own wages just so they could have the privilege of working. After all, economists spend their lives trying to figure out how people can have more while working less. Yet the notion of economic development has persisted with nearly universal support. The premise of this notion is to levy a tax and then to give the tax revenue to an employer so that he can pay his workers’ salaries. Perhaps you’ve never thought about what the term means. If, after seeing it in print, it seems to be a convoluted concept, then you may be experiencing the same confusion that baffled me for so long.
It really does boil down to people paying their own wages. Among the first lessons that we learn in economics is that the entire point of working is to increase your consumption and, thereby, your standard of living. If your wages are coming out of your own pockets, then you are not increasing your standard of living. So what is the point of working, right?
Sure, the benefactors of economic development incentives have the advantage of getting money from people who don’t get anything in return. Yet this aspect of economic development confuses me even more. Why do the people who don’t benefit from an economic development (otherwise known as corporate welfare) scheme agree that it’s a good idea to give up their income and get nothing in return? They’re not buying a product. In fact, the very reason for which they need to give up money to support a struggling company is because nobody wants to buy the company’s product – at least not at the prices the company is charging. So why does the public ever agree to finance a corporate welfare scheme?
If no answer to these questions immediately jumps out at you, don’t be alarmed. I’ve spent years thinking about it, and I’ve never been able to work out a reasonable answer. At least not until this week.
I had an epiphany while watching the state legislature hash out the details of a corporate welfare package for the state’s large tire manufacturers. That’s when it hit me – I’ve been trying to place the so-called idea of economic development in the wrong context all along. It’s not about living standards, income, consumption, or any of the economic concepts I’m familiar with. It’s about altruism. People really believe that it’s just a good idea to give away money. Maybe they think it’s noble or dignified or that it’s the cure to male-pattern baldness. It really doesn’t matter why they think it’s a good idea. The simple fact that they do think it’s a good idea answers all of my questions.
After all, that’s what happened at the legislature this week. The elected representatives of the people collectively voted to take the people’s money and give it to two large corporations who are losing their competitive edge in North Carolina – not for the purpose of creating new jobs or even to save the existing ones – but simply for the purpose of giving money away. Bridgestone Firestone and Goodyear will not be bound by the state’s investment to keep production here. No promises were made except for the state’s promise to hand over $60 million of the people’s money. What can I say? The people have spoken. And they call it economic development.