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In the mad scramble to land jobs, crony capitalism is alive and well

Daniel Howes
Detroit News

Heard about America’s new parlor game? Global corporations are playing regions and taxpayers off one another to land the richest deal. And Michigan is in the game. So far, anyway.

Earlier this week, Wisconsin Governor Scott Walker signed legislation obligating his state’s taxpayers to pay Taiwan’s Foxconn Technology a cool $2.85 billion in cash. That’s billion with a “B.”

What for? To offset its payroll and capital costs to set up shop in the southeast corner of that state.

That’s if the fickle Foxconn keeps promises better than it did in Pennsylvania and Brazil. There, investments by the world’s largest contract manufacturer never materialized — a cautionary tale for the Midwest industrial states scrambling for pieces of Foxconn’s purported investments.

Be careful what you wish for, folks. Hunting big economic development game ain’t cheap.

Michigan lost the first Foxconn round earlier this year, so it’s vying for its automotive business. Of course, the chances of Governor Rick Snyder and state lawmakers obligating taxpayers to huge cash payouts for investment is close to nil in Republican-controlled Lansing.

But opportunities to spend big keep on coming.

Amazon.com sparked an interstate feeding frenzy with the public sweepstakes for its second North American headquarters, the so-called “HQ2.”  The numbers are staggering: a $5 billion investment and up to 50,000 jobs with annual compensation averaging $100,000.

Who wouldn’t want that?

Take a moment and consider the implications: the incentive “arms race” would be fierce and very costly. Think huge challenges like land acquisition and utility capacity, road and bridge upgrades, municipal service delivery and permitting, housing and public transit.

All of it costs money, requires crisp execution, and demands teamwork between business and political leaders. Petty regional squabblers need not apply.

Philosophical arguments about taxpayers subsidizing arenas for billionaires, or expansions for multi-billion-dollar corporations, are understandable. And they’ll become more frequent if more financial heavyweights decide to emulate Amazon and Foxconn by throwing site selections open to the public.  

Detroit lived the alternative for way too many years. Its dysfunction, disinvestment, and deindustrialization made it the national poster child for urban decline. Its struggling automakers were exemplars of how NOT to compete. Its public confrontations and petty political infighting made it easy for would-be investors to look elsewhere.

Those days in Detroit are being relegated, slowly, to history.

This month, the Ilitch family is opening the new Little Caesar’s Arena and its District Detroit — a billion-dollar development still evolving on the north edge of downtown.

Dan Gilbert is planning to spend another $2.1 billion building or renovating four more downtown buildings, most of those projects financed by private capital.

Better here than elsewhere because this much is certain: Capital is more mobile today than anytime in human history.

It has choices. It goes where it is invited, and it stays where it is welcomed — especially if it gets a helping economic hand from the communities that stand to benefit most.

Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.

Daniel Howes is columnist and associate business editor of The Detroit News. A former European correspondent for The News, he has reported from nearly 25 countries on three continents and in the Middle East. Before heading to Europe in 1999, Howes was senior automotive writer and a business projects writer. He is a frequent contributor to NewsTalk 760-WJR in Detroit and a weekly contributor to Michigan Radio in Ann Arbor.
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