Laurie ask:
>Given the upsurge of interest in corporate welfare from left, right and center,
>can we distinguish industrial policy (i.e. gov't support for R&D, planning,
>patient investing and infrastructure) from welfare for the rich type schemes?
>The slash-and-burn-all-gov't-funding bandwagon seems a dangerous one to jump on
>uncritically.
>It's hard to imagine a form of industrial policy which does not involve some
>form of subsidy, but it also seems to me to carve some space for a regulatory
>agenda and a quid pro quo arena where corporations are in some way accountable
>to society and obligated to workers, consumers and communities. Maybe the idea
>of industrial policy is dead in the water in the U.S., but I have to think
>twice before jumping in bed with the CATO Institute.
I have just finished some work on this topic. Its focus is on OZ but I have
some US evidence too. In OZ, the business lobby (and its associated right
wing hangers on) have recently called for massive cuts in the Federal G
deficit. The Budget deficit is forecast to be around $A11.7 billion or 2.4 per
cent of GDP over this financial year. The goons want at least $5 b cut out of
personal welfare, health and education. the usual claims that it is wasteful,
promotes high taxes etc are made.
with the UR at around 9 per cent, the estimates of the structural deficit are
about $5.3 billion (give or take). the amount of money that the Feds give
business by way of tax breaks, direct payouts (cash), wage subsidies, provision
of land, building, transport links, cheap loans in the current fin. year is
well in excess of the structural deficit.
the personal welfare in OZ is very closely targetted and is income maintenance
spending, in other words, to keep food and clothing and housing at min. levels.
there is very little evidence (read - none) that a dole bludger class exists in
OZ. the UR-V ratio is still very high.
yet highly profitable multinational corps are getting millions and even
billions from the taxpayer in the name of industry development. the problem is
that they are never called to account for the outlays. they preach themselves
about the need for stringent welfare examination - read, raid single mother
pension recipients to see if she has a guy (or girl i guess) in her bed, and
making unemployed produce ridiculous dossiers of all the interviews they have
attended, and more.
but they do not apply the same standards to their own welfare payments. we have
no guarantees that they will produce the output or the jobs. it gets worse.
Govt money has been increasingly used to underwrite private debt and profits.
several very dubious ventures have gone totally broke running up huge debts and
the public sector has come in and assumed the debt at the taxpayers expense.
The problem also is compounded in a federal system which both OZ and the US
share. here we get the smokestack chasing syndrome where States compete for
business location.
In the US many examples of this are to be found. In the early 1980s, tennessee
paid more than $11000 per job in various incentives to lure Nissan, and then a
short time later paid out for the saturn plant at a rate of $26 k per job.
to compete, Kentucky in 1985 paid out an amount equiv. to $50k per job for the
Toyota plant.
the big bucks started flowing though in 1993, when alabama did a deal with
mercedex benz. 35 states and 100 locations were part of the battle to get the
sports utility plant. the "winner", alabama ended up paying out an incentives
package worth $300 m or $200k per job. the governor valued the win in terms of
its "symbolism" that alabama was part of the new corporate world. critics
pointed to the decline in its public school system.
most of the largesse goes to larger and already profitable firms. the jobs
created are modest.
there is evidence that NY state paid out millions to a company that publicly
admitted it wasn't going to leave anyway. (this is the NBC-CBS-ABC fiasco).
the penn state vw deal is also scandalous. in 1978, a $71 m (then) package
lured vw away from ohio with the promise of 20,000 jobs after development.
within 5 years, half of the 6000 workers were sacked, and within 10 years the
plant was closed.
more recently, northwest took $840 million off minnesota as an incentive to
build some repair facilities in the iron range area. nothing was built. no
action has been taken by the state.
in western europe, "clawback" provisions are now being included in "Industry
Policy" handouts whereby all or part of the handout has to be repaid of the
companies fail to deliver the estimated benefits. these of-course do not work
if the firm goes bankrupt. also local development authorites compete against
each other for more modest clawback clauses and soon there are none.
[ a good article for us readers is by Charles Mahtesian, Governing, Nov. 1994]
the point is that the INDUSTRY policy practices of the past have delivered very
little by way of jobs. in most examples of this sort of handout, the public
sector would have been better paying the wages themselves and putting the
people to work in the public sector.
kind regards
bill
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