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Source link: http://archive.mises.org/7046/the-dilemma-of-state-economic-development/

The Dilemma of State Economic Development

August 28, 2007 by

I live in Alabama, and my state’s economic development agency is perhaps among the most active in the country. It is now certainly among the best funded, as voters here recently approved a referendum increasing a cap on the oil and gas royalties that fund its activities to $750 million. It will use this money (ostensibly) to generate jobs, retain existing jobs, attract capital investment, nurture nascent industries, and rescue stagnant ones.

Since state governments waste millions of dollars a year with conscripted capital, it is hard to oppose this spending. After all, this is spending not for special interests, but for everyone. Right? FULL ARTICLE


Robert M. August 28, 2007 at 9:52 am

State planning board? That just screams socialism. It’s sad that people think that state governments are bringing them jobs, when in reality the states tax and regulate business elsewhere. It’s disgusting how blinded by state propaganda people are. Almost as bad as workers thinking unions are in their best interest…maybe if you like having your job go overseas

Bill Ott August 28, 2007 at 5:35 pm

You kind of touched on it but really did not go deep the two biggest reasons I see for prohibiting state industrial policy:

Mal-investments are bad because these investments depend on the state for their profit. If the state stops giving money then the investment fails. Otherwise it limps along at tax payer expense when it would be better had it failed.

The state could use the money to cut taxes and let the tax payers have it. Instead the state choses to invest this in capital assets that are different from those choices the individual would make. Thus individuals are NECESSARILY POORER as the those individuals may have purchased something else, LIKE CAPITAL EQUIPMENT or something to make them happy.

RogerM August 28, 2007 at 9:31 pm

Excellent article! Oklahoma is another state that looks to government to create economic growth. Okies actually believe that they can tax their way to prosperity!

In spite of massive failures, Okies won’t give up on state directed economic development. Why doesn’t it work? The Indian Nations turnpike is a good example. The state built a beautiful four-lane highway from Tulsa to the Texas border north of Paris, TX. It’s great to drive because there is almost no traffic on it. But state legislators built it in the name of economic development. Meanwhile, it took the state 40 years to four-lane the busiest highway in the state, state hwy 69, which carries most of the truck traffic passing through the state to and from Texas.

The reality in Oklahoma is that legislators spend money to reward their cronies. Highways, state parks, schools, government offices, whatever, goes in places that will financially reward campaign contributors and powerful legislators. But it’s all done in the name of economic development. If you want legislation to pass, even regulating hookers, you have to claim it will create economic development. I don’t think this state has done anything in the last 50 years that wasn’t suppose to create economic development, but each year we fall farther behind states like Texas. There isn’t a state project done in the name of economic development that isn’t a financial disaster.

Paul Marks August 29, 2007 at 9:10 am

Of course this 750 million Dollars of State government spending is the corporate welfare that the Constitution of Alabama was supposed to prevent.

American history (like the history of most other nations) is full of examples of failed government “economic development” schemes. It is not that “people do not learn from history” – they never get a chance as history (like economics and other subjects) is mostly taught by statists in both schools and colleges. I doubt this will change whilst government remains an important source of money for education.

Sadly the “private media” is mostly no better, with most newspapers and broadcasters being echo chambers for statism. The “schools of journalism” continue to produce their “objective, scientific journalists” – i.e. their unthinking statists.

If people want better economic conditions in Alabama they should cut government spending, government regulations and taxes (a first tax cut of 750 million Dollars would be a start).

“But taxes in Alabama are already low” – they are only low compared to most other States, they could certainly be much lower.

sean August 29, 2007 at 2:13 pm

“Almost as bad as workers thinking unions are in their best interest…maybe if you like having your job go overseas”

what exactly do you mean by that robert?

Robert M. August 30, 2007 at 4:39 pm

I mean that people often support things that hurt them. Unions are terrible for workers. First of all, the workers actually pay the unions to harm them. They are run by political people, not workers, who often have an agenda contrary to the best interest of the employees. They drive up costs for employers, so the employers are more like to outsource or offshore jobs, or at the least not create new jobs. They just basically are an extreme inefficiency in the market.

Anthony August 30, 2007 at 7:43 pm

Unionization (as long as it is voluntary) is fine in certain areas of the economy, but in most cases it is just another political pressure group, vying for power. Unions can on occasion secure benefits for their own members, but usually at the expense of other workers.

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