Gateway City #6: Fall River

FALL RIVER, strikingly outlined against the sky on a long steep hill crest across Mount Hope Bay, looks both larger than it is and very foreign.
- Massachusetts; a guide to its places and people, written and compiled by the Federal writers' project of the WPA (1937).

This post is part of an ongoing series where I visit each of the 11 original Gateway Cities  and record my thoughts on their community, economy, and civic culture. Fall River – apparently “The Scholarship City” – is where I’m headed next.

There are some people who insist that NYC has gone soft. Popularity made it lose that hard edge it had in the 70s and 80s. You just can’t get the liveliness and the authenticity in the new cleaned-up version, according to this theory.

The thought that always occurs to me when I visit Fall River is that if you miss the grit of the New York of decades past, you can find a bit of it here. If New York has undergone a “renaissance” (which depends on your perspective) then consider Fall River definitively un-renaissanced, in ways good and bad.

To be fair, I have never been to New York City, so the “NYC is soft” theory is right for all I know. I am, however, a bit skeptical of people’s distant memories, which tend to come wrapped in nostalgia. When people say eighties New York was lively they might mean “exciting, but scary, but I forgot about the scary.”

Fall River is very lively, without a doubt. In that liveliness is the contradiction that people sense in the bygone era of New York: it’s joyful yet also hopeless, invigorating yet draining, chaotic, but logical in its own manner.

Fall River as a city makes basically no sense and as such it’s the furthest logical extension of the Gateway Cities that I’ve visited so far.

A Century of Searching

The city’s history is dominated in every way by the boom and bust of the textile industry. The city was founded around mills developed by Boston and Providence magnates, going through a boom period from 1870-1920. Here’s an extended excerpt from a 1903 history of the city:

Fall River easily leads all other manufacturing centres of America in the extent of its cotton manufacture. It has more than one-seventh of all the cotton spindles in the United States. It has more than any state in the Union except Massachusetts, nearly as many as all the Southern states combined, and more than twice as many as any other city in America. Every working day more than fourteen hundred miles of cloth are made. If all the mills could be run upon one and the same piece of cloth no express train could travel fast enough to carry away the product from the looms, for more than two miles of cloth are made every working minute.

You might guess, correctly, that this is no longer the case. The city population peaked in 1920, and the total number of residents is still some 30,000 below what it was before the Great Depression.

Fall River is still searching for an economic purpose in a post-textile age, and in that search it looks like so many other places across the country that are economically dislocated. Fall River has more poverty and crime than Massachusetts as a whole. It’s had a long history of dysfunctional and corrupt politics that colors everything to this day: the city’s youngest ever mayor was recently elected after a recall election of a previous mayor over a garbage collection program, and has run into some cronyism charges of his own. I don’t know enough to make any judgments about particular local politicians, but I do know that in a political system this brittle there are strong disincentives to working together and creating the type of leadership the area needs.

A shaky political system and a century’s worth of economic disappointment couple easily with resentment at the outside world, creating the same type of pessimistic resignation that I’ve observed in other Gateway Cities. The city’s motto, probably unintentionally, reflects this: it’s as close to a literal shrug as you can get in a few words: “We’ll Try.” We’ll Try. Seriously. It’s right there on their seal at the top of this page.

The Economic Trajectory of Fall River

Things are not all bad in Fall River. What I was trying to get across in my initial NYC comparison is that there is a real energy to places that are down on their luck that is legitimately exciting. Redevelopment has its good sides, but people from Boston constantly complain that no good dive bars exist in their city anymore and they’re not all wrong.

Fall River Map
City of Fall River, Mass. 1877.
Source: Library of Congress

Fall River has a diverse immigrant community including most prominently people from Portugal and Cape Verde. I am a serious devotee of Portuguese pastries, and one of the few places you can get an authentic Pastel de Nata outside of Europe is in Fall River. This to me is one and the same as the dive bar effect: if rents were a bit more expensive, that weird coffee place I went to get pastries, where obscure Portuguese folk festivals crackled through a 90s era TV, would lose out to Starbucks, and there’d be a good deal less charm on the block.

I am hugely sympathetic to the problems of Fall River. It’s the type of place where incremental change seems possible while big change remains elusive. To be a leader there is immensely difficult when there is no obvious solution that can take the place of a million cotton spindles. I am actually being too kind: there is simply no solution that will replace the type of economic activity in the excerpt above. So the city is left struggling for answers with no resources to pursue them. Do they woo a big company, prostrating themselves to earn low-skill and low-wage jobs? Do they go all in on a casino or real estate boondoggle?

In other words, can Fall River afford not to pursue wishful thinking economic development? The answer given the need for jobs can hardly be no, but any strategy of that type will play out as it has in countless other places.

It’s not entirely fair to lay the culture of wishful thinking at the feet of Fall River local leadership. It’s a pretty endemic trait to many parts of Massachusetts, including many that have far more resources. The only reason I judged other cities, like its neighbor New Bedford, less harshly is because the latter has been slightly more successful on its path.

So a fair question would be what a good, positive strategy could realistically look like in Fall River. I don’t even close to know the answer. Fall River has a lot of the hopelessness of the struggling places in Massachusetts, with few of the assets that make Massachusetts so prosperous. Unless the people looking for the grittier alternative to glitzy New York are ready to put their money where there mouth is, it’s going to be difficult.


Governing: Immigrants Establishing Roots in Gateway Cities

An interesting article was released recently in Governing Magazine discussing the role of the foreign born in declining cities. The basic finding is that in some cities a declining or stagnated native-born population is being offset by growth in  foreign-born residents (this is true overall in the state of Massachusetts, for example – net international inmigration outweighs net domestic outmigration). Some cities are making an explicit pitch to international migrants, although it’s unclear how well that’s working.

Population growth isn’t always an important end goal for cities in and of itself, but it’s definitely true that cities that can stabilize population loss and diversify have an additional leg to stand on. This is especially important for the Rust Belt and northern cities that have been continuously hit by deindustrialization.

Louisville and Indianapolis are two examples of cities attracting new international residents to places where they have not traditionally been. As the article states, they’re starting from a very low level, making the percentage gains huge:

Louisville FB and NB

Indy FB and NB

Compare with Boston, which has always had a high percentage of foreign-born residents. It shows 3% and 2% growth in foreign and native-born residents respectively, even though the overall numbers are far higher than either Indy or Louisville:

Boston FB and NB

I poked around in other cities I am familiar with to compare. Most are in line with my expectations – high demand areas like Seattle, San Francisco and Portland are seeing both segments of the population grow, often with the foreign born growing faster. Salem, OR made me double take. The foreign-born population has declined (or possibly remained stagnant given the margin of error) while the native-born has increased. It was one of the only cities I was able to find with this pattern.

Salem FB and NB

I am not familiar enough with Salem to say what caused this decline. It could be that a previous immigration boom to Salem has now ended, or maybe people who originally immigrated there don’t love Salem and tend to then move elsewhere like Portland or California.

Another interesting example is some of the Gateway Cities in Massachusetts we’ve looked at. Although they haven’t experienced the same population declines as an Akron or Cleveland (Cleveland, by the way, along with Flint and Detroit, declined from 2009-2014 in both populations), I suspected that I would find that their continued growth has depended on an influx of the foreign born. That’s definitely true in Springfield:

Springfield FB and NB

I was surprised by the growth in Worcester. I knew that the demographics in the city have changed quickly, but I didn’t expect it to be this stark over the 5 year period:

Worcester FB and NB

An interesting counterpoint is Lowell, where both foreign- and native-born populations are growing.

Lowell FB and NB

I wonder if Lowell’s population growth in both sections is a cause or an effect of their relatively successful economic positioning?

An interesting caveat about the data, which you should play around with: populations are based on those living within the city proper. Normally, a metro area is a better way to look at migration data, because individual city borders tend to be arbitrary. In this case I actually think it’s helpful, because it can capture loss of population whether that population moves to suburbs in the same metro or to another state altogether. When it comes to things like tax rolls, school enrollment, and other bread and butter local government services, the important question is whether someone is here or not, not where they ended up.

Gateway City #5: Lowell

Overnight the company founders became the first city fathers in what would today be called a huge company town. Both men and women slept in corporation lodging houses, ate in company dining-rooms, shopped in company stores, and were buried in company lots. Employees worked from five in the morning to seven at night. Women received from two dollars and twenty-five cents to four dollars a week, men about twice that...
Europe watched Lowell with something like amazement. Its rapid rise to industrial eminence interested and astounded economists, historians, and writers all over the world.
- Massachusetts; a guide to its places and people, written and compiled by the Federal writers' project of the WPA (1937).

LowellMA-sealThis post is part of an ongoing series where I visit each of the 11 original Gateway Cities  and record my thoughts on their community, economy, and civic culture. Lowell is the next stop.

Lowell is, generally speaking, the poster child for Gateway Cities. The consensus seems to be that of the original eleven Gateways, this northeastern Massachusetts city of 100,000 has most successfully turned around its fortunes. Public officials and the media consistently consistently point to Lowell as an example of what focusing on image and investing in important infrastructure can do to a mill town (within the state anyway – I’m not sure this type of good news travels very far).

Having visited a few times, I am inclined to agree. Though the city benefits from an advantageous starting point, it’s certainly one of the most exciting and economically vibrant Gateway Cities I’ve visited. For this series I wanted to look a bit deeper. How good is good? If things are really as they seem, what’s the secret sauce in Lowell?

Lowell Map
Birds eye view of Lowell, Mass
Source: Leventhal Center at the Boston Public Library

Lowell: the Massachusetts-est of them all?

In addition to its status as favorite Gateway child, Lowell is perhaps the archetypal Massachusetts city. It carries the name of a Boston Brahmin (like Adams, Quincy, Gardner, Winthrop, Peabody, Boylston, Lawrence, etc…)  and along with the last of these, was named after a wealthy textile patrician who probably never saw his namesake. Francis Cabot Lowell was the foremost of the “Boston Associates” who shaped the Northeast by building textile mills and the towns around them.

Just as familiar is Lowell’s path from factory boomtown and massive immigration hub to decline. As described in the opening quotation, Lowell was a textile company town, growing in the 1850s to contain the largest industrial complex in the United States. Like its peers, it lived by the loom and died by the loom. Eventually the industrial textile mills that powered the local economy moved south and then overseas. By the mid twentieth century, Lowell was a depressed place lacking jobs and opportunity.

But unlike some of the other cities covered in this series so far, the population of Lowell today is near its height – like many others, it reached its population crest in 1920, but it is back to almost the same level, unlike cities such as Fall River or Holyoke, which are still fractions of their previous size. In addition, today Lowell has built up more specialized and technical firms than other Gateways, and performs relatively well in metrics like employment gains and median income.

A Bit of Luck, a Bit of Love, and Good Planning

So how did Lowell end up in the winner’s column relative to Holyoke and Fall River? The answer is in the section’s title: a bit of luck, a bit of love, and good planning.

World War II provided a temporary boost to traditional manufacturing that had sustained Massachusetts economies for the previous century. But by the 60s and 70s, the writing was on the wall, and in some places had been for 50 years. Cities responded to the changing economic circumstances in different ways. Some wrung their hands and gnashed their teeth, some abandoned the city altogether, and a few met the challenge with proactive leadership.

Lowell, thanks to a couple of unique factors, took the latter approach. It made a conscious effort to shift towards comprehensive planning and a more diversified economy in the 1970s. The foremost among these efforts was the “Lowell Plan”, formed in 1979 as a nonprofit economic development organization tying in partners from the public and private sector to work together on collaborative city growth goals.

In retrospect this was a key time to be moving away from old school, top-down and manufacturing-dependent economies. 1979 was well before Public Private Partnership was every government’s favorite catch phrase. Everything I’ve read indicates that the Lowell Plan was a daring and meaningful experiment for its time, leveraging tens of millions of private and government dollars for education, workforce development, and economic growth..

A difference in approach informed how the city responded to later economic challenges. While many places in Massachusetts felt the “Massachusetts Miracle” in the 80s, that miracle was coming to an end in the 1990s. In 1992, Lowell was hit with a shockwave when Wang Laboratories, a $3 billion computer manufacturer based in the city employing 33,000 people, filed for bankruptcy .

The closure had a gigantic impact on Lowell’s economy. But unlike other cities, Lowell appears to have had better infrastructure, capacity, and even political willingness to deal with the loss of the company in the company town. Lowell pivoted and continued to build on strengths, taking the loss as further evidence that reliance on a single industry was a bad ide,a even in high tech sectors. A Boston Fed analysis of the booms and busts in Lowell found that while the ups and downs of the Lowell economy have been severe, the local economy was still better off than it would have been without the high tech sector that had made the bust possible.

Lowell’s Many Assets

I don’t want to leave the impression that Lowell is doing well because the powers that be willed it to be so. Meaningful economic development comes from leveraging existing community assets to build the wealth of inhabitants.  When it comes to assets, Lowell would be well above the average Gateway City even if city leadership was incompetent (which it doesn’t appear to be) or if the state ignored it.

Old mill machinery, left in place in a building now used by UMass-Lowell and other local institutions.

First and foremost, the University of Massachusetts Lowell. The fact that the state’s second largest and fastest growing public university is located downtown and runs programs from dozens of the old mill buildings provides a unique “anchor tenant” for the whole town. Similar to Worcester, “town-gown” relations aren’t the strongest, but having 20,000 student and faculty based in the city is a powerful economic engine that isn’t going anywhere.

The people are another significant asset. One reason that Lowell has not suffered severe population loss is foreign inmigration. Lowell has grown much more ethnically diverse in the last 25 years, with an enlivening effect on the local community. Lowell has the highest proportion of Cambodians of any city in the US, with a corresponding effect on local cuisine and culture. Puerto Ricans, Portuguese, Brazilians, Colombians, Indians, and Liberians and other African immigrants also form substantial communities.

More so than its neighbors, Lowell also received attention at the federal and state level. The name Paul Tsongas may not mean much to folks outside of Massachusetts, but he was instrumental to the government attention and financial firepower that has helped Lowell weather the economic storms over the years. As a US Representative, Senator from Massachusetts, and presidential candidate in 1992, hometown hero Tsongas tirelessly advocated for Lowell. His major issues in Congress were ecological and historical preservation, and he cultivated a reputation for economic revitalization. It’s probably due to his work that the National Historical Park that forms a centerpiece of Lowell’s downtown today exists.

Lowell-Merrimack looking west
Merrimack Street looking west, Lowell, Mass.
Source: Library of Congress
Lowell-Merrimack looking west 2012
Same view in 2012. Not many Massachusetts cities stayed this well preserved through urban renewal.
Source: Google Maps

The combination of economic flexibility and asset preservation has allowed Lowell to be relatively well positioned in the 21st century. Through skillful use of historical status and open space, the city does a good job cultivating a feel of modern entrepreneurship existing alongside the machines that powered the industrial revolution. For example, the University of Massachusetts-Lowell occupies space in old mill buildings that maintain their impressive original machinery.

This balance is not easy to do. Many other cities in Massachusetts don’t have the capacity to put underutilized properties to use unless they have a new occupant with deep pockets moving in. Trying to balance preservation and growth either leads to a jarring contrast between the past and present, or row after row of abandoned buildings. The temptation to clear “eyesores” and start again or focus attention on the outlying areas is strong.

Looking up, but a long way yet

I’ve been pretty glowing in my review of Lowell, but it would not be a Gateway City if everything was working perfectly. Lowell still suffers from slow job growth, underutilized properties, and serious poverty – we’re talking about one of the top performers among a class of Massachusetts’ most challenged cities.

An example of how those difficulties manifest themselves is the recent experience with the Hamilton Canal project a vital piece of downtown with an ambitious plan for mixed use redevelopment. Progress on the development has been slow because attracting a main tenant and arranging financing are both tricky (there are many similarities with Worcester’s City Square project). Trinity Financial, the developer that had been chosen to build out Hamilton Canal, pulled out in May. The state has a lot of money on the table but as is usually the case there are complex jurisdictional questions to be dealt with, things like contingent funding and various levels of government ownership. Patient money is hard to find, especially when developers can make a killing in and around Boston with much less headache.

Still, I’ll bet that Hamilton Canal makes substantial progress before City Square. The city has a firm idea of where it wants to go with the project and appears to have the leadership to make it happen. Although Lowell has a long way to go to reach its potential, it inspires confidence in onlookers.

Lowell’s success seems to be in process rather than product. The city has more resilience and flexibility that allow it to deal with crises, comparing well to the fragile systems (of politics, administration, or economy) in other Gateways. On its own, this has not propelled Lowell towards the high bar the state has set, but it’s headed in the right direction and is won’t be easily deterred by the roadblocks that stand in its way.

Stadiums, Subsidies, and other Wishful Thinking (Part 3)

This is a wrap up of a short series on economic development ideas that are allergic to evidence. Parts one and two are here.

Aside from wasting public money, what do outrageous investments in megaprojects and inequitable economic incentives have in common? The common thread, and the rot at the root of economic development, is an ideology based in wishful thinking.

When economic development fails to meet the needs of the people it is supposed to serve there are a few plausible explanations. The more attention grabbing explanation is corruption and cronyism, which tends to draws a lot of attention and quick denunciation. The boring explanation is a lack of critical thinking and imagination on the part of public officials. Cities copy what’s popular, go for cheap wins, and try to take the shortcut on the complex path towards economic growth. A ribbon cutting is much easier than sorting out the threads connecting federal and state governance, education policy, tax rates, public investment, racial and economic inequality, local real estate markets (and on, and on…).

It makes a lot of sense that we end up where we do. We elect politicians to improve conditions, not to write a dissertation. It is hard to run a city or a state, and sometimes Pyrrhic victories seem better than slow infinitesimal progress. Striking a deal to focus on the process rather than the results doesn’t seem on its face so insidious, but the human mind has incredible ways to get us to believe that we are doing is right. The logical end result will always be things like stadiums and tax incentives.

Here’s a fitting explanation from the New York Times article about 38 Studios:

At bottom, 38 Studios may be that rare political scandal that grew not from any lies that anyone told the public, but from the stories that desperate politicians told themselves.

So true. I’d just go back in and take out the word “rare”.

Here are a few rules I’d like to suggest to move us away from the wishful thinking paradigm.

Rule 1: Trust No Silver Bullets. That next convention center expansion or new real estate deal will not be our savior. Even important steps like supporting new entrepreneurship or getting zoning right are merely steps in the right direction. We want so bad for the answer to be something as easy and momentous as a huge public building but wanting will not make it so. We have to resist the temptation.

Rule 2: There’s Always Blowback. Something that seems brilliant can have unintended consequences in a decade. Urban renewal is a great example of a period of magical thinking, and the projects of that time are not so far from the stadiums of today. We’ll bulldoze blighted neighborhoods, the thinking went, and the problems associated with them will go away. Instead, the frenzy completely erased whole communities and wiped out local wealth. Many neighborhoods are struggling to recover from choices made in the 1950s. There are dozens of parallels today, each of which has important, predictable downsides. We need to be humble enough to recognize how our big plans could end poorly.

Rule 3: Hold Politicians to Realistic Standards. Like I said at the beginning of the series, I think people are beginning to finally get it. I’ve seen more articles criticize the way things are done, from megaprojects to megaevents like the Olympics. The rise of blogging and special interests news sites make these complex deals easier for interested groups to analyze and criticize than in the days of the citywide daily newspaper – although it can be harder for such sites to have the same pull.

The question is whether and how quickly this perspective will be adopted by public officials. One thing’s for sure – if you don’t say anything or vote as if these issues are important to you, the deals will continue. There’s just to much incentive for dealing behind closed doors for general distrust to have the same effect as calling out offenders.

From an excellent paper by Peters and Fisher examining the lack of impact of tax incentives:

The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government—providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems —and then letting the economy take care of itself.

It’s comforting to beat up on megalomaniac politicians, but this is really a sin of omission on the part of voters. We want someone who can affect the economy, and our political language reflects it. We yearn for someone who can “create jobs” or “bring home the bacon.” Simply wishing we had more control doesn’t mean we do and when we force someone to take that role this is the outcome we can expect. Voters have to recognize that the power that politicians actually do have is still quite important, just not as straightforward.

Just as I finished this post, I came across this article from the Springfield (Mass) Republican. A casino is set to open in Springfield, and the Republican’s reporter took a trip to Atlantic City to see how the former gambling hotspot is recovering from the decline of the industry. The answer? They’re diversifying their one horse economy…with convention centers.

Sigh. The work continues.

Stadiums, Subsidies, and other Wishful Thinking (Part 2)

As promised, the outrage continues this week with an exploration of wishful thinking economic development policies. Part one of the series is available here.

While there’s some evidence that local government is getting a bit more savvy (or at least is under more scrutiny) on flashy white elephant investments, I’m not sure the same consensus has developed in a similar arena: public subsidies and tax benefits for companies to relocate.

It’s time to seriously pare back our addiction to this type of spending. There are as many cases as there are states of companies being lured in by the use of public money only to fail, leave again, or extract even greater public resources. I’ve previously written about how Texas could lead the way in cooling the economic development arms race (spoiler alert: they haven’t) and referenced before how badly Reno got fleeced by Tesla.

Just one extreme example that hits close to home in New England is Curt Schilling’s 38 Studios. Before he was famous for politically incorrect tweets, I’m told that Curt Schilling played baseball. After his retirement, Schilling started a video game company in Massachusetts with the modest goal of dethroning World of Warcraft, the highest grossing video game of all time. Ambitious, sure, but companies thrive on ambition.

Schilling convinced Rhode Island  that subsidizing his company would turn around the struggling state, then at the height of its unemployment and economic problems. This sort of deal, where one state pays for jobs or offers a low interest loan to a company to relocate over a state border, is absurdly common in the US. I don’t need to tell you where this goes, right? Rhode Island gave 38 Studios a $75 million loan guarantee, and in 2012 the company declared bankruptcy. Litigation has dragged on to determine how much RI is on the hook for.

The New York Times did an excellent post-mortem that will take you through all the steps, but this sums it up well:

If there’s a lesson in all this, it probably has to do with the limits of what any government can — or should — do to bring about growth. Just about every state offers some kind of tax incentive or loan program for businesses looking to relocate. But Rhode Island went further than that; in its zeal to land Mr. Schilling, the state took on the role of venture capitalist, without having the expertise to do it well.

An actual venture capital firm would have been investing in many companies at once, to minimize its exposure, and it would have demanded a sizable equity stake. It would have taken a seat on the board so it could monitor the money closely and, if needed, restructure the company. Rhode Island, instead, threw most of its venture money into a single, highly speculative start-up, insisted that it more than double the size of its work force, and then walked away.

I tend to agree that government cannot and should not be responsible for making investments in individual companies. Even when they have the best of intentions, they don’t have the experience, capacity, or distanced judgment to make wise investment decisions.

While the article makes the point that the state acted inappropriately and ineptly as a venture capitalist, to me the affair brings into question the entire structure: where is the proof that paying firms in the name of providing jobs is a good idea?

One Man’s Investment is Another’s Corporate Subsidy

The 38 Studios story gets more play than others like it because of the personalities involved, but if you get too caught up in the narrative, you’ll miss the larger point.

First, it’s not very useful or interesting to talk about good intentions. I’m sure Curt Schilling thought his company would succeed – he’s also lost tens of millions in the project. When we talk about the use and abuse of the subsidy system, the reasons vary. Some have noble goals, some are greedy, some are just making decisions that are advantageous within the economic system.

Second, it’s not a partisan or regional issue. Republicans and democrats both support a wide range of corporate subsidies. No state that I know of is appreciably leading the pack when it comes to moving away from ineffective corporate subsidies. There’s just too huge a disadvantage to being first.

Instead, what you should take away from the story is that far more likely than a 38 Studios is the everyday transfer of wealth from citizens to businesses. Have a look at Rhode Island’s page on Good Jobs First’s Subsidy Tracker:

RI Good Jobs First Subsidy TrackerThere’s 38 Studios, third on the list, but it is easily outranked by the 30 subsidies given to home state hero CVS Health (from Woonsocket, RI). I’ve talked about the subsidy tracker before, but you should really look at it in your own state.

In the vast majority of cases, when a state or local government provides tax incentives for jobs, they are not creating new economic activity but instead simply relocating it from a different place. Because of measurement issues, it’s also unclear that the incentives themselves are what induces the economic activity at all. It could be that they just sweeten a decision that is already going to be made, squeezing local finances for no local gain. After all, as critics of these schemes point out, the jobs are going to exist somewhere if no one subsidizes them.

Proponents of tax incentives will also point to equity as an advantage. Maybe, even with the above shortcomings, it still makes sense to use the lever taxes to bring jobs to places they might otherwise not go – high poverty or unemployment areas that desperately need to build an economic base. The problem is that tax incentives are rarely used in the areas that fit the profile of a market failure. Even in the rare cases that incentives are used to bring jobs to high-need places, the local governments can ill afford to subsidize the companies, especially if wealthier areas in the hunt bid up the price to attract a business.

A Zero Sum Game

Academics and top level policy makers understand that economic growth actually depends on regional cooperation, but word hasn’t reached everyone. Indiana and Illinois to this day go back and forth on a recruitment border war, boasting about how they will “rip the economic guts” out of each other. This is obviously a point of pride for the politicians, but sounds to me like someone bragging about how much they paid for their used car.

There’s no question government has an important role to play in the economic landscape. The things I’ve outlined above are not criticisms of the federal government investing in basic research, or local and state governments incentivizing the development of new businesses, or even helping existing businesses get to scale. State governments should have a role in investment in workforce and infrastructure, especially in regions with fewer resources, as a means to make them attractive to business. Local governments should work closely to provide services businesses and workers need, which inevitably means the expense of resources.

What we really need is a coalition at the federal level that can help the states help themselves out of addiction to corporate subsidies. Don’t hold your breath for this to happen in Washington. In the meantime, think about what your state could do to get itself out of this dangerous game.