I get tired of beating the same dead horse, but the Star’s story this morning about the Litebox episode–a piece of real reporting that is becoming increasingly rare–raises additional questions.
The story makes vividly clear how slapdash the City’s vetting process has been, and how politically motivated the decision to announce “job creation.” But the story makes a bigger point, albeit implicitly, about the entire policy of “buying” jobs for one’s area by offering financial incentives to companies that will promise to move or expand.
The obvious arguments against such efforts are familiar: it puts government in the position of helping some businesses but not others that may be their competitors, which troubles those of us who believe in real markets; and it is a zero-sum game overall, since the company that moves its company from Ohio to Indiana is not creating more jobs–it is simply moving jobs from one place to another.
But the Litebox fiasco pointed up a problem I hadn’t previously considered. Even if competent people are running these programs–clearly not the case here–they are unlikely to know enough about the technologies and economic realities of very different industries to make truly informed decisions. This may not have been the case when local officials were competing to attract an automobile factory, but the same technological and cultural changes that increasingly challenge tech businesspeople and that make investment decisions risky even for savvy and knowledgable investors make it virtually impossible for government officials to accurately gauge the viability of tech business deals.
When you add in the inevitable politics involved–the huge pressures to score political points, to look like you are delivering on your campaign promises–it’s no wonder that the jobs don’t materialize. As the Star pointed out, even companies with sound performance records and none of the red flags that accompanied the Litebox proposal have more often than not failed to deliver on their promises.
It’s time to rethink these incentives. Even in competent administrations, as currently structured, they are bad public policy.
The lack of competence on this is amazing. Develop Indy only need to drive an hour southeast to Greensburg.
The Litebox proposal is to build a manufacturing facility with the equivalent of 45% of the staff of the Honda Plant but in less than 6% of the space, all the while building a product 15 time larger. Add to that their statement that the Litebox facility is to be built in less than seven months — when it took Honda about 16.5 months to open the Greensburg plant — and you can see something is not right.
The numbers for this project simply don’t add up.