Economic Development Develops

Every so often, we need to take our eyes off the clown show in Washington, D.C., and consider what’s happening elsewhere. For example, the much-hyped competition for Amazon’s second headquarters.

I hate to be Debby Downer, but that competition is an excellent example of what’s wrong with current approaches to economic development. Economic development offices around the country participate in what is nationally a zero-sum game–attracting businesses from one locality to another, and spending lavishly to do so. (According to several sources, states and counties have awarded over $1.3 billion in incentives just to attract Amazon’s fulfillment centers.)

As a Brookings Institute report recently noted, this approach to job creation is problematic.

The most obvious is that in each of these cases, Amazon was going to come with or without incentives. It is a core tenet of Amazon’s strategy to be able to rapidly deliver products directly to people’s homes, increasingly with same day service, so they must have a major presence in every large region. Seemingly every metro area we’ve worked in over the past several years has highlighted the attraction of an Amazon facility as a major local economic development success story. (A quick web search confirmed the presence or recent announcement of one or more major Amazon fulfillment centers in or near each of the 40 largest US metro regions.) In these cases, state incentives make no sense. And county incentives are used only to influence selection of the actual site within a region, thus pitting local jurisdictions against each other to claim a political win, with no actual competitive benefit to the regional economy….

Another issue is spatial mismatch. In our work across the country, many employers such as Amazon express frustration in not being able to find enough workers—while at the same time, workers complain of not having access to good jobs. This problem is predictable. While traditional retail jobs are spread throughout metro areas to be near customers (and by default, the workforce), warehouse and logistics operations (such as Amazon’s) consolidate employees under one roof on the periphery of the metro…. The Amazon jobs that replaced these are less accessible to many of the lower-skilled employees that are best suited to fill them because workers do not live nearby. Lack of access to transit, zoning decisions that limit nearby affordable housing, and childcare responsibilities severely limit the number of workers in a given region for which this type of job commute makes sense.

The Amazon Headquarters frenzy highlights what economic development has become; a system that revolves around government giveaways to corporations.

There’s a better way. And the Indianapolis Chamber of Commerce has recently partnered with Brookings to research that better way, culminating in a report titled “Rebuilding the Dream: Inclusive Growth in the Indianapolis Region.” It begins with a recognition that the economy is “misaligned between employer needs and workforce capability, and riddled with barriers to upward mobility,” and it urges policymakers to focus on removing those barriers and creating the conditions for inclusive and sustainable growth.

Rather than a competition to bring new employers to the region, the report advocates an emphasis on expanding companies that are already here, especially but not exclusively in so-called “advanced” industries (tech, very broadly defined). If those companies are to grow, however, they need access to a workforce capable of doing the jobs they are creating. The report enumerates the multiple barriers those potential employees face, and recommends a comprehensive and strategic approach to their removal: improved transportation, childcare,  health care innovations, language and training opportunities, etc.

This makes so much sense.

Rather than prospecting for companies willing to relocate and then bribing them with our tax dollars, the Chamber wants us to spend those dollars on measures that will reduce the mismatch between employer needs and the ability of unemployed or underemployed residents to meet those needs.

This is an investment that would pay real–rather than PR– dividends. Policymakers should endorse it.


  1. For years businesses have pointedly asked why their tax dollars should be used to incent competitors to move into their community. Good point. I also would rather incent the local businesses to expand. They have established roots here and are more likely to stay beyond the expiration of the incentives.

  2. “Rather than prospecting for companies willing to relocate and then bribing them with our tax dollars, the Chamber wants us to spend those dollars on measures that will reduce the mismatch between employer needs and the ability of unemployed or underemployed residents to meet those needs.”

    Wouldn’t this process also work into aiding the current “Abandon Indy” problems of abandoned business sites which could be renovated and reused by expanding local businesses, improving entire neighborhoods which have deteriorated around the vacant sites? This problem has escalated from 4,500 – 5,000 in the 1991 study under Mayor Hudnut to more than 10,000 at last report. The problem remains with the tax law which sells buyers only the tax lien, not the property, for one year during which it continues to deteriorate with no one responsible for maintenance.

    The problem of abandoned businesses, homes and entire neighborhoods where crime has escalated; is an ongoing detriment to this entire city as there are so many of them. Renovation and tax incentives for local businesses would also offer the opportunity of numerous jobs for those with skills and those willing to learn skills. The process of abandoning entire neighborhoods and moving to outlying areas by businesses and residents rather than renovate, repair and reuse results in large areas of Indianapolis decaying, areas where crumbling infrastructure is ignored. The overall view of cities prospected for new business sites must be taken into consideration by any successful business. What good is any tax incentive in a decaying city with crime infested neighborhoods near available sites to renovate or build new structures? Why shouldn’t local businesses benefit by current tax incentives before a tax giveaway to some possible future new business?

  3. JoAnn,

    Within the goal to build the local economy there is not just the problem of abandoned buildings, but also the problem of abandoned people. In my part of the city the daily sight of young men and women living on the edges of the economy is heartbreaking indeed. For most it is not a matter of falling through the safety net, but rather that they made a terrible decision at some point in their young lives and jumped.

    What to do? How to help?

  4. In the same vein as luring businesses the same is true about pro sports teams. An excellent expose of this is the book Field of Schemes which ironically opens with a discussion of the Hoosier Dome being built before landing a franchise. Count me among those who think the nearly 1 billion spent to keep the Colts in town as a waste. Weighing what could have been done with the money versus providing minimum wage jobs 8 Sundays a year looks like a bad deal, economic development or not.

  5. What the Brookings Institute is proposing is logical and is therefore completely unacceptable to the state and local representatives who, in the current system, get to travel, provide lavish parties, and work the rooms for their next jobs.

  6. Peggy, Thanks for pointing out why the current EDC executives will fight to keep the status quo at the taxpayers’ expense.

  7. Peggy and Nancy,

    “Peggy, Thanks for pointing out why the current EDC executives will fight to keep the status quo at the taxpayers’ expense.”

    It’s the same problem everywhere we look.

  8. The following might help point us in the right direction:

    IG Farben Trial
    From Wikipedia, the free encyclopedia

    The United States of America vs. Carl Krauch, et al., also known as the IG Farben Trial, was the sixth of the twelve trials for war crimes the U.S. authorities held in their occupation zone in Germany (Nuremberg) after the end of World War II. IG Farben was the private German chemicals company allied with the Nazis that manufactured the Zyklon B gas used to commit genocide against millions of European Jews in the Holocaust.

    The twelve trials were all held before U.S. military courts, not before the International Military Tribunal, but took place in the same rooms at the Palace of Justice. The twelve U.S. trials are collectively known as the “Subsequent Nuremberg Trials” or, more formally, as the “Trials of War Criminals before the Nuremberg Military Tribunals” (NMT). The IG Farben Trial was the second of three trials of leading industrialists of Nazi Germany for their conduct during the Nazi regime. (The two other industrialist trials were the Flick Trial and the Krupp Trial.)

    The defendants in this case had all been directors of IG Farben, a large German conglomerate of chemical firms. The company had been a major factor already in World War I, when their development of the Haber-Bosch process for nitrogen fixation compensated for Germany’s being cut off from the Chilean nitrate trade and allowed IG Farben to produce synthetic nitrate and extract and process nitrogen for use in agricultural fertilizer. (Nitrate is an important component for the fabrication of explosives such as gunpowder, dynamite or TNT.) In World War II, Degesch (42.5 per cent owned by IG Farben) was the trademark holder of Zyklon B, the poison gas used at some Nazi extermination camps. IG Farben also developed processes for synthesizing gasoline and rubber from coal, and thereby contributed much to Germany’s ability to wage a war despite having been cut off from all major oil fields. The charges consequently centered on preparing to wage an aggressive war, but also on slave labor and plundering.

    The judges in this case, heard before Military Tribunal VI, were Curtis Grover Shake (presiding judge), former Chief Judge of the Supreme Court of INDIANA; James Morris from North Dakota; Paul M. Hebert, dean of the Law School of the Louisiana State University; and Clarence F. Merrell, a lawyer from INDIANA, and friend of Judge Shake, as an alternate judge. The Chief of Counsel for the Prosecution was Telford Taylor. The indictment was filed on May 3, 1947; the trial lasted from August 27, 1947 until July 30, 1948. Of the 24 defendants arraigned, 13 were found guilty on one or the other counts of the indictment and sentenced to prison terms ranging from one and one half to eight years, including time already served; ten defendants were acquitted of all charges. Max Brüggemann (Farben’s chief legal advisor) was removed from the trial and his case discontinued on September 9, 1947 due to medical reasons.

    Are the Koch Brothers Immune?

  9. Theresa; some of those people you see every day are those I had in mind regarding the renovation of abandoned areas. They would probably seek jobs where lack of transportation was not an issue. It could also mean jobs after renovation of businesses; residents in once abandoned and deteriorating homes could be the start of renovating the neighborhood. Tax incentives for those local businesses willing to renovate and reuse would keep the tax benefits local and we would see an actual “trickle down” benefit for resident tax payers. It would encourage the city to invest in maintaining and/or repairing the infrastructure and aid in cleaning up crime-ridden areas.

    The former Disciples of Christ, Christian Church Missionary Foundation building at 222 South Downy Avenue has been a decent, secure, affordable home the past few years to a few hundred seniors and/or disabled on low income. The building has been bought by an out of town business which plans to change the roomy apartments to “family living”; an Irvington organization used zoning ordinances to stop the immediate eviction of those residents. It only forestalled the inevitable so the new owners have raised the rent by $125 monthly beginning January 1, 2018. Where are these people to relocate; the city has no assistance for them on any level. There are abandoned business buildings and large homes throughout that Irvington area which could be put to that use. Many will not be able to afford the new rent; many are unable to seek new affordable living areas and are unable to move themselves. The new owners must have plans for hiring workers to renovate once the building is vacated – that out of town new owner I referred to. Why are our tax dollars aiding them and not Indianapolis residents; many of the elderly have lived here all their lives and paid taxes supporting this city throughout the years they were able to work. This is another of those future business opportunities for non-residents who will benefit by the tax advantage paid for by family and friends of the soon to be driven from their homes.

    Ultimate benefits of tax abatements and advantages rarely, if ever, reach those of us who are paying those taxes.

  10. Marv,

    The problem with finding a way to bust the status quo is that most of us either don’t have the money to help with any campaign or we don’t have the time or legal expertise. I am unable to come up with a solution, especially when those who have invested their money to gain even more power via propaganda are able to trick the general public into believing their lies. It is truly exhausting.

  11. amazon, foxconn, and the rest, when talking jobs and wages, who wins? the need for a living wage should be the first to be answered,and not, some set of averages that only become numbers and blurring,when the pay checks arrive. since amazon and foxconn are already in buisness,and im sure bean conters know exactly what a wage will be at inception,and when settled. many have alot of ideas, but, lets look, at the COOs job. heres a job where they are in charge of what a wage will be. im sure this may sound outhere,but read on. theres been alot of news about foxconn,chine.and the news isnt what american jobs tollerate,or the workers. if this new presense in employment was to blossom and take hold, its back to the company store again. on site employee living,on demand get out of bed and crack the whip. sounds far fetched,but,with all thats been on the present administrations bucket list,along with wall streets greed,whats next? militerized industrial work place? sure we can say its a far fetched ideal, but, take the wages given to todays employees, and, well i call it economic slavery. say what you wish, and watch what you wish for, tell amazon to get a pier off the coast somewhere when then start taking over a area, we can set them asail… tax haven, no, pay your taxes or get out… wages,living,or find some third world nation willing to take the ,,,,,knee….

  12. The modern EDC era started out with good intentions (the road to hell is paved with them) but soon came to have a significant impact on the decline of real middle class wages in the US and especially manufacturing-heavy Indiana. All these steel buildings that have popped up on the landscape, especially in rural communities, helped to accelerate replacing the low-skill-high-wage union factory jobs with low-skill-low-wage non-union jobs to mop up the oversupply of labor. Because they have to put food on the table, millions of workers and high-school graduates took these jobs because they were the best available for the skills they could bring. What would have happened if, instead of subsidizing factory construction and operation, we had subsidized education and training of displaced workers, or even relocation to areas that required the skills they had?

    But here’s the problem. According to one source, the federal government has 41 separate workforce development and training programs run under 4 or 5 different agencies. It’s not that resources aren’t being expended – it is that they aren’t doing much good. So, elected officials and their appointed EDC execs prefer to deal in tangibles. You can see and feel buildings, road and other infrastructure investments. Skills? Not so much. Now that the steel-building boom has mostly run it’s course, the attention has turned to investments in “quality of place”, or amenities. These too have their place in making communities more attractive places to live, work and play but they, like the steel building business, don’t directly address the critical issue of helping to develop a highly educated and trainable workforce. They’re supposed to just keep communities from losing educated and trained workers and possibly attract others from outside the community (there is absolutely no emprical evidence that this works – it was all made up by a guy in Florida who wrote a best-selling book).

    I’m no socialist, but I think one possible solution is to take all this federal, state and local work-force money and convert it to a voucher to be given to every kid when they turn 17 years old that will pay tuition and fees for some kind of post-secondary education or training program with only two strings attached: It must be spent at an accredited institution and it must be spent within 5 years of their 18th birthday.

    As for Amazon HQ2, I’m all in with the joint application of Detroit MI and Windsor, ONT – the first international response to a US EDC opportunty. And as the authors of an article in the Detroit Free Press wrote, if Amazon had one shred of corporate social responsibility in their fabric, they would locate in D/W in a heartbeat.

  13. The first response from “the representatives of the people” in corporate location or relocation should be what is in the best interests of “the people,” and “the people” should be an educated workforce that attracts such location or relocation, irrespective of the urban concentration of consumers. I do not often agree with the Chamber of Commerce, but they have this one right. Vocational and academic education of a workforce will attract industry but costs tax money (or should, as such burden should not be on the shoulders of the students in the form of debt). The legislatures are not interested in reducing student debt; they are interested in reducing taxes so that the surplus saved goes to their rich and corporate sponsors, a policy which in the long run is antithetical to the rich and corporate class’s own interests but does make for short term greed
    and good quarterly reports from Wall Street stock analysts.

    We have this thing turned around, i.e., if we had a world-class reservoir of talented workers, the Amazons of this world would be begging local politicians for location and relocation sites, and even paying cities and counties for the privilege. Case in point – Germany’s emphasis on vocational education leading to smart manufacturing and with a global trade surplus second to only China is competing in the same global market we are but we are far and away the world’s leading trade deficit country at a rate of some 800 billion dollars per annum. The problem is not the trade deficit; it’s our failure to address the reasons for it which could have been avoided had we invested in our people rather than Wall Street’s bottom lines, already fortified by stock buybacks, dividends, and stock options paid to already overpaid executives as the German policy proves. Greed of the few comes at great cost to the rest of us in many different ways, and all of us are paying the price. The competition for location venue is only one of them.

  14. Remember the neighborhood lumber yard or hardware store? The Mom and Pop on the corner that sold really nice meat and had a deli.., or the little hole in the houses along the way ‘restaurant’ or ‘bistro’..? long time gone. But I think it is what we need NOW. A resurgence that says SCREW YOU BIG MEGAOPOLY! Time we took our country neighborhood by neighborhood back from a bunch of rat race idiots who want everything ‘just so’… Screw that – I say let people have a factory in their own home – the guy who works at the deli has a kid at home designing systems on his Mac.., the Office becomes working from home. We need to rebuild this nation right out from under the thumbs of idiots! That is what we need to do. Rebuild the HUMAN network at Human Scale – and we can overcome the LOT!

  15. an article I read sometime back (The Urbanophile? Aaron Renn) suggested that bankruptcy had been helpful to Detroit since it eliminated so many city employees in zoning, code enforcement, planning, etc. that were rent seekers standing in the way of improvements. The analog was to East Berlin, where the Socialist state had effectively blocked growth, and West Berlin had slowed growth, and the now regulation free East Berlin entered into a growth spurt. Supposedly some of the (re) developers of East Berlin are exploring Detroit as a similar opportunity. Reminds me of the situation in Indy where there was a streetcar turnaround on West Washington near Central State Hospital, vacant for years, that Salvation Army wanted to develop into apartments for people with problems needing support. IIRC, Salvation Army wanted it, the NEIGHBORHOOD wanted it (no NIMBY’s, apparently) the DONOR of funding wanted it, only the city bureaucrats fought it. They wanted it to stay empty for many more years until a “suitable” project appeared. IIRC the City Council forced it through. N.B. I understand that private citizens in Detroit were funding street lights in their neighborhood and getting opposition from the city. We always get approval for sports facilities and upper class downtown apartments, of course.

  16. By the way, Manuel, you might look at Granola Shotgun, an interesting blog. About 4 issues back nice article called Precis?? or something similar, mentioning the fight by large real estate interests (not restaurants that rented from them) against food trucks, mobile hardware vendors, and similar small scale enterprises. Weird blog name, but good articles.

  17. In Marion County, we have many underused old warehouses, former lumberyards, former brickyards, former factories and other deteriorating commercial buildings near former rail lines, and which are accessible by existing public transportation. There is no logical reason for companies like Amazon to build in the suburbs, or to take more farm land to build new distribution centers, when there are plenty of possibilities right here in the City, and which are close to customers where they need to make deliveries.

  18. Tucson was marked as a location for Amazon’s second HQ but the reality is that we don’t have an good international airport and several other factors (like being 50 miles from the border and that wall, ya know) so I don’t see this city making the final 10 either. Indy and Tucson are similar in size and not much different in issues. They want to build up a suburb (Oro Valley) for sports tourism (like Indy) for soccer teams and I just laugh at the thought. They want to add a 24 million dollar bond in this November’s election to build fields for children to play baseball and soccer in a neighborhood of two lane roads! There’s a huge back and forth on this because there are about 300 children that would benefit from the sports park but at a cost of 76k per child. I wonder what kind of perks these town leaders get if this thing passes. Good grief we’re doomed.

    Be careful all y’all, it’s Friday the 13th in the month of Halloween! Cheers. 🙂

  19. Nancy,

    I like these two quotes attributed to Yogi Berra, who was the famous catcher for the New York Yankees:

    “Even Napoleon had his Watergate.” And “it’s not over until it’s over.”

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