Marching in Lockstep

When incentive-based economic development was the rage in the early 1990's, California appeared slow and distracted, a lumbering giant ignorant of the "proper" way to do things. After all, many states had successfully lobbied businesses in California to relocate to their states. Washington, Nevada, Utah, Arizona and farther out, the growing states of the deep South profited greatly at California's expense, taking advantage of a swarm of problems besetting the State, including natural disasters, regulatory burdens, the cost of doing business in California etc.

Manufacturing was especially vulnerable. As the state lost thousands of manufacturing jobs in the early 1990's when the defense industry shrank in a short period of time, many States picked up the slack, offering generous (sometimes absurdly generous) incentives to lure businesses away. However, in what may be referred to as the "what goes around, comes around" scenario, the advantages to the other states have not been permanent. Manufacturing, for example, has been on the decline throughout the U.S. since the mid 1990's, as other places around the world have been offering their own incentives, including the most compelling incentive of them all: a lower wage and cost structure, often much lower than anything offered anywhere in the U.S.

This game of incentive-based attraction, often tacitly encouraged by the federal government (and by the 435 members of the House of Representatives and the 50 Senators), may have had little effect but to demonstrate momentary clout and longer-term headaches for communities and localities whose entire strategy has been pegged to this egregious practice. Understanding the underlying strengths of a regional economy and building first the supportive infrastructure and then putting in place programs to grow and enhance the underlying strengths is the key to economic development. Everyone agrees on this principle of course, until the first dollar flows and the first hole is dug, and suddenly, everyone, everywhere, wants to reinvent themselves in exactly the same manner, wanting that hole to be dug and that dollar to flow in exactly the same way.

This clearly happened with the period in economic development in the mid 1990's, when the economics and politics of "silicon envy" was in evidence throughout the country, and even infected the rest of the world. From Seattle to Stockholm, from Henderson to Helsinki, there was a fervent attempt first to market oneself as a "Silicon" wannabe (note the capital S) and then to go around convincing yourself that you were worthy of the moniker. Incentives were flung around like so many body-pierced dot comers, and the air was rife with the unmistakable stench of something decaying. And so it died. But like so much else, incentive-based economic development does not die: it just hangs around enough to allow people to weave more fantasies, and let their imaginations run riot for one more season.

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