Although we are no fan of Amazon’s destructive effect on Main Street retailing, we are happy to see that the company will be generating 1,000 news jobs in Madison County with a new distribution center.
There was one big thing missing from the announcement: There was no secret special legislative session to give Amazon a free ride exemption from local and state taxes. Amazingly, free market forces, independent of governmental action, made this economic development advance come to fruition. As a result, the county and state will now have a new tax paying industry that will pay its fair share of the schools, roads, legal system and other basic infrastructure required by civilized society.
After decades of states locked into a self-defeating bidding war for jobs, our political leaders are finally started to wise up and realize they were being taken for a ride by far private industrial leaders far shrewder than our elected officials. Slowly but surely, studies revealed that those states most aggressive in the bidding wars ended up with slower GDP growth than less aggressive states. The light has finally started to dawn that giving away the store to attract a few hundred jobs makes no long-term economic sense.
There is a simple reason being the highest bidder for jobs didn’t work. The bidding wars distorted the free flow of capital. These were subsidies for inefficiency. Giving special favors to new industries hurt our existing industries. The new subsidized industries were able to out-bid the unsubsidized industries for the best workers. This moved workers from efficient, unsubsidized industries to inefficient, subsidized industries. That’s a perfect recipe for low growth. And that’s exactly what resulted. Unfortunately, it’s taken three decades of bad public policy to reach this realization.
We’re all for economic development and incentives for new jobs. What we’re against is crony capitalism in which politically connected industries smooze politicians for special tax breaks, all done in a secret, hurried special session in the name of jobs. Let’s hope those days are over and we can get back to letting the free market do what it does far better than government planning: Create prosperity.