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"A regional government asks: which industry sectors are we already comparatively good at?" Nothing. Most regions that don't already tilt toward a particular sp
by niftich 8y ago
"A regional government asks: which industry sectors are we already comparatively good at?"
Nothing. Most regions that don't already tilt toward a particular specialty dominated by a few large employers aren't specifically good at anything. This isn't a slight: it's just reality. The employment and talent base in most areas tilt toward retail (overwhelmingly consisting of national chains, and dominated by the likes of Walmart), human services (healthcare, education), and government. Small businesses then cover a wide gamut of services required for daily life, but don't stand out.
There are very regions whose competency comes from a convergence of independent actors, and most of these seem to focus on healthcare research intertwined with healthcare delivery, because the products, talents, and facilities aren't readily transplanted elsewhere: the article's example of NC Triangle, central Maryland, Cleveland, Grand Rapids. Rochester, MN would get an honorary mention, but it's dominated by a single actor -- the Mayo Clinic.
So what's everyone else to do? South Carolina began an ambitious plan that culminated in landing BMW in the 1990s, and now the state is a major center of automotive manufacturing and related businesses. For them, the gamble, even with generous incentives, paid off. This is the same kind of thinking behind northern Nevada's (and Arizona's) chasing of manufacturing and high-tech looking to flee from California. Rural areas chasing datacenters might seem a bit puzzling, but they support a comparable number of local jobs, while having fewer externalities than trucking distribution centers -- another typical rural development opportunity. On the other hand, the scope of the subsidies in the Foxconn plant and the nature of the behavior of Wisconsin officials are unjustifiable: it shows desperation, ruthlessness, and a disregard for local residents and local economic realities. Most cases are not that egregious.
A jurisdiction landing a large-footprint warehouse-like building, like a datacenter or a distribution center, or even a Walmart, offers a short-term boost of jobs in construction, and then a steady, if low, number of jobs in years to follow. It also vests national or international corporations to the local plant: these sorts of sites are unlikely to close or move. A few million dollar subsidy is comparable in cost to grading and paving roads for a new subdivision, or installing water and sewer service. To cities and counties competing for the long term, this is often seen as an investment in the future of the area.
- opportune 8y agoThis is a really good point. However, I think we really should be making a distinction between skilled and unskilled labor. The reason wealthy nexuses of comparative advantage emerge is generally due to skilled labor. You get a network effect from having that labor after which you may no longer need to offer incentives. The Bay Area is a great place to start a tech company because of all the tech workers/investors/incubators, NYC for hedge funds and IB, Chicago for trading, DC for nonprofits, etc. And generally other areas can experience a similar phenomenon owing to natural resources. However, I think an area makes a mistake in investing (via subsidies/tax breaks/whatever) in unskilled labor when it’s not tied to their natural resources. The difference is simple: you don’t gain the network effect from unskilled labor because, well, it’s unskilled. A distribution center doesn’t really make it better for a call center to pop up in the same area. That said, all large business will cause at least somewhat of an incentive to build other large businesses by it due to infrastructure.