[Mb-civic] THE BUSINESS CLIMATE HOAX

[Mha Atma Khalsa]

THE BUSINESS CLIMATE HOAX
By Russell Mokhiber and Robert Weissman

President Bush just can't leave bad enough alone.

With the Gulf Coast physically battered by Hurricane
Katrina, the
president's reconstruction plan is on track to do
further harm to a
region that was poor and maldeveloped even before the
hurricane struck.

The core of his proposal is the creation of a Gulf
Opportunity Zone that
would provide massive depreciation and tax benefits to
firms investing in
new plant and machinery in the region. Translation:
giant subsidies for
oil companies and casinos.

Hurricane Wilma is on the way to Florida. Tropical
Storm Alpha is
brewing in the Caribbean. Scientists say a combination
of natural
hurricane cycles and global warming very likely mean
we are going to see
more, and more intense hurricanes over the next many
years. So, Katrina
reconstruction is not likely to be the last major
clean-up and recovery
effort during the next decade-plus.

How does a tax giveaway plan for big business end up
as the centerpiece of
the president's reconstruction plan?

It's easy enough to say the administration never
misses an opportunity to
cut taxes and do favors for its big business backers.
And that's true.
It's also easy enough to point to the influence of
right-wing think tanks
like the Heritage Foundation in designing the
administration's plan. And
there's no disputing that, either.

But something more is going on, too -- a decades-long
effort to promote
the idea that cities and states (and nations, for that
matter) will best
develop by cutting taxes and providing subsidies to
big business.

Greg LeRoy, executive director of Good Jobs First and
author of The
Great American Job Scam (Berrett-Koehler Press, 2005),
shows that these
policies are not only unjust, they are unwise.

In The Great American Job Scam, LeRoy, whose
organization has led the way
in trying to counter the business climate ideology,
provides case study
after case study of corporate rip-offs of communities
and states. One
example is Marriott's leveraging of a threat to locate
its headquarters in
Virginia to extract more than $50 million in gifts
from Maryland -- even
though the company had already decided to build its
new headquarters in
Maryland, where it was already located. Another is
Dell Computer's
finagling of a roughly $250 million subsidy package
from North Carolina --
as an incentive to invest $100 million to $115 million
in the state. The
Louisiana Coalition for Tax Justice found that, over
the course of the
1980s, Louisiana granted $2.5 billion in property tax
exemptions, nearly a
billion of which would have gone to schools in the
state.

States and cities do not get much in return for these
donations to the
corporate coffer, which is part of what makes them so
flawed as
development policy. LeRoy shows how blind faith, bad
negotiating and
illusory promises leave local and state government
officials with little
or no guarantee that new and permanent jobs will be
created.

But it's not just that they get manipulated. LeRoy's
key point is that
business does not invest because of the tax breaks
they are able to
extract. Location decisions are driven by access to
suppliers and
customers, labor costs and skills, transportation
facilities and costs,
the cost of utilities, land or rent costs and, not so
incidentally, the
whim of executives. Tax rates make almost no
difference in location
decisions. So generous tax breaks will rarely attract
investments that
would not otherwise have been made.

Crudely put, in the case of Katrina reconstruction,
oil and
petrochemical companies are not going to locate or
rebuild in the Gulf
area because of tax breaks. They build there because
there is oil there.

Perhaps most enlightening in LeRoy's book is his
explanation of the site
location consulting industry, which has driven the
competition among
states and cities for investments.

A single firm, Fantus Factory Locating Service, played
a key role in
developing the business climate ideology. By 1977, it
had claimed to
assist with more than 4,000 corporate relocations.
Fantus is now an
affiliate of the accounting firm Deloitte & Touche.

Fantus, and the other players in the small field of
advising
corporations on how to shift locations and blackmail
cities into
lavishing them with tax breaks and subsidies, realized
their business had
created another market niche: advising cities and
states on how to make
themselves attractive to investors. Thus they work
both sides of the
street -- instructing the corporate extortionists, and
advising
governments on how to make themselves appear desirable
to the
extortionists.

There's not a lot of subtlety in the business. In
March 2004, the
national director of Ernst & Young's Business
Incentive Practice and a
former Boeing official led a workshop at a trade
association of corporate
officers handling government relations. Their
powerpoint presentation was
leaked. Its title: "Turning Your State Government
Relations Department
from a Money Pit into a Cash Cow."

The combination of windfall subsidies for big business
and low wages for
workers represents the "low-road" of economic
development, LeRoy says. It
leaves communities poorer and more vulnerable.
Louisiana and Mississippi
have long traveled that road. It's not unrelated to
why they were so poor
before Katrina hit.


Russell Mokhiber is editor of the Washington,
D.C.-based Corporate Crime
Reporter, <http://www.corporatecrimereporter.com>.
Robert Weissman is
editor of the Washington, D.C.-based Multinational
Monitor,
<http://www.multinationalmonitor.org>. Mokhiber and
Weissman are
co-authors of On the Rampage: Corporate Predators and
the Destruction of
Democracy (Monroe, Maine: Common Courage Press).

(c) Russell Mokhiber and Robert Weissman

This article is posted at:
<http://lists.essential.org/pipermail/corp-focus/2005/000217.html>

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