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The Economic War Among the States: Letters

Incentive Battles Between States Inevitable and Healthy

Should states participate in incentive battles to keep and lure businesses?

Of course they should. In fact, they have no choice but to join the battle -- because those they "serve" increasingly DO have choices: business, labor, and capital are all mobile -- and States, municipalities, financial institutions, economies and nations that do not know that (or learn it fast, like, TODAY!) are doomed to decline. Intense competition will do the United States a whole lot of good, too: in the process, our so-called "public servants" would themselves learn first-hand, at a gut level, what business has to do to survive. Hey! The whole country might learn something about capitalism and marketing!

Stu Mahlin

Avoid Corporate Manipulation and Stick to Education and Infrastructure

Q; Should states engage in incentive wars to keep and lure businesses?

A; Absolutely not. Such incentive wars make states the targets of corporate manipulation. Look at sports franchises. They have wheedled millions of financial incentives, new stadiums, tax breaks, and the like from cities. Even the Yankees have threatened to move to Jersey over money. Furthermore, auto plants, especially the japanese and German "transplants" have induced states into paying tens of thousands of dollars in incentives PER JOB created, money the state is unlikely to ever retain through taxes or other economic developments.

States should concentrate on what they do best: creating sound infrastructres, solid, productive education systems at all levels, and perhaps occaisonal targeted zoning changes, development projects, and broad (as opposed to company-specific) low-level incentives (such as a tax reduciton for a region or county). These programs should be orchestrated around creating a good, high-quality business, research, and service environment to maximize the economic benefits of state expenditures and increase the international pull of a region. Silicon Valley, the Research Triangle did not arise because of competition between states but rather through educational and infrastructural developments, and created not merely national but global centers of production and innovation.

Incentive wars are counter productive, and they too easily slip into the "race to the bottom" that opponents of federal deregulation fear. Interstate competition should be regulated as part of a comprehensive federal policy on multinational corporations.

Matt Harmon

Government Should Require an Ownership Stake in Exchange for Subsidies

You are to be congratulated for bringing this important subject into public discussion. Sorry about the loss of the donation from Paulucci; maybe he'll change his mind.

I can't see any alternative to action at the federal level to stem this ferocious competition by cities and states to attract industries. But we have a Congress that is highly unlikely to do anything about it.

Any official who proposes to give public money to any private company, whether in cash, below-market property, tax increment financing, or whatever, should be required to see that the public receives a beneficial ownership holding in the company, equivalent in value to the gifts provided from the public coffers.


Donald L. Maxwell
2630 E Medicine Lake Blvd, Plymouth MN 55441

An Initiative in L.A. to Support Entrepreneurs and Build Networks, Not Chase Smokestacks


Please place me on the email list for this vital discussion. The organization I represent is involved with this issue, yet, from an entirely new angle.

We call our new paradigm, Economic Development Two, as opposed to Economic Development One. The new paradigm, like most business, does not recognize politically defined boundaries, rather commerce defines our picuniary (and policy) boundary. Further, we do not chase smoke stacks! We do, however, chase entreprenuers, for the creation of NEW enterprise does not lead to Thurow's "Zero Sum Game" of economic development.

Below follows my organization's vision, mission and goals. If you have any questions, comments, cander or anecdotes please email or phone me.

Thank you, keep up the good work, and stay in touch.


To increase the overall competitiveness of the Los Angeles regional marketplace.


The Los Angeles Regional Technology Alliance will provide the groundwork for the regional infrastructure necessary to directly assist those firms wishing to develop dual-use technologies, and truly solidify the State's commitment to defense industry diversification._ (As established by state law.)

We will accomplish this goal through the development of programs which subscribe to the theory of Economic Development II (e.g., technology-based economic development). Economic Development II serves to enable industries. Its boundaries are defined by commerce, not political jurisdiction. We are a facilitator, assisting suppliers and developers through the network of multiple partners. As a critical point of information, we serve to connect companies with resources. Our effort is regional, inter-regional and federal.

The Los Angeles Regional Technology Alliance will strive towards a fair, neutral agency role to assist firms which serve a diverse technology base. We will strive towards achieving the highest quality of service and products available. We are industry led and therefore rely upon our clients, the businesses we serve. We must provide value in the community. At the same time we must also serve our customers, the state of California, our funding partner, the Economic Development Corporation of Los Angeles, our program partner, and other partners throughout the five-county region.

We serve the Los Angeles economy (Los Angeles, Orange, San Bernardino, Riverside and Ventura counties). Our programs will be directed at assisting the development of an effective marketplace in this region as well as providing the appropriate linkages to the state, the national, and global marketplace.

Our role is to inspire and lead.

Our battle cry is: Onward and Upward!


(As specified in our 1996 contract.)

  1. Creation and retention of jobs.
  2. Creation of new businesses.
  3. Development of new commercial or dual use products.
  4. Establishment of industrial partnerships and consortia.
  5. Demonstration of productivity enhancements within key regional industries in such areas as a) return on investment, b) reduced cost, c) employee training, and d) equipment upgrades.
  6. Establishment of private-public partnerships.
  7. Commitment of industry support, participation, and capital.
  8. Leverage State, Federal and private sector funds.
  9. Participation of small businesses and minority, women and disabled-veteran owned businesses.
  10. Work force training.

Brandon F. Stauber
Associate Director - Program Development Los Angeles Regional Technology Alliance (LARTA)
Sponsored by the Economic Development Corporation of Los Angeles (EDC-LA). Supported by the Office of Strategic Technology, California Trade and Commerce Agency.
Other contact information:
515 South Flower Street, Suite 3200 Los Angeles, California 90071
(213) 622-7039 (213) 622-7100 - facsimile

Unequal Subsidies to Business Simply Not Fair

I hope the following is helpful to your study/contest. Please call if you have further questions or need additional information.

Public tax incentives should not be used to entice businesses to locate in North Carolina. My rationale is simple. I opened a small business in 1993, employing myself and two 1993 graducates of UNC-CH. Three years later, I am employing those same three people, plus a 1995 graduate of UNC-CH. During this time I have generated over $400,000 in payroll, which is recycled several times in the North Carolina economy, plus at least $20,000 in North Carolina state income taxes, plus NC unemployment taxes, etc.

In exchange for this economic stimulus, I have not received one cent from the State or local government, nor do I expect to. But why should I be paying taxes so that these governments can then subsidize other businesses? If you are going to subsidize one business, you must subsidize all at an equal rate or it is unconstitutional. End of story.

George White

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