Give them tax money and they will come? Nope. | Arkansas Blog

Give them tax money and they will come? Nope.



Chamber of commerce shills (see Arkansas Business publisher Jeff Hankins) are busily deriding those skeptical about putting a $38 million economic development slush fund in the Little Rock $500 million sales tax proposal. This small businessman still happens to think government best creates jobs by investing in infrastructure that builds a working, attractive city. Using an unaccountable group of business community insiders to dole out subsidies in hopes of creating jobs — as Mayor Mark Stodola has proposed — isn't much of a strategy. Government didn't create Silicon Valley. Great thinkers with great notions tinkering in garages did.

Little Rock is merely the latest to propose to walk down an unproductive road. From The Economist:

Build a magnificent technology park next to a research university; provide incentives for chosen businesses to locate there; add some venture capital. That is the common recipe for harnessing higher education and industry to spur economic growth as prescribed by management consultants touting the "cluster theory" developed by Harvard Business School's Michael E. Porter.

Hundreds of regions all over the world have spent billions on such efforts; practically all have failed. Yet others are following suit — such as Japan, with its Okinawa research-and-development cluster, and Russia, with its Skolkovo project.

All of those are well-intentioned efforts to build Silicon Valley-style technology hubs, but they are based on the same flawed assumptions: that government planners can pick industries they want to develop and, by erecting buildings and providing money to entrepreneurs and university researchers, make innovation happen.

It simply doesn't work that way. It takes people who are knowledgeable, motivated, and willing to take risks. Those people have to be connected to one another and to universities by information-sharing social networks.
Regional planners and some academics get very defensive when asked to produce evidence of cluster theory's success. They commonly tout Silicon Valley and North Carolina's Research Triangle Park as examples of the success of government-supported clusters. Research Triangle Park is a 50-year-old project that achieved success decades ago but lost momentum in the Internet era. And the success of Silicon Valley was achieved without government involvement.

It's amusing to hear the chamber shills call critics of government welfare payments to business "anti-business." That's like calling a critic of government welfare payments to poor people anti-human. Right?

As for the sales tax: Little Rock city government needs more money, though, as Jim Lynch has noted, it's disingenuous to compare the city sales tax with that in other cities in Arkansas given the huge sum it also reaps from the county sales tax. I'm inclined at this point to support the operational portion of the tax proposal — 5/8ths of a cent. There are some worthy projects in the capital portion — a 10-year, 3/8ths of a cent tax — but it's a Trojan Horse for a corporate welfare slush fund lacking specifics, accountability and a governing board representative of the community at large. If the county could tighten its books sufficiently to pay for a county jail expansion without additional tax money, I'm thinking Little Rock could also meet some of its most critical capital needs with a hefty infusion of new operating money.

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