Something New or More of the Same in the Bidding Wars for Big Business?

Abstract

The economic downturn that began in 2007–2008 was blamed by some commentators on neoliberalism and pro‐business policies. So we might expect U.S. state and local governments to have responded with policy changes affecting their neoliberal economic development strategies. Based on this assumption, this paper is a theoretically informed examination of recent high‐profile bidding wars in Wisconsin. The highest profile example was in 2009 when General Motors chose a plant in Michigan over Wisconsin and Tennessee for a new small car line. Wisconsin's Commerce Secretary characterized Michigan's $1.2 billion incentive offer as “absolutely crazy” (compared with his state's $409 million offer!). My main research question is how have Wisconsin state and local governments adjusted their neoliberal economic development efforts in these bidding wars given the recent economic downturn and weak economy? This paper uses the largest incentive offers in Wisconsin during the tenure of the current and previous state governors within the context of ten themes drawn from the literature to problematize the neoliberal policy of bidding for big business. It concludes by considering the implications for economic development policies.

Interstate Relocation of Manufacturers and Business Climate

“…In the end, this study provides three insights. First, based on the signs and statistical significance of our measures of the characteristics that are central to the supply‐side, or a neo‐liberal (as referred to by some researchers, such as McCarthy ) view of business climate, the data tend to support the importance of some business climate components. Second, economic significance or magnitude of the effects is very small: relatively large reductions in taxes would result in a very small change in the expected number of manufacturers moving into the state.…”

“…The “first wave” of economic development policies and strategies that followed the BAWI Act focused on creating what McCarthy () refers to as a neo‐liberal, or supply‐side, approach to a pro‐business climate emphasizing low costs of operations (Eisinger ; Ross & Friedman ; Shaffer, et al ). Plaut and Pluta ( p. 99) note that the definition of “a good business climate is not entirely clear but is usually associated with low state and local taxes, right to work laws, little union activity, and a cooperative government structure.” In a study of 11 different business climate indexes and their relationship to economic growth, Artz et al () note that most of these indexes, many of which are widely publicized by elected officials and business organizations, emphasize supply‐side factors, such as taxes, regulatory environment, and unionization rates, yet have very low explanatory power in predicting economic performance.…”

“…The "first wave" of economic development policies and strategies that followed the BAWI Act focused on creating what McCarthy (2015) refers to as a neo-liberal, or supply-side, approach to a pro-business climate emphasizing low costs of operations (Eisinger 1988;Ross & Friedman 1990;Shaffer, et al 2004). Plaut and Pluta (1983 p. 99) note that the definition of "a good business climate is not entirely clear but is usually associated with low state and local taxes, right to work laws, little union activity, and a cooperative government structure."…”

Incentives and Austerity: How Did the Great Recession Affect Municipal Economic Development Policy?

“…After the election, resources were transferred to other, more loyal regions of the state, and none of the major subsidy packages that the State of Wisconsin funded between 2010 and 2016 were located in Milwaukee (Good Jobs First 2017; McCarthy 2015). Mimicking other examples of conservative state houses “pre-empting” local authority, the Wisconsin legislature sought to curb Milwaukee’s power by passing bills aimed at voiding local ordinances and constraining spending.…”

Incentives and Firm Migration: An Interstate Comparison Approach

“…Today, one of the most common ways for states to compete for economic activity is to encourage firms to relocate from one state to another by marketing a stronger or more “positive business climate” (Deller & Goetz, 2009; Stallmann & Deller, 2011). 1 McCarthy (2015) defined this kind of policy as a supply-side approach to business climate, where policies are built on neoclassical firm location theory and focus on the costs of production. These policies take two forms: (a) reducing both tax burdens and regulations and (b) offering focused incentive packages targeting individual businesses (Eisinger, 1988).…”