Many states and cities have big budgets for “economic development”. The theory behind this kind of government spending is that politicians and bureaucrats can make a meaningful and unique contribution to the growth of businesses and industries. The practice of economic development, on the other hand, can be rather peculiar, and often results in massive waste of taxpayers’ money. There are also cases where politicians, in their efforts at “helping” the private sector, put so much emphasis on the role of government that they actually end up expanding their own bureaucracy. Take Colorado, e.g., where Governor Hickenlooper can’t stop talking about the state’s new economic development plan:
Gov. John Hickenlooper announced Monday that he is updating Colorado’s economic development plan to incorporate new strategies that he has voiced recently, including infrastructure development and international tourism promotion. Hickenlooper also said that he will speed up the time frame for completing a comprehensive statewide industry-cluster strategy from mid-summer 2012 to early next year. The announcement comes two weeks after Colorado had one of its most successful economic development weeks in its history, announcing that Arrow Electronics would relocate its headquarters here and that General Electric would build a solar plant in Aurora that will employ 400 workers.
It is a little bit audacious of the governor to take credit for one company’s move of its headquarters. As for the GE solar plant, one cannot help but wonder if there are any federal grants involved in that project. It is not exactly a secret that the Obama administration has been throwing truck loads of money after solar energy (Solyndra, anyone?) and other so called “green energy” projects, regardless of how economically viable those projects might be. If there is a federal grant involved in the GE project in Aurora, then it is going to be very hard for the governor to claim that his economic development plan encouraged a private business to come to Colorado and risk its own money.
A closer look at the governor’s much-touted economic development plan also raises some questions about what the plan actually could accomplish. Anyone familiar with how a free-market economy works knows that the only role that government can play is to create a business-friendly economic environment. That means deregulating, removing fees and taxes and giving businesses a maximum of freedom to operate without having to interact with and be hampered by government bureaucracies. But in the chapter called “Build a Business-Friendly Environment” (p. 7) the Colorado economic development plan focuses almost entirely on government and on preserving the existing bureaucracy and regulatory environment. Instead of getting government out of the way of entrepreneurs, the plan talks about improving “customer service” and creating a more “empathic” government. Instead of cutting taxes and removing fees, the plan says government should be more uniform in its sales tax collections and in how it imposes fees on businesses.
Painting a brick wall in a nice color does not make it easier to climb over. By preserving, instead of removing, business hurdles, Governor Hickenlooper will secure Colorado’s decline in business climate. According to the Tax Foundation, the Centennial State’s business tax climate has deteriorated over the past three years: in 2008 Colorado had the tenth best business tax climate in the country; in 2011 the state ranks 15th.