This is a little old, but it was brought to my attention late and it seems to be of durable relevance. Last month, the New York Times (NYT) published an article chronicling public giveaways to corporations in the United States. What is extraordinary is that the article is the result of ten months – 10 months! – of investigative journalism on the topic, during which time over a hundred of public and corporate officials were interviewed and over 150 000 awards by all levels of governments were analysed. The NYT even put together a searchable database of all these awards. Frankly, this is quite an impressive piece of investigative journalism.
The conclusions are not unexpected: (1) There is an inter-state competition to attract or retain private investment (once started, it obeys a prisoner’s dilemma logic); (2) there is no particular indication that the public awards have that much influence on firm decision (to invest, stay, or go); (3) Other factors seem to be more important, like the quality of education, infrastructure, living environment for the employees, etc. i.e. stuff that could be paid for with the money given to corporations. What is interesting, though, is how candidly managers basically admitted to this (though they said they “owed it to their shareholders to go and get the most handouts possible”), while public officials essentially said they were powerless to act otherwise. This sounds like a classic case of coordination failure… but then again, following (2) and (3) above, other public investment could be prioritised.
Is there a good comparative study out there of the impact/influence of some of these handouts in Canada ? If not, It would be interesting to make one, to see if patterns of corporate handouts vary across provinces and government levels, perhaps with an attempt to assess the actual impact on investment flows (and calculate the return on public investment).
- Bank of Canada, Exports, and LMI (October 23rd, 2014)
- More on Secular Stagnation (September 7th, 2014)
- What Have we Learned From the Financial Crisis? Part 4: Bernard Vallageas (March 29th, 2014)
- What Have we Learned From the Financial Crisis? Part 3: Mario Seccareccia (March 25th, 2014)
- What Have we Learned From the Financial Crisis? Part 2: Louis-Philippe Rochon (March 25th, 2014)