For Job Creation, Local is Better

In his 1993 book The Selling of the South, historian James C. Cobb writes about Southern states’ Depression-era invention of using tax breaks, free land, and cheap labor to woo businesses to locate new industrial facilities in our region to remedy the desperate unemployment of the period. The innovator responsible for putting this strategy in motion in the mid-1930s was Mississippi’s governor Hugh White, and at the time, his state desperately needed any help it could get. The Mississippi Historical Society’s History Now website explains:

By any measure, Mississippi entered the Great Depression far behind the rest of the nation. The mere 52,000 industrial jobs the state claimed in 1929 fell to 28,000 by 1933. Bank deposits dropped from $101 million to $49 million over the same three-year period. Nearly 1,800 retail stores closed as sales shrank from $413 million to $140 million. Farm income was reduced by 64 percent. The average annual income, already the worst in the nation at $287, fell to an unbelievable $117. On a single day in 1932, one-fourth of the state’s farm land was sold for taxes.

White’s “Balancing Agriculture with Industry” program (BAWI), which was adopted in various forms all over the South, combined the state government’s power to organize and negotiate with a reliance on local chambers of commerce recognizing and offering up their own communities’ resources. Essentially, local leaders would identify unused land, untapped labor, and money available for investment, and the state would help the community find a company that could use what they had. BAWI may have been a viable engine for economic recovery in a mostly agrarian society— but as a long-term solution in the modern Sun Belt South, not so much.

Cobb’s final two chapters are titled “The Price of Progress” and “A New South with Old Problems.” To begin the final chapter, he relays that the 1960s and 1970s were marked by rampant environmental pollution by these out-of-state corporations, and thus by the 1980s,

southern leaders found themselves confronting the question of how cheap labor, low taxes, and minimal constraints on growth could be rationalized in the face of expectations of rapid improvement in the general standard of living, expanded social services, social stability, and all the other factors that influence the quality of life in any region. (254)

The 1980s were three decades ago, and we’re still trying to answer that question: how do you sell Southern workers without selling them out?

In the eighty years since 1936, this unfortunate modus operandi for decreasing the South’s interminable poverty has yielded its fair share of negative results, prime among them the consequence of having our natural and human resources exploited and the profits shipped elsewhere in the country. The South may have gained jobs here and there for a time, but the extractive capitalists who have taken us up on our offers (reduced taxes, free land and improvements, government-sponsored job training) do so with the plan of taking the real booty home with them. Drive around the rural Deep South, and you will find our countryside littered with near-empty small towns that have a boarded-up industrial facility nearby.

The states of the Deep South have been touting this job-creation strategy for eight decades, through three or four generations of workers, but our leaders somehow haven’t seen – or at least haven’t acted on – the obvious truths: these outside companies suck out the little economic sustenance we do have, and when they’re done with us, they shutter the operation, write off the loss, and move on. Yet, the bulwarks stand firm, protecting the negotiations until, every couple of months, at some sparsely attended ribbon-cutting ceremony they brag that a new employer is coming to town. We always hear about the jobs, and we never hear about what we gave away to bring them. In the long run, BAWI-style initiatives do not offer viable solutions to Southern economic problems.

In February, the Center for Budget and Policy Priorities (CBPP) released a new report titled “State Job Creation Strategies Often Off Base”. The report, which isn’t specific to the South, is the culmination of a study that tracked job creation over several decades, even reaching back into the 1980s, and their conclusions are simple:

The vast majority of jobs are created by businesses that start up or are already present in a state — not by the relocation or branching into a state by out-of-state firms. Jobs that move into one state from another typically represent only 1 to 4 percent of total job creation each year, depending on the state.

and

During periods of healthy economic growth, startups and young, fast-growing companies are responsible for most new jobs.

The evidence seems overwhelming, when we read that:

fully 87 percent of all 1995 – 2013 gross private-sector job creation was “home grown” — it came from startups, the expansion of employment at existing establishments, and the creation of new in-state locations by businesses already headquartered in the state.

If you’re still skeptical, just look at the state-by-state numbers on page 8 of the report. There isn’t much variance from one to the next. The facts are obvious, thus investing state money and favor on bolstering small, locally owned businesses makes far more sense than traveling far and wide with giveaway offers. Alabama, where I live, is a state of four-and-a-half million people with a 6.2% unemployment rate – well above the national rate of 4.9% – and a multi-year pattern of budget shortfalls. What we need are thousands of good-paying jobs and millions of dollars in tax revenue.

Just this month, we had another announcement in Alabama, three hundred jobs coming from a company with offices in five other states. While I’m sure that the three hundred people who get the jobs will be glad, we aren’t told in the press release what those jobs will cost our state.

The leaders in the Deep South who continue with this job-creation strategy don’t seem to understand in 2016 what one historian understood in the early 1990s. The CBPP has tracked it across three recent decades, and it seems pretty clear: giveaways to out-of-state companies aren’t worth the few jobs they bring. If Deep Southern state leaders truly want to improve quality of life, there are far better ways that are right under their noses: develop and support local businesses, work with the EPA to forbid pollution, give all working people a living wage, and ensure access to healthcare for everyone. I’d say that’s all that most working people ask for: a good job, a decent salary, and a healthy and safe place to call home.

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