This year, as Amazon.com invited communities across the country to compete to host its second headquarters, no site in Louisiana seemed to be in serious contention. In November, the mammoth online retailer announced that it would split its new operation — and an estimated 50,000 new jobs — between New York City and Arlington, Virginia.
As Nathan M. Jensen, a professor of government at the University of Texas at Austin, noted in a recent commentary in The Wall Street Journal, some critics have suggested that Amazon intended to locate the new facility in New York and Virginia all along — and that the widely touted competition was simply a way to land more concessions as various state and local governments struggled to outbid each other for the project.
“The reality is that this sort of competition for projects, while unusually large in the Amazon case, is the rule not the exception in economic development and has been for a long time,” Jensen tells readers. “It has been happening in the United States since Alexander Hamilton received local tax exemptions in 1791 to build up the city of Paterson, New Jersey as an industrial center.”
Jensen cites research from the nonpartisan Upjohn Institute concluding that in most cases, businesses don’t change their plans based on incentives. The lavish government breaks usually reward companies that were going to locate in a given place already.
“In my own study of 80 incentive offerings in Texas,” Jensen writes, “I found that numerous companies applied for incentives after they had already broken ground and, in some cases, after they had completed building. A few even noted in their applications that they weren’t even looking at other states for their investments.”
If big tax breaks often aren’t decisive in landing high-profile economic development wins, then why do state and local governments offer them? Jensen argues that the giveaways “allow politicians to attend ribbon-cutting ceremonies where they can highlight their own role in attracting a new company ... and creating jobs.”
The issue that Jensen raises certainly isn’t new in Louisiana, where the question of incentives for nabbing big new industry projects is a subject of continuing debate.
The best way to grow business in a community or state, it seems, is to nurture the fundamentals: a good education system, decent infrastructure, and the kind of civic and cultural amenities that bright, educated workers demand.
On that front, Louisiana has much work to do in 2019 — and beyond.