Auto Subsidy Hypocrisy?
Are Southern senators arguing against a federal bailout of Detroit on free market grounds hypocrites? Mike Lillis thinks so:
Yet this argument — that the government has no business interfering in free markets — ignores an increasingly frequent tradition among Southern states, which have fronted billions in local taxpayer dollars in the past two decades to attract foreign auto plants. Those incentives, arriving in the form of tax breaks, training for new employees and even land, have enticed BMW to South Carolina, Mercedes to Alabama and Nissan to Tennessee. The result of the government subsidies has been the steady emergence of the South as an auto-manufacturing powerhouse. Some are dubbing it the “New Detroit” — a region where real estate is cheap and the labor’s not unionized.
Not only that, Matt Yglesias argues, but Southerners are bringing down the economy.
This is, of course, but a small slice of the larger southern politics tradition which has always insisted since the end of the Civil War that cheap labor and a low-tax, low-service, high-inequality social and economic system are the key to prosperity. This approach left the South perennially poorer than the rest of the country, but over the past couple of decades this made-in-dixie failed approach to economic development has come to dominate national policy. Not coincidentally, during this period the United States has begun to fall behind high-wage, high-service, low-inequality northern European countries in terms of average living standards.
Now, first off, there’s a substantial difference between offering a federal taxpayer bailout of failing companies and states offering incentives to businesses who might bring in new jobs. As with publically financed sports stadia, there’s a legitimate debate to be had as to whether it’s worthwhile to spend taxpayer money to attract business. But Alabama was competing with several other states to attract Mercedes and the incentives were part of a winning bid.
The South is poor for a variety of reasons, mostly having to do with relying on agriculture and mining much longer than their counterparts in the West and Northeast and the legacies of slavery and Jim Crow. But it’s been growing for decades, mostly at the expense of the Rust Belt.
Further, the United States is still, by far, the most prosperous country on the planet despite having always been a low tax, high inequality, low service society. We’re a gigantic, continental landmass and we’ve been well behind the Western curve in transferring wealth through government coercion for social purposes. It’s far from clear how giving $15 billion to keep failing manufacturing firms afloat another few months is going to increase our standard of living.