A Grassroots Guide to Investigating Development Subsidies

with Greg LeRoy

Since No More Candy Store was published in 1994, the grassroots movement to reform economic development has continued to surge.

Seeded in the mid-1980s by activists fighting plant closings, the movement has grown enormously to include tax and budget watchdogs, living wage campaigns, labor unions, community groups, smart growth activists, environmentalists, good-government projects, and advocates of alternative development strategies.

Why has the campaign to stop the abuse of development subsidies blossomed? Because the state-eat-state civil war for jobs has continued, making subsidies ubiquitous. Any company that has been awake the last 15 years and has built a new facility has probably gotten tax breaks – even companies merely moving jobs from one place to another. And the corporate practice of demanding subsidies for an existing facility by threatening to leave or expand elsewhere – commonly dubbed “job blackmail” – has become a fine art.

Subsidies have become such an automatic “gimmee,” they have changed the whole rationale public officials use to justify them. No longer do public officials speak of “leveraging” private investment with public dollars; that is, bringing jobs to areas that have been redlined by banks or polluted. Now, officials simply speak of being “competitive;” in other words, they justify offering subsidies simply because other places do.

The costs per job boggle the mind. Many states now have dozens of deals on the books in excess of $100,000 per job. We once interviewed a plastics company that had been offered subsidies totaling $469,000 per job. The company spokesman basically shrugged and said it was just an “off-the-shelf” deal.

And the total costs are enormous. In his new book, Competing for Capital, Professor Kenneth Thomas estimates that as of 1996, states, counties and cities were already spending $48.8 billion a year on economic development! Most significantly, he finds that grassroots organizing by non-profit groups is leading the way to reform. Comparing the United States to Canada and Europe, Professor Thomas concludes that “…the real story of attempts to control subsidies to investment in the United States is one about nongovernmental organizations and their organizing efforts.”