NCPA - National Center for Policy Analysis


February 16, 2009

Across the United States, state governments are crafting economic strategies that blur the boundaries between the public and private sectors.  They are targeting specific industries and intervening in ways that go far beyond traditional perks like tax breaks and cheap land. 

  • Almost every state has set up a fund to launch and develop high-tech startups. Public venture funds are especially pervasive in Arizona, New Mexico, Oregon, Pennsylvania and Texas.
  • States are pouring huge sums into industry-university Research & Development consortiums targeting specific industries and technologies. California, Texas, Massachusetts, Maryland and Michigan all have $1 billion-plus biotech initiatives.
  • Arizona, Maine, Oregon and other states are designing university, community college and even high school curriculums to train engineers, technicians and production workers for target industries.
  • Some states are getting less shy about investing taxpayer money in high-priority businesses. Tennessee is investing with DuPont in a biofuel producer, and New Mexico gives interest-free loans to films produced locally.

Additionally, New York will reimburse chip manufacturer AMD $900 million in costs tied to a new plant.  But to some critics, such state efforts amount to corporate welfare.  Greg LeRoy, head of the watchdog group Good Jobs First, has faulted such state efforts.  He figures most of the $50 billion or more states spend annually on industrial incentives goes to "smokestack chasing" - courting companies that shrewdly play states off against each other to win subsidies for factories, offices and even retail stores.

Source:  Pete Engardio, "State Capitalism," BusinessWeek, February 9, 2009.


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