Reining in the Competition for Capital

Reining in the Competition for Capital

Reining in the Competition for Capital

Reining in the Competition for Capital

Excerpt

Across the globe, communities and their civic and business leaders find themselves increasingly preoccupied with the mobility of capital, most tangibly in the pressures to produce large incentives packages to attract and retain private sector employers. Each individual expression, interest, or demand for concessions sets off flurries of energy, negotiations, and press furor. Entire communities are plunged into considerable anxiety, often in a cloud of uncertainty about what is being offered or threatened, their options, and the outcomes. Information is imperfect, and the “market for jobs” imbalanced. Cities and regions may lose their bids and wonder if they offered too little or whether the outcome had been decided long before the bidding. Or, they may win and find that the promised jobs do not materialize, or are short-lived, or go to newcomers who drive up the local cost of living. Worse, they may find that the opportunity cost of subsidies is stiff. Investments in infrastructure, human capital, or entrepreneurship that would do more for diversified local development are foregone, while state and local government have a hard time meeting operating costs because of tax giveaways over the long term.

This book explores the causes, character, and potential remedies for the growing spatial competition for capital. The authors, from the United States and Europe, are economists, political scientists, lawyers, and nonprofit public policy leaders. Each was invited to give a paper at a spring 2004 conference, Reining in the Competition for Capital, hosted by the University of Minnesota’s Humphrey Institute of Public Affairs. Each author was chosen for his or her unique expertise and proven track record in path-breaking intellectual contributions and workable policy solutions on the subject of incentive competition. Before the conference, each submitted a draft for public Webbased distribution. At the conference, each paper was presented and responded to by a panel of three commentators from diverse walks of life, followed by a 20-minute debate by the larger audience. We strived to ensure that every point of view was represented in the debate, from site consultants, mayors, and subsidy critics to Federal Reserve Bank vice presidents and members of Congress, as the acknowledgements below demonstrate. At the close of formal sessions, all participants were invited to a two-hour discussion, where new directions for action and research were debated. All these lively intellectual encounters were incorporated into the authors’ final drafts and our overview.

Five conclusions emerge from this project. First, the phenomenon of interregional competition for capital is increasing in intensity and becoming a pressing problem for many governments, regions, and communities. It is spreading across the globe, especially in larger countries with decentralized . . .

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