- Eminent domain, state and local subsides, and federal-corporate partnerships have yielded these lifeless fruits.
- The economic philosophy at work here isn't capitalism or socialism. It's corporatism.
- Often, the corporatist ship founders on the rocks of false promises.
Weeds and rubble cover 90 acres along Long Island Sound. A room with cinder-block walls sits locked in an empty in Brooklyn basement. And a gleaming industrial palace has failed to bring jobs to the banks of Ohio's Mahoning River.
These are monuments to failed central planning. Eminent domain, state and local subsides, and federal-corporate partnerships have yielded these lifeless fruits, failing to deliver the rebirth, community benefits and jobs they promise — but succeeding in delivering profits to the companies that lobby for them.
The economic philosophy at work here isn't capitalism or socialism. It's corporatism: the belief that government and business should work together. You could describe corporatism as the view that profits provided by the market aren't sufficient motivation for business, so government must put some icing on top. From another perspective, corporatism is government's attempt to harness the profit motive for the goals of policymakers: let industry row the ship while politicians steer.
Often, the corporatist ship founders on the rocks of false promises.
Last decade, the New London Development Corporation -- a quasi governmental body -- crafted a plan for revitalizing the small Connecticut town. This plan involved a new Pfizer plant. The NLDC and local politicians sold the land to Pfizer for $10, gave the company tax breaks and pledged $26 million to clean up contamination and a local junkyard.
"Pfizer wants a nice place to operate," the Hartford Courant quoted executive David Burnett as saying in 2001. But Burnett wasn't just talking about the junkyard and the contamination. He was also talking about the area's middle-class homes. "We don't want to be surrounded by tenements."
So NLDC drove out the homeowners, using eminent domain. Homeowner Suzette Kelo sued, but in the end, the liberal majority on the U.S. Supreme Court ruled in favor of the developers and the politicians. The majority argued: "The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue."
The New York Times applauded the ruling: "New London's development plan may hurt a few small property owners, who will, in any case, be fully compensated. But many more residents are likely to benefit if the city can shore up its tax base and attract badly needed jobs."
In 2009, Pfizer, after its merger with Wyeth, abandoned its plant in New London. The condemned neighborhood is now, as Charlotte Allen put it in the Weekly Standard, a "vast, empty field -- 90 acres -- that was entirely uninhabited and looked as though it had always been that way."
On the bright side, Pfizer got to sell the plant to General Dynamics for $55 million.
In Brooklyn, developer Bruce Ratner teamed up with Mayor Michael Bloomberg and the Empire State Development Corporation to condemn a neighborhood, seize properties and build a subsidized arena so the New Jersey Nets could move to Brooklyn.
This has worked out well for the Nets. The team's value has tripled since 2010 to $780 million, fifth highest in the NBA, according to Forbes. But to win neighborhood support, Ratner promised a slew of community benefits, including affordable housing. According to the Times, the only "community benefit" he's delivered so far is a small (usually locked) "meditation room" in the basement of Barclay's Center.
President Obama's efforts to boost manufacturing jobs have had a similar result.
Obama's government-supported "manufacturing innovation hub" in Youngstown, Ohio, is called "America Makes." Reuters reported: "Of six organizations in Youngstown and Cleveland -- the nearest major city in the state -- working on America Makes projects, none has made new hires for the work."
The companies involved seem to benefit from the partnership, but given the increased automation of manufacturing, the fruits of this federal-corporate collaboration do not include jobs.
Corporatism typically has a political advantage: The shiny new stores built on stolen land, or the jobs created through subsidies, are very visible, while the costs — opportunity costs, increased deficits or crushed Mom & Pop businesses — are hidden.
That's why New London, the meditation room, and America Makes are important. They reveal how corporatism doesn't deliver on its promises — except maybe to the corporations.
Timothy P. Carney, a senior political columnist for the Washington Examiner, can be contacted at [email protected] This column is reprinted with permission from washingtonexaminer.com.