Minnesota’s consumers, not its politicians, should be picking winners and losers

Minnesota’s bid for the new Amazon headquarters is due in tomorrow. And, in true Minnesota style, it looks like being low key.

How to attract a business like Amazon

As the Pioneer Press reports

Washington, D.C.’s mayor readied a video of herself asking Amazon’s Alexa about the secondary headquarters, which is to complement Amazon’s existing HQ in Seattle. An Arizona region sent Amazon a cactus. Birmingham, Ala., set up Amazon delivery boxes around town and created a Dash button-themed social-media campaign…“That’s not the Minnesota way,” Department of Employment and Economic Development Commissioner Shawntera Hardy said Monday.

So, if nothing else, we will be spared the sight of Gov. Dayton dressed as Paul Bunyan or Prince.

In terms of fiscal incentives, Minnesota’s bid may be modest. Shawntera Hardy said she is limited to using economic development programs that are currently available to help attract and retain businesses. Officials have confirmed that the only sweetener in the state’s bid consists of up to $3 million from existing programs.

That may change. Michael Langley, CEO of the regional economic development group Greater MSP, said that the first goal is to get on Amazon’s short list.

“Once we get on a short list, then there will be a lot more negotiation, a lot more sitting down with the company and understanding what the benefits of locating here in Minnesota might be. So, there will be more to talk about later on as it relates to any financial supports and cooperation with the company. But at this point in time, we need to get to that next step.”

Handouts for thee…

But the mere possibility of handouts/welfare/incentives for Amazon has upset some smaller businesses in the area.

“I don’t think the government should play a role in picking winners when it’s an insider process that only works for the largest businesses,” Danny Schwartzman of Common Roots Cafe told City Pages. “They’re doing it because they can, and I don’t actually begrudge Amazon. I begrudge our elected officials who are letting them do it.” (Sadly, the Small Business Request for Proposals amounts to just as much special pleading as any multinational)

Not all elected representatives are so inclined. Sen. John Marty, DFL-Roseville, said he’s heard from several small business owners who share this concern. “They’re already paying taxes. They’re already creating jobs in Minnesota,” he said. “It’s always an unfair, unlevel playing field when government is picking winners and losers and saying ‘we’re going to give you guys a tax break and not you. Matter of fact, you folks are going to pay more for it.’”

Who ‘picks’ in an economy?

Its true that state or national politicians shouldn’t be in the business of ‘picking winners and losers’.

For one thing, they aren’t very good at it. The skills it takes to get elected are seldom the same as those it takes to set up and run a successful business. They have short time horizons, rarely more than four years or whenever they are next up for election. Also, political incentives – winning over voters – aren’t always or often aligned with economic incentives. When politicians bailed out the auto industry it might have bought them a few votes, but it cost the taxpayer an estimated $9.3 billion.

The people who do the picking in an economy ought to be the consumers. They have money and they spend it as they see appropriate to maximize their satisfaction. The companies that sell them the means to these ends will benefit. They will be the winners. The ones which don’t will be the losers.

John Phelan is an economist at the Center of the American Experiment.