With Wisconsin debating data centers across the state the role of government in economic development is a topic needing public discussion.

Conservatives, who normally oppose government interfering with “free markets” (or funding necessary public services for people) have no problem subsidizing billion dollar multinationals.

They claim these government expenditures are necessary to create jobs and economic growth. But is this true? Is it the best way to encourage real prosperity and economic stability for all of us?            

Bribing companies to create jobs is not an effective way to promote economic development. It is not a comprehensive strategy to build for the future. The primary, and often only, result of business development tax incentives is simply reduced tax collections from the favored businesses. Everyone else pays for the the incentives provided for the few.

Many studies confirm this opinion. In a 2017 article, I quoting Good Jobs First, which tracks business subsidies nationally. They said “mega-deals” were  growing in number and dollar amount. The average cost per job was $456,000 and many deals involve little new job creation. Some companies blackmail communities with the threat of leaving. Often the “new” jobs are just “job piracy” with jobs being moved from one community to another.

Common sense tells us that bribing companies to create jobs is unlikely to succeed because of one simple fact. Businesses do not want employees. The goal of a business is to make money and not to hire employees. Employees are an expense. Like other costs of doing business, labor costs must be minimized to maximize profit.

Hiring employees is a last resort for most businesses. No business will hire employees they do not need. If they must have more employees they will hire them without subsidies. And they will only keep employees as long as the profit they produce exceeds the cost. So the idea that you can pay businesses to hire more people is contrary to basic business principles.

Most businesses will do everything possible to avoid hiring people. They will pay overtime, increase hours for part time workers, contract work out, use temp agencies, automate, merge with competitors, and use foreign suppliers before they will hire new employees.

Many of you have experienced this in your own work life. Did you ever have an employer keep you employed when business was slow? Have you ever been hired just to create a job and boost the economy? If you have it was a rare exception (or the boss was your daddy or uncle).

Business incentives are not going to build a stable economy. It is not a sustainable strategy to deal with unemployment. Economic development strategies that rely on business incentives are one-time infusions into the economy. They are boom and bust programs. They do not build a foundation that promotes widespread prosperity. A few benefit from paying less in taxes or getting subsidies while the many non-subsidized businesses and general taxpayers pay the cost.

What does motivate businesses to expand is customers coming in the door. When there is more demand for their goods and services, businesses have a real reason to expand. But this demand has to be sufficiently large and likely to last. This is why sustainable economic development must be bottom up. When ordinary working people have money to spend the economy does well. When money is moving between hands in a stable, predictable, continuous manner you have prosperity. We are all better off when everyone is better off.

The best thing government can do to promote prosperity is to do the job of government.

Government provides the legal framework, public infrastructure, and the necessary regulation to support the economy. Government should “promote the the general welfare” by collectively doing what people need and the private sector does not do well. This includes enforcing equal opportunity and labor laws, public health, public safety, and providing education and job training. Government needs to provide the necessary social goods and services that are not profitable or should not be profit driven.

When government does these things it provides the stable foundation on which the rest of the economy rests.

Government also provides stability by being about 1/3 of the consumer economy. It is a buyer of goods and services as well as an employer. It is the foundation of the rest of the economy. It provides the stability that the private sector boom and bust lacks.

The only way government can actually create jobs is to hire people. In the 1930s government did this with programs like the CCC and WPA which hired the unemployed to do public service work. If we really wanted to deal with unemployment government would guarantee people jobs. When government hires police offices, teachers, road maintenance workers, building inspectors, nurses, and fire fighters, it builds a stable economy. When government creates national parks, public broadcasting, social programs, public health facilities, public transportation, or funds scientific research it supports and supplements the private economy.

One of the best economic development actions government could do would be a national, tax supported, single payer health care system that was not connected to employment. Ensuring a pool of healthy employees, and relieving businesses of the financial burden of providing health insurance to their employees, would stimulate economic growth uniformly across all businesses large and small.

Another would be to see that everyone has the ability to get the education they need based on their ability rather than ability to pay. Tuition free education in state universities and technical colleges would be a win-win for everyone including the business community.

Greatly expanding apprenticeships and on-the-job-training opportunities are also needed. Nothing is “free” and people will pay for it later in taxes, but investing in people will pay off for everyone.

Short sighted, ideologically driven, austerity that cuts taxes and underfunds essential government functions hurts the economy in the long run. We need to maintain essential government services all the time not just during good times. Cutting emergency relief programs right before a hurricane is not a good idea. Skimping on road maintenance until the bridges collapse is foolish.

To create real, sustained prosperity – not just GDP growth – we have to put people first. We have to stop playing the bribe game, use government to support the general welfare and do what needs to be done to improve everyone’s well being.