I came across an interesting article in the WSJ recently about the “incentive” package Texas recently gave to Toyota in order to move its U.S. headquarters to the state The State, notes the article, put together a comprehensive set of financial incentives to make the giant automaker leave California:

Texas offered Toyota $40 million to move, part of a Texas Enterprise Fund incentive program run out of the governor’s office. At $10,000 a job, it was one of the largest incentives handed out in the decade-old program and cost more per job created than any other large award. Last year, Texas spent about $6,800 to lure each of 1,700 Chevron Corp. positions to Houston and $5,800 for each of 3,600 Apple, Inc. jobs shifted to Austin.

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Governor Rick Perry claims that the move is a result of a decade of legal and regulatory reform, and perhaps he’s right. However, the fact that on top of ten years of reform efforts the State still had to basically outbid other states for the jobs begs the question of just how effective those reforms really are? Moreover, if Texas is supposed to be an oasis of free market competition, then what is it doing intervening in Toyota’s decision?

It’s interesting that so many conservatives are aghast whenever they see a nation like France take dirigiste measures to lure or keep business in France, but when Texas does it somehow it’s OK.

Either it’s government’s job to buy jobs for its citizens or it’s not. I would argue the latter and that Texas’ willingness to act as a market player distorts what should be a free-market decision process and not a battle decide by  which state government is willing to pay the most for corporate jobs.

 

Read more:

http://online.wsj.com/news/articles/SB10001424052702303939404579529672654374090?mod=WSJ_article_EditorsPicks

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Posted by Carlos Alvarenga

Carlos Alvarenga is the Executive Director of World 50 ThinkLabs and an Adjunct Professor at the University of Maryland's Smith School of Business.

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