In recent years, the fifty states have been engaged in a self-defeating competition to woo businesses through incentive packages, an endeavor that has siphoned huge sums—variously estimated at $80 billion to $110 billion—out of public budgets and into corporate coffers each year.
President Donald Trump and his allies have encouraged this inter-state war as a way to ratchet down what he has called “too high” wages and taxes. “You can go to different parts of the United States and then ultimately you’d do full-circle,” he said as a candidate arguing for a “rotation” of wage and job cuts. “You’ll come back to Michigan because those guys are going to want their jobs back, even if [the pay] is less.”
PandaSmashTV
In their eagerness to attract businesses, states routinely weaken environmental regulations. Meanwhile, state funds are diverted away from services like public education and mass transportation, which are solid pillars of healthy, long-term economic development.
The most striking recent example of this is in Wisconsin, where public officials including Republican Governor Scott Walker won a bidding war to land Taiwanese electronics giant Foxconn. The proposed plant would be located in the Congressional district represented by House Speaker Paul Ryan, Republican of Wisconsin, now on his way out the door.
Walker and state lawmakers originally agreed to pony up $3 billion in incentives to Foxconn (4th quarter profits last year: $2.5 billion), making it the largest incentive package ever provided to a foreign firm in U.S. history. That amount quickly metastasized into a nearly $4.5 billion handout. It is a sum that will drain the state of revenues needed for education spending, including K-12, technical colleges, and the state’s prized university system.
In Wisconsin, the state’s entire educational system has already been reeling from Walker’s slashing of school funding and his near-total destruction of teachers’ bargaining rights. The vise on education and other vital public needs will tighten further as other major corporations, including the paper company Kimberly-Clark, await subsidies to thwart plant-closure threats.
Foxconn, quite literally, will be draining the state. The production of the liquid crystal display screens at the southeastern Wisconsin plant will require a massive diversion of water from Lake Michigan—as much as 7 million gallons daily. The company is seeking to circumvent environmental regulations and the Great Lakes Compact with Canada and other states. Wisconsin state and local officials seem willing to oblige.
Foxconn, in more ways than one, will literally be draining the state.
The plant will also use a variety of toxic substances, including cadmium, chromium, zinc, and mercury. “We know that outside manufacturing plants of Foxconn [in China], rivers are very polluted,” Peter Adrians, a professor of environmental engineering at the University of Michigan, told the Associated Press. While lax Chinese reporting requirements make it difficult to prove Foxconn is responsible, he added, “The correlation is very strong.”
Foxconn also has a long record of violating workers rights, to the point where many have committed suicide. A newly released report by the City of Milwaukee Legislative Reference Bureau documents some of the abuses.
“There are numerous reports of employees working 7 days per week without the required 24-hour rest,” the report states. “They work 10 to 12 hours per day, often on their feet. Some workers have reported standing so long that their legs swell. The work consists of repetitive, highly-detailed tasks. If a worker makes a mistake, management often berates the worker, which adds additional stress to working conditions. . . . A 2010 report from 20 Chinese universities described Foxconn factories as labor camps with widespread worker abuse and illegal overtime.”
Despite this record, the state of Wisconsin is imposing no rules on Foxconn to protect workers rights. Contrary to high-profile and inflated claims that base pay at the plant would average $53,875 a year (or more than $25 an hour), a top Republican legislator carelessly let slip that most entry-level wages would pay just $13 to $15 an hour. And it’s likely that a substantial percentage of jobs will go to workers and executives living in nearby northern Illinois, whose state is contributing nothing to the Foxconn subsidies.
Finally, Foxconn has been embarking on an extensive program of automating its jobs elsewhere, leading to doubts about whether the supposed 10,000 to 13,000 jobs will be created in Wisconsin. In Taiwan, Foxconn is wiping out 10,000 jobs by replacing workers with robots.
All in all, Wisconsin’s “victory” in landing Foxconn seems certain to produce a devastating loss for Wisconsin taxpayers, its educational system, and its environment. But the damage will spread far beyond Wisconsin as other corporations insist on the new standard of incentives set by the Foxconn deal, thereby heating up the corporate subsidies “arms race.” And as corporations become more ruthless as they “rotate” jobs around states, long-stagnating wages in the United States are likely to drop.
But this is exactly what Trump predicted would happen, and exactly what he wants. His mission, and that of politicians like Walker and Ryan, is to force down “too high” wages and corporate taxes, and shift the highest priority of state governments to enlarging corporate profits and power.
The goal is for states to engage in an intensified war amongst themselves. The competition is the equivalent of an interstate demolition derby, in which even the “winners” end up as smoking wrecks.
Calling a halt to this war will not be easy. Corporations will want the stream of “incentives” to keep flowing, even as many CEOs regard subsidy packages as a mere cherry on top of a lucrative new project launched for entirely different reasons. At the same time, politicians cynically view subsidies to the corporations as prized “photo opportunity grants” for themselves, as subsidy critic Greg LeRoy puts it. Rightwing ideologues, who otherwise fight any government involvement in the economy, absurdly describe the states’ competition for handing out the largest government incentives as “the highest form of free enterprise.”
Happily, there are ways to fight back.
Yet taxpayers are getting restless over the increasingly obvious pattern of losing state services as the price for subsidies to giant corporations which often fail to meet their commitments on wage levels and the promised number of jobs. Happily, there are ways to fight back.
One first step: disclosure of the vast scale of subsidies and the actual income and jobs generated in return. Second, states and localities need to “claw back” a portion of subsidies when corporations neglect to fulfill their pledges. Third, the nation urgently needs a national “industrial policy” to ban subsidies to corporations, and instead allocate public resources toward good-paying, environmentally sound jobs.
Unless individual states like Wisconsin and the United States as a whole move in this direction, more sacrifices—on good wages, public services, environmental regulations, and authentic democracy—will be senselessly tossed into the fire of the interstate subsidy race.
Roger Bybee, a frequent contributor to The Progressive, is a freelance labor journalist and labor-studies instructor based in Milwaukee, Wisconsin, and previous editor of the Racine Labor weekly.