In my South Dakota Magazine column this week, I harken back to Adam Smith and challenge some gubernatorial candidate to propose eliminating the Governor's Office of Economic Development:
...let government fulfill its proper role of doing what the private sector cannot or will not. Build good roads and schools and sewers and parks. Build public services and policies that serve and protect all citizens equally. Create a reliable, uniform economic framework in which business and labor can make their own decisions about where to set up shop. But never step into the marketplace with a state decision or a state check that gives one business or one worker a benefit that is not available to every other actor in the South Dakota marketplace [Cory Allen Heidelberger, "Manpower and Free Market Fundamentals," South Dakota Magazine, 2013.12.11].
Purported free-market conservatives Dennis Daugaard and Pat Powers both whimper forth with weak defenses of failed economic development policies. But my suggestion finds support from two very different Ellises.
First, from the liberal media, Jonathan Ellis says former governor turned Senate candidate Mike Rounds will have a hard time explaining his support for unsound business plans like Northern Beef Packers:
It was a big priority for the state and Rounds. But one could argue it was a misguided priority.
Really, if it were such a great idea, if there was really such a big demand for slaughtering Dakota beef, don’t you think an established meat-packing company would have built a facility? You know, market economics.
...It was a mess. But in his final month in office, Rounds agreed to sign a grant commitment to Northern Beef for $1 million. Under the agreement, Northern Beef would get the money from the state if it proved it met certain conditions. The state cut a check for $1 million shortly after Rounds left office.
For Rounds’ political opponents, this episode builds on the criticism that the former governor wasn’t so good with spending taxpayer money. It’s an especially potent argument among Republican primary voters [Jonathan Ellis, "Rounds Campaign Braces for Some Turbulence," that Sioux Falls paper, 2013.12.08].
Then today vehement conservative blogger Bob Ellis fires very similar guns at Governor Dennis Daugaard for defending the state's dubious dalliance with the doomed NBP:
I agree that more business in the state is a good thing. But is it really the role of government to invest between $2 million and $3 million of the taxpayer’s money to start a business? I thought Republicans understood that it is the role of private interests to start a business, and that the best thing government can do is create a clean regulatory and tax environment to facilitate economic development. Apparently many “Republicans” do NOT know this [Bob Ellis, "The Stench from the South Dakota Slaughterhouse," The Right Side, 2013.12.12].
Frequent readers will recognize how unusual it is for me to point to anything Bob Ellis writes as reasonable and accurate. But his essay on government, economic development, and the errors of his Republican Party is definitely on the right side.
South Dakota is now littered with bad state investments in businesses gone bad. South Dakota politicians might save themselves more wrecks by taking their hands off the traditional economic development wheel. Let the Invisible Hand take that wheel and determine winners and losers. Instead, let's focus our political efforts on sensible regulations and taxes and real public goods. Schools, roads, parks... society gets a more reliable return on those investments.