Can government force behavioral change?

by Tom Campbell, Producer and Moderator, NC SPIN, May 4, 2017.

In the late 1970s, I was appointed to the Economic Development Board. At the time I lived in Northeastern North Carolina and believed rural areas deserved to get their share of the economic growth and prosperity locating in more urban areas.

I was convinced the main problem was that our economic developers just weren’t doing enough to sell prospects on locating in rural areas. After every new economic development announcement I would vigorously question Commerce Secretary Lauch Faircloth and his team of economic developers as to why these projects didn’t select a rural site, constantly touting the wonderful lifestyle, lower property taxes and land prices and lack of congestion. Finally, exasperated with my constant harangues, Faircloth, in his classic fashion, told me the best economic developers in the world couldn’t convince industries to select areas where they didn’t want to locate.

What sounded like a cop-out at the time gradually grew into a reality I had to accept. In far too many cases rural sections didn’t have a sufficiently trained workforce and lacked needed infrastructure like natural gas, major transportation arteries, and water and sewer capacity. Cultural amenities were often sparse and healthcare and public education were generally not as good as often found in more urban areas.

Since 1992, North Carolina has been forced by competition from other states to get into the high-stakes game of offering economic incentives, a need exacerbated when the few industrial plants located in rural communities - mostly textiles and a smattering of manufacturing facilities – closed, either relocating offshore or going out of business.

A WRAL-TV News analysis of the $859.4 million in state incentive money handed out from 2008 to 2015 shows that $660.8 million went to firms locating in the 20 wealthiest counties statewide, while only $104.8 million went to companies in the 40 poorest counties. Wake and Mecklenburg counties alone combined for $522 million in incentive awards, more than 60 percent of the total.

State Senator Harry Brown, along with others, sponsored legislation that would change North Carolina’s economic incentive programs, mandating that the 20 wealthiest counties would be limited to no more than half the $20 million in annual Job Development Investment Grants, while the other 80 counties would receive the other half. The One North Carolina Fund would allow poorer counties to match only 33 cents for every state dollar granted, while mandating as much as a 4 to 1 match in wealthier counties. The bill’s intent, says Brown, is to change behavior, both from economic developers and businesses desiring grants.

We have a long history, both on the state and national level, of legislation attempting to change or modify behaviors. In too many instances these attempts failed, sometimes even backfiring. Current Commerce Secretary Tony Copeland, who has been in the economic development business a long time, says Brown’s bill will not result in more industries in rural areas and could harm urban sections.

Our state will not grow and prosper by punishing some counties at the expense of others. Instead, we must focus our energies and dollars in greater support on workforce development and infrastructure improvements in rural areas. We can’t force businesses to locate where we want them, but we can make rural areas more attractive locations for them to choose.