The Michigan Economic Development Corporation (MEDC) is a quasi-public agency of the state. For budgeting purposes, the MEDC is not officially recognized as a state agency. The Strategic Fund, which was created in the 1980s, is the recipient of state and other funds that are used to operate the MEDC. The MEDC was created in 1999 and took over a portion of duties once held by the Michigan Jobs Commission (MJC). The MJC was a department designed to house all of the state’s disparate "economic development" programs in one single unit. An executive order split the MJC in 1999 in favor of two newly created departments, known as the Michigan Department of Career Development and the MEDC.

The MEDC oversees work designed to "retain and expand jobs through business retention visitation programs." [1] The 231-employee MEDC is Michigan’s chief dispenser of corporate welfare.

The MEDC is arguably the least necessary entity in state government. Its existence is based on several flawed premises and political considerations, such as:

• The assumption that state bureaucrats can foster wealth and job creation better than individual consumers, workers, bankers, insurers, investors and managers, whose collective decisions form the market economy.

• The assumption that the efforts of trade associations, industry groups, chambers of commerce, law and accounting firms, universities and a host of specialty consultants are insufficient to provide businesses with the expertise they need to grow and prosper in Michigan, and that state bureaucrats can supplement the services these organizations already provide.

• The assumption that engaging in an economic "war between the states" through selective tax credits and subsidies for large corporations is a more effective economic development strategy than across-the-board tax relief.

• The political fear that public officials will be seen as "doing nothing" to encourage economic development if they only remove barriers to the efficient operation of the free-market economy and refrain from state intervention.

The fact is that all the business support services provided by the MEDC, if needed at all, can be, and most often are already, provided by private-sector firms. The programs are subject to political considerations, and there is no reason to believe that state bureaucrats can invest capital any better than private-sector financial institutions and Michigan companies themselves. Michigan does not need a government-directed industrial policy; it needs leadership that understands and respects the operation of a free-market economy.

It is therefore recommended that the MEDC be eliminated entirely. Doing so will liberate significant state resources to be returned to Michigan citizens and businesses. State legislators also should change the law to ensure that all Strategic Fund revenues generated through Indian Gaming Compacts be redirected to the General Fund. Doing so will raise approximately $11.5 million annually for state coffers. [2] Author’s Note: In 2002 Compact revenues exceeded $13 million. The Mackinac Center will use this updated figure to calculate the total recommended savings for the 2nd edition of the Center budget study.