In 2002, the Michigan Privatization Report dedicated an entire issue to dismantling the state's economic development complex — the myriad programs designed to create jobs where central planners think too few exist. One of the articles, "If You Build It, They Won't Come," critiqued a government effort to create a shopping plaza anchored by a grocery store in the Northside neighborhood of Kalamazoo. Northside's experience shows that a business won't stay just because government builds it.
The grocery store project was well-funded: The Michigan Economic Development Corp. — the state's official "jobs" department — promised $1 million; the federal government contributed $300,000; and the city of Kalamazoo dedicated $200,000 to the project.
After more than three years of planning and delays, the grocery store finally opened and was met with great fanfare. Indeed, public interviews and comments suggested that the deal had panned out nicely and was bringing much-needed direct and indirect jobs to the neighborhood. The new grocery store and plaza even got positive coverage in the Congressional Quarterly, a popular periodical read by members of the U.S. Congress and other "movers and shakers."
But a funny thing happened on the way to economic nirvana. Despite generous subsidies, the grocery store closed in May of this year, less than six years after opening.
The tale of this economic "winner" is really one of government economic development work in the Great Lakes State. It involves the redistribution of tax money in the name of jobs; government officials' false belief that they can increase total jobs in specific geographic areas; and a disregard for past experience and evidence.
In the first MPR article on the Kalamazoo grocery store project, we argued that:
Moreover, throughout Michigan Privatization Report and other Mackinac Center work, analysts have pointed out that taxing some to give to others does not create new jobs, but at best just shifts them around.
The grocery store's operations may have ceased, but government efforts have not. The Kalamazoo Gazette reports that the Northside Association of Community Development would like another grocer to take over the building. In June 2009, the Kalamazoo City Commission allocated $250,000 of federal stimulus funds to help "resurrect a grocery store in the city's Northside neighborhood," according to The Gazette. The first $50,000 is slated for maintenance on the empty grocery store.
One has to wonder how many of these development initiatives need to fail before officials at all levels of government get the picture. Even if AutoWorld's inglorious implosion — both figurative and literal — wasn't enough to dissuade policymakers from such gambits, examples of failure abound. A quick summary shows this folly:
A better economic development approach would be for local units of government to make sure their public services are effective and efficient and then roll back the costs of living, working and investing in the community. The likely result would be a far stronger economic base, and one that can easily induce grocers to open stores without targeted subsidies or other incentives.
Michael D. LaFaive is fiscal policy director at the Mackinac Center for Public Policy.