Program: Market Development (Section 109)
Special Revenue Funds:
Development program is effectively a marketing department for the state’s
private agriculture industry. It
also subsidizes some charitable work with food banks in the state.
All line items
underneath Section 109 of the MDA budget for the 2003 FY should be eliminated.
There are no functions in this section of the budget that cannot or are
not already being performed by private for-profit and nonprofit organizations.
The following is a description of each individual program, and the amount that
could be saved by elimination.
This program is designed to “serve as a catalyst, coordinator, and
resource to provide promotional marketing, and economic development
opportunities for Michigan’s food and agricultural industry.”
It is also dedicated to “protecting the state’s food and agriculture
resources in times of emergencies.”
Unfortunately, the marketing component of this line item is best
described as corporate welfare for the agriculture industry.
Agriculture is a profit-making industry and should not receive what are
essentially marketing subsidies any more than the auto, computer, and defense
industries should. A prime example
of the department’s unnecessary marketing efforts is the free distribution of
Michigan Wine Country, a trade publication of the Michigan wine industry. (See
subsequent discussions on the state’s export marketing program on page 13.) Savings:
Agriculture Development Office was created in 1997 to help improve “economic
and environmental sustainability and viability of Michigan’s food and
agriculture industry ... ”
The office also “focuses on expansion of food and agricultural
value-added processing ... ”
For example, in September 2000, the MDA reached a grant agreement with
the Midwest Nut Producers Council in which it would grant $82,255 in federal and
state money to “develop, test and devise a marketing strategy for two
products, a chestnut puree and chestnut crumble.”
The grant will help the industry “work with 15-20 Michigan chefs to
test and evaluate new chestnut products,”
and prepare recipes in their own restaurants using chestnuts, interview
customers about the dishes, and provide feedback to the grantee.
has its own incentives for adding value to agricultural products — profit
being one of them. By providing
government money for such research, the state is, in effect, socializing the
risk of the agriculture industry while helping to ensure profits that the
industry may not otherwise see. In
addition, the Agriculture Development Office may actually hurt agricultural
processing businesses. It has used
its own resources in conjunction with the Michigan Economic Development
Corporation (MEDC) to grant special favors to particular firms, while giving
none to their in-state rivals. The
Summer 2002 issue of the Mackinac Center’s Michigan Privatization Report,
described how “Agricultural Processing Renaissance Zones” may do more harm
newest type of renaissance zone created in Michigan is known as Agricultural
Processing Renaissance Zones, of which there are three, two in Oceana County and
one in Ionia. All illustrate two
basic problems with state favoritism in the name of “economic development”:
1) It’s unfair to businesses that do not receive the tax advantages offered;
and 2) Officials can’t prove that the development they claim as proof of the
zone’s success wouldn’t have taken place without their interference.
relief places at a competitive disadvantage those businesses that do not get the
state favors. This is why some
Michigan agricultural companies, in January 2001, actively opposed zones being
granted around the properties of their competitors, Peterson Farms, near Shelby,
and Gray & Company in Hart.
One of the
zones’ critics, who asked to remain anonymous for fear of state retribution,
told Michigan Privatization Report, “The state has put me at a terrible
disadvantage by giving my competition substantial tax relief.
How can Lansing bureaucrats possibly believe that hurting me will help
the economy?” This was generally
the nature of other processing companies’ opposition, though several firms’
officers noted that they were not opposed to the idea of helping the
agricultural industry. The state
took testimony in person and by letter from businesses opposed to the way these
zones were being used, but plowed ahead anyway.
of this might be tolerable if state officials could prove that renaissance zones
actually produce a positive net benefit to the economy.
But the literature on the subject is very clear: Enterprise zones have
little measurable impact on economic growth and employment — but they do have
research indicates that enterprise zones have had a negligible impact on
economic growth and development. Professors
Thomas Lambert and Paul Coomes of Spalding University and the University of
Louisville, respectively, studied one of the nation’s oldest and biggest
enterprise zones in Louisville, Ky., and used “many measures to try and give
the program every chance of success.” Yet
the evidence, published last May, showed that after 14 years “it is difficult
to document that this program has been effective.”
concur. In their paper,
“Enterprise Zones and Local Employment: Evidence from the States Programs,”
published in Regional Science and Urban Economics, Daniele Bondonio and John
Engberg found “zero impact” on local employment from enterprise zones and
that “the level of the monetary value of the incentives awarded to zone
businesses does not noticeably contribute toward enhancing the impact on local
Fortunately, the legislation for agricultural processing zones was sunset
for the end of 2002 and the state can no longer use this particular device for
agricultural economic development.
(For more on this
subject, see “Make Michigan One Big Renaissance Zone,” in the Summer 2002
Michigan Privatization Report.)
Market Development Program: This
program is similar to the marketing line item above, with an international
application. In a time of fiscal
crisis, should the state of Michigan subsidize dried fruit seminars in Taiwan?
Promote dried blueberries in Japan?
Should it market pickles in Korea, apples in Israel, and cherries in
Germany? Past MDA grants have also
been used to help “develop bakery recipes that utilize processed cranberry
Indeed, should the state do these things at any time?
The case that it should is an extremely weak one.
In February 2002,
the MDA gave a $5,950 grant to the Michigan Food Processors Association so its
members could attend a food show in Canada.
In March, a delegation from the Michigan Potato Industry Commission flew
to tropical Costa Rica with the help of a $5,600 MDA grant.
The goal? To educate Costa
Rican snack processors on the use of Michigan potatoes in their respective
A review of the commission’s spending
indicates part of its grant was spent before and after the trip on meals at the
Budweiser Brew House in Detroit and at a Bob Evans restaurant in Romulus.
These are particularly troubling uses of grant funds.
Even if subsidizing this travel were a legitimate function of the state,
is it not fair to assume that commission members would have eaten something, and
paid for it themselves?
These are just a
few examples of how Michigan subsidizes the international marketing efforts of
private business. For-profit
businesses should be required pay for their own marketing efforts.
It is a basic issue of fairness. Most
business owners do not receive state help marketing their own businesses yet
they are forced to pay taxes to support those who do.
appropriation provides a General Fund/General Purpose subsidy to the Food Bank
Council of Michigan for handling items donated for charity.
The Food Bank Council of Michigan is a private, nonprofit charity that is
comprised of 10 smaller food banks in the Great Lakes State.
Each bank provides food and funds to low-income people through 2,500
This is a seemingly kind, but unnecessary, state appropriation. Europe, America, and Michigan have a long and generous
tradition of private charity. If
the state took less money from taxpayers, private citizens would have more to
give to private food banks and similar organizations, voluntarily.
“Harvest Gathering” program is a good example of how the private sector can
contribute to citizens’ hunger problems.
Harvest Gathering is a private, nonprofit foundation founded by then-MDA
director Bill Schuette in 1990. Schuette
and other state officials used their high-profile positions to help raise
private funds and food for Michigan families.
Last year alone, Harvest Gathering collected and redistributed 650,000
pounds of food at 100 locations across all 83 counties in Michigan. Savings:
Michigan Tourist Council: This
line item also markets Michigan agricultural products, but only in southwest
Michigan. One marketing tool the
council uses to get its message out is color brochures, featuring dates and
locations for fairs and festivals in southwest Michigan.
Another technique used by the council is to hand out Michigan
agricultural products free of charge at the New Buffalo Welcome Center in New
Buffalo. The state maintains a
variety of lavatories for Michigan travelers and one is in New Buffalo.
The Southwest Michigan Tourist Council uses money from this line item to
buy products — such as strawberries and asparagus — and distribute them gratis
on Saturdays to travelers who have stopped at the center.
During the fall and winter the Council gives away Christmas tree
corsages. Savings: $60,400.
of America: This
line item subsidizes the Michigan chapter of the Future Farmers of America.
Future Farmers of America is a private, nonprofit organization whose
mission is to make a “positive difference in the lives of students by
developing their potential for premier leadership, personal growth and career
success through agricultural education.”
The state should no more appropriate funds for this organization than it
should for future economists, accountants, or computer scientists of America.
To subsidize one career choice over others, the state effectively gives
its blessing to a single job category as if farming is more important than other
work choices. Government should be
neutral with respect to how free young men and women choose their occupations.
In addition, career opportunities are of sufficient importance that young
people have every incentive to find career information without government
involvement. Savings: $60,000.