Landry: Letting governments 'create' jobs just creates trouble

August 27, 2013 

Municipalities provide water and sewer services as well police and fire protection. The state looks after education, builds highways and operates courts and prisons. The federal government looks after national defense, foreign relations and entitlement programs such as Medicare and Social Security.

You would think that there would be enough to do without governments being seemingly eager to go beyond their natural spheres of endeavor.

You would be wrong.

All governments appear willing if not eager to venture into “job creation.”

The City of Raleigh and various other governments gave $3 million to the Raleigh Business and Technology Center to promote minority-owned small businesses. Thirteen years after politicians put on a smile for the ribbon-cutting ceremony, we discover financial abuses such as sweetheart contracts that smack of nepotism, checks made out to cash for unascertainable purposes and no or obscure financial records.

Why should Raleigh, or any other city, use taxpayer money to support businesses that will compete with established taxpaying businesses? It makes no sense.

At least, Raleigh was not promoting “rural development,” which left the field wide open for the federal and state governments.“Rural development” is an oxymoron. Bring enough industry and business to a rural area and it is no longer rural.

After reading The N&O’s recent two-part article on the N.C. Rural Economic Development Center, I concluded there were reasons beyond the grammatical for separating the center from its stated mandate and from our money: fuzzy math in claims of jobs created, significant involvement by the politically connected in awarding grants and a tendency for the center to break its own rules to keep the money flowing.

Its aims were to “create” jobs in the private sector using taxpayer money – with little, if any, public benefit. The benefits accrue to the business owners and to the people who get jobs, many of which are in the retail and restaurant businesses.

Whatever role the NCRDC might have had in “creating” those jobs, the lifeblood of all such jobs is the continued patronage of the customers who have been given new options for their purchases.

Let’s take the Bojangles restaurant as an example. The NCRDC claims that its $350,000 grant created 35 jobs in this restaurant. Does anyone believe that the patrons of this restaurant would do without food but for the intervention of the NCRDC? Of course not. They would get their fried chicken and iced tea someplace else.

Those competitors and their workers are taxpayers. Why should the state make grants that enable new businesses to come in and take business away from established stores and restaurants?

The U.S. Department of Agriculture has a program that gives loans to businesses in rural areas that no bank would ever dream of lending to. Former state Rep. Stephen LaRoque thought he saw an opportunity and was found guilty of misappropriating $300,000 from two economic development nonprofits he operated using Uncle Sam’s money. He faces up to 90 years in prison and is to be sentenced next month.

Businesses start up when entrepreneurs perceive a need or demand for a product or service. The entrepreneur will study the market, look at what competitors are doing and decide whether to proceed with the venture.

Some will thrive, hire people and create jobs, prosper and pay taxes. Others, of course, will fail miserably. It is not the job of government at any level to interfere with the natural process of selection among businesses. It is unfair to established businesses, and it is unfair to the taxpayer.

It is also unjustifiable in purely economic terms as, by their nature, grants to businesses that could not otherwise operate profitably merely mask inefficiencies that will remain once the grant money has been spent. The sad truth is that such programs appear to attract the clever and the charlatans, either among those who operate them or among the intended beneficiaries – and quite often among both.

The media played a significant role in exposing these three examples. The governments who set up these programs appear to have little if any interest in following up.

They seem quite happy to keep the money flowing.

Contributing columnist Marc Landry can be reached at

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