Tossing horseshoes at NC economic incentives

Jean-Pierre Faye is likely not a name that comes to mind when asked to explain some element of North Carolina politics. But the French philosopher and poet (b. 1925) developed a unique way of viewing the ideological spectrum that is helpful when pondering the direction of the state’s economic development incentives policy.

Faye is credited with the “horseshoe” theory of political behavior, but sadly his celebrity doesn’t extend too far outside of political science departments. The theory likens the political spectrum, which most have long assumed has a straight-line horizon from ultra-left across to hard-right, to an upside-down horseshoe.

As the bend to the extremes moves on each side of the center, the extremes become closer to each other than they are to the fulcrum.

The current stalemate in the N.C. General Assembly over economic development incentives is a vivid example of this theory in practice. Though never as eager as many Southern states to offer financial inducements to outside businesses, North Carolina nonetheless arrived at the practice in the 1990s and early 2000s. The William S. Lee Act and the Job Development Investment Grant program were products of centrist, business-oriented coalitions of Republicans and Democrats. Both measures overcame opposition from market purists of the right and their left-wing counterparts suspicious of large, profit-focused businesses shirking their responsibilities as corporate taxpayers. In those cases, as well as others, the center had the votes necessary to carry the day.

Today, all bets are off. North Carolina’s economic, social and political landscapes have converged to put precarious ground beneath the feet of economic development leaders, many of whom would be well-served by Googling Jean-Pierre Faye.

As totems posted at the intersection of the public and private sectors, incentives are nothing new. In the 19th century, the cash-poor federal government granted lands to private railroad companies, a move that accelerated the country’s emergence as an industrial powerhouse. Railroads, for their part, often gave away parcels adjacent their tracks to manufacturers who would become ready customers of rail transportation.

In the 20th century, utilities got into the game, viewing large industrial power users as a lucrative offset to less profitable residential consumers. Southern states later pioneered government-sponsored incentives as we now know them, using offers of free land and buildings to lure northern industries south. The practice of extending tax credits, rebates and cash grants are now a part of the job-growth strategies most governments deploy in today’s increasingly porous global marketplace.

Conservatives – especially those with libertarian views about the reach of government – are at best uncomfortable with most functions of modern economic development, questioning the legitimacy and efficacy of public-sector efforts to manipulate market mechanisms to the benefit of one community over another, Industrial Property A as opposed to B or C, or certain companies and industries but not others. They have honed their arguments well. And while we hear many of their voices at the state level, their ranks can roil policy discussions and projects at the local and national levels, too.

The left arrives at a similar position from a different point of departure. Their side, equally articulate, tags incentives as “corporate welfare,” a regressive transfer of wealth from the working class into the hands of fat-cat shareholders. In fairness, those of the left have fewer objections to other economic development programs; they believe government action should focus on endeavors such micro-enterprise development, worker training, “green” businesses and heritage tourism. The left seems less reluctant to deploy direct financial incentives, provided benefits are awarded at a grassroots level.

In our economic development policies, we’ve entered a Bizarro World where unabashed liberals and conservatives find common cause with each other, temporarily calling a truce in their noisy verbal jousting while the center takes inventory of its numbers – and its fortitude.

Call it a horseshoe moment for North Carolina politics.

Lawrence Bivins, a Raleigh business writer, is author of “North Carolina: The State of Minds.”