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Olson’s Economic Development Myopia: Handouts over Investments

Last updated on 2011.03.04

I heard Senator Russell Olson (R-8/Wentworth) whining on Statehouse last night about losing economic development opportunities to other states. Yesterday, Senate State Affairs, of which Olson is vice-chair, discussed HB 1230, Governor Daugaard's permanent economic development fund. Senator Olson spoke of how, as a professional economic developer, he's frustrated when they're competing another state to recruit a new company, and all the factors between South Dakota and the other state are equal, but then our hands are tied and we can't bring one more incentive to the table. That's why Senator Olson voted with the committee majority to recommend HB 1230 for passage, to give our economic developers one more chip they can throw on the table.

Now never mind Senator Olson's dogged refusal to acknowledge that this particular chip doesn't add much value to our bid for bargain-hunting corporate exploiters. Never mind that Senator Olson is taking us down the endless road of an interstate bidding war that South Dakota can't win with its limited resources.

Let's focus on Senator Olson's myopic mindset on economic development. Given $16 million or so a year, Senator Olson thinks that the best way to promote economic development is to hand that cash directly to the businesses we're trying to recruit. As Olson said in committee, "I'm a capitalist!" which apparently means he thinks purely selfishly, in terms of money in his pocket... or, in this case, money in the pockets of fellow capitalists. Hand the rich guys money, and then cross your fingers that some of it will trickle back to our own people in wages.

But there are always alternatives, Russ. What if we took that $16 million and patched all the potholes on the highway leading to the industrial park? What if we built a lovely public park across the road from the housing development where the new business's workers might live? What if we spent that money to refurbish the local high school and hire a couple more teachers to provide more foreign language and music classes for the corporate executives' kids?

Now just imagine coming to the negotiating table making that bid for the new company to move to Madison instead of Des Moines. We're neck and neck, and those darned Iowegians say, "Oh, by the way, Acme Widgets, here's a million-dollar grant." We turn to the CEO and say, "Gee, we don't have any more cash to offer you, because we spent it patching the roads, building a park, and hiring better teachers." Even if Acme Widgets takes the money and runs to Iowa, we still come out ahead, because we have invested in infrastructure and services that directly benefit every South Dakotan in the neighborhood. Plus those investments in public amenities have at least as much potential to draw workers and investors as corporate handouts.

Alas, Senator Olson doesn't see the value in such public investments. That same myopia is why our local economic development efforts (which Olson once ran) have mostly failed: we think the only way to enrich our community is to transfer our public wealth to private pockets. Instead, we should make concrete investments (literally when it comes to roads and schools!) that immediately improve South Dakota and give outsiders lasting reasons to move here.

Update 2011.03.04 08:02 CST: Bad economic thinking passes the Senate 28&ndash4. Corporate raiders chuckle.


  1. larry kurtz 2011.03.03

    Read, we are competing with the tribes.

  2. larry kurtz 2011.03.03

    Some reflex smells like this has something to do about competing with the tribes.

  3. Steve Sibson 2011.03.03

    Definition of "capitalist": Use of government to redistribute money form the small guy to the big guy.

    A capitalist is not a free-market advocate.

  4. Roger Beranek 2011.03.03

    Why not use that money as a seed fund for a business directed training program. Any business looking ahead could request a scholarship from the fund to have a south dakota resident trained in the skills that business needs. An attractive resource to prospective businesses as well as existing ones and that benefits South Dakotans directly instead of stock holders that may not even be US citizens, let alone SD residents.

    Steve: a capitalist believes in private property rights, so the redistribution of wealth in any direction by government is anathema

  5. Jana 2011.03.03

    So today I heard that the crux of this discussion is to socialize the risk and privatize the profits. So I guess we should just buck up and give the state socialized dollars to make someone wealthy.

  6. caheidelberger Post author | 2011.03.03

    So Steve and Roger, would you both agree with me that Russ Olson is defending neither capitalism nor the free market?

    Jana, you've got it exactly right: even the rich guys like socialism when it benefits them.

  7. Roger Beranek 2011.03.03

    Socialism benefits someone?

    Yes I agree, Russ is doing nothing but wasting dollars to ingratiate himself to potential supporters

  8. caheidelberger Post author | 2011.03.03

    And I agree that your proposal for investment in a business-priented training program could have some merits. It at least sounds better than a straight handout to the company, since we're talking about providing education that benefits the community (or at least the local folks receiving the training) as well as the business. Education, infrastructure... these are good public investments. Straight transfer of wealth from the public to private pockets... that's a problem.

  9. Jana 2011.03.03

    Speaking of transfer of wealth. It would be interesting to ask our legislators that receive farm subsidies how they feel about this. Anyone know how many of those that are making our laws in Pierre get federal farm subsidies?

    It would seem funny that they are telling kids, teachers, communities and seniors that they can't rely on the government for funding and then have them continue to feed off of that system.

    Maybe if we ask nice they will all disclose the amount they have gotten over the last 10 years and how it is different than a public to private transfer of wealth.

  10. Jana 2011.03.03

    Thanks. You are right on the all night thing. Took a quick peek and there are some in both the House and the Senate of both parties that are truly blessed.

  11. larry kurtz 2011.03.04

    Ok, Rog, about the management of apex predators: why is cougar and wolf slaughter the answer to curbing marauding livestock killers while Monsanto, Koch Industries, et al are allowed free range? Coyotes are mesopredators yet Citibank is too big to fail.

    Troy, feel free to jump in; we know you're lurking out there somewhere.

  12. Roger Beranek 2011.03.04

    Larry: because we don't shoot CEO's from helicopters, but the comparison has no validity anyway. Macro-Economics is not equatable with natural resource management

  13. larry kurtz 2011.03.04

    Think, trophic cascades as applied to economics, and, Steve, yer a free market guy, right? If the free market is such a cool deal, why aren't cougars and wolves protected instead of assassinated?

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