Monday, March 13, 2006

Corporate Welfare Good - Poor People Welfare Bad

News of Kia locating their first United States manufacturing facilty in West Point, Georgia is positive. Alabama will of course benefit in some tangible ways. That cheaper money and limited labor protections helped attract Kia to the South doesn't thrill me however. Nor does an incentive package worth $410,000,000.00 yet I'm not generally against welfare. Just working from the $259,000,000.00 state money gives estimates of $88,000.00 per job from this Ledger-Enquirer view on the deal. Complicated economics! And giving away the farm might not really be that wise in the long run for the South.

The Manufacturer in August of 2005 gave us, with my emphasis supplied, the following,
Interestingly, one of the major reasons the South is so attractive to foreign automakers—the economic conditions that create a perfect storm of financial advantages for incoming plants—could also hold the region back in the longer term. The fact is, Alabama is still, well, Alabama. “You also need to look at the economic outlook for Alabama as a whole,” warns Goepfert. “It’s a little blip right now, playing catch-up to the rest of the nation. But its overall structure and trends are not that favorable: the population trends, the economic outlook in the big picture—beyond just automotive—is structurally just not as good as it could be.” Barkai agrees. “Maybe there’s a great diversity or polarity within the state, and there’s some pockets of qualified labor and higher education, but it is pockets,” he says. Huntsville, AL, is one of these pockets, he says. As a result of the space center there, a number of other manufacturing industries have sprung up, including a successful medical instrument industry. But it will be a while before the state as a whole becomes such a manufacturing breeding ground. Still, many analysts are keeping an eye on the South to see where all the “insourcing” is heading. “It certainly is interesting activity, because it puts [the South] in the limelight, it helps with jobs, and so on,” says Barkai. But, in the short run, IT vendors, suppliers, and other industries that support these manufacturers should wait and see. Instead of the future of the auto industry, the “insourcing” phenomenon could turn out to be merely a drive-by.

The questions of incentives is actually before the Supreme Court now. What happens to the deals already cut if the Court upholds the lower court is a mystery to me. Still, the fact that corporate welfare is so easily accepted deep here in the Southern Red Sates when we treat our poor people so badly on welfare and taxes and .... just doesn't make much sense. Also, my spies report that many of the Korean manager class will expect to live in Auburn as their city schools have a very solid reputation. Plus Lee County, especially around Auburn University, is considered to be more international than most of Alabama and Georgia. So at least good schools and tolerance and ... had a role in this "success". Peace ... or War!