The Outstater

January 16, 2023

Yes, You Live in Corruption

“Nothing happens until the right people own the land.”— anonymous

THE MOST BASIC economic statistic is how many are coming and how many are going. So how do you explain that Indiana is now second only to Illinois in the number of people skedaddling. The national moving company Atlas says that 59 percent of its Indiana customers are leaving.

As with everything these days, there are two explanations. The economic-development experts says it’s just people wanting to get closer to loved ones. Others say it is the economic-development experts.

The past three Indiana governors have pretended that dollars leveraged by regional development plans, tax increment financing, public-private partnerships, government grants, deferments, complex bonding and tax rebates are the same as free-market investments. They have used that money to create regional fiscal kingdoms, in effect awarding royal titles, charters and warrants to those willing to play their game. Campaign donations to malleable local officials are a given.

In sum, modern economic development (eco-devo) can be thought of as using laundered government money to build sports venues, mixed-use luxury apartment complex, acres of parking garages, downtown renovations, etc., without much thought to market forces, productivity or missed opportunities. The tons of cement and rebar sold seem to be the measure of success.

The experts told the governors this was all “progress” but nobody seems to have been fooled. These machinations are what a former scholar here, Tad DeHaven, dubbed “press-release economics.” Others have likened them to the mercantilism that ruled back when Shakespeare was writing sonnets.

In any case, the millions and millions of eco-devo dollars should have made at least some difference. But no, how many taxes are we willing to rebate to pay for each lost resident? Would we have done better dropping the money from helicopters?

Another basic lesson of economics that has been lost to our governors is that the security of property matters. Tom Lincoln, father of Abe, moved his family from Kentucky because Indiana’s property titles were more secure. Today, it is political connections that matter, not the best use of freely traded land.

If you doubt that, take a look at IndianaScorecard.org, an independent web site that ranks legislators on how they voted on matters affecting private property. Only the top-scoring few list any regular citizens among their donors. The low scorers, though, are financed by corporations and the ubiquitous political action committees. Those are the same legislators who score well on a competing rating by the Chamber of Commerce, as good a measure of cronyism as you will find.

It gets worse. The Indiana Policy Review took a close look at who donates to the typical mayoral reelection campaign. Most of the money came from architectural, engineering, contracting, surveying and legal firms or their family members, employees or associates, many of them out of state.

To put it brutally, if you haven’t been invested by the local eco-devo princes, you can’t do business in their kingdom, or you do so at a disadvantage. Our study estimated in one city that almost $100,000 in total donations produced more than $128 million in direct payments from city hall. The study, conducted by a former banking analyst concluded this:

“Currently, Indiana has the highest business personal property tax in the Midwest, and the worst tax environment for manufacturers according to research from the Tax Foundation and the auditing firm, KPMG. This provides a deep moat and a high barrier to entry in the market. As a result, the Chamber/eco-devo conglomerate holds both the key to entry and a substantial amount of power.”

It turns out that handing over control of your state’s future to unaccountable medieval schemers isn’t a good business plan. — tcl



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