Where, oh where, should we put our economic development resources? This question often goes unasked by economic development agencies.
There are those who are philosophically opposed to answering that question. Others believe the answers are so obvious it is not necessary to give voice to the issue.
We have free market advocates who believe firms should locate wherever they wish and economic development is best when not guided by government or private local interests. Alternatively, there are planners who believe that development should be guided to meet a community’s needs.
States and localities give tax breaks to specific businesses to encourage investments. This is basic real estate promotion similar to an apartment complex offering free rent for two months. Building a highway or installing sewers is less direct because many can benefit from those advances, but it remains property development.
Most jurisdictions are hesitant to be too directive. Many attempts at guiding where firms should locate have been unsuccessful; think urban enterprise zones. Nonetheless, federal and state funds still pour out of Washington and Indianapolis designated for urban or rural purposes.
Where should the subsidies go? The U.S. Bureau of the Census reports only 18 Indiana counties in 2012 had median household incomes higher than the national average. Five of the top six are adjacent to Marion County (Indianapolis). Two others (Warrick and Posey) are next door to Vanderburgh County (Evansville). Porter County is part of the Chicago metroplex. Dearborn County cuddles up to Cincinnati.
Note: Other than Bartholomew County (Columbus), none of the top 18 counties is the center of a metropolitan area. This pattern is a result of reinforcing suburbanization with state and federal subsidies. Indiana widens I-69 to help Marion County workers live in Hamilton County. In Northwest Indiana, I-94 is widened to let wealthy workers living in Porter County have better access to high-paying jobs further west in Lake County and the rest
Why don’t homeowners in suburban counties pay for the transportation they use? Why don’t central county businesses pay for the infrastructure costs generated by their commuting workers? The answers are simple. It would not be popular; it would be branded as contrary to the popular will, the “natural” desire for big houses on big lawns, the agrarian DNA of our farming ancestors.
Yet, would it make sense to underwrite economic development in poor counties? Apparently, left alone, high-paying businesses do not choose to locate in the five counties with the lowest median household income: Wayne, Delaware, Orange, Blackford and Grant counties. Nor are those counties close enough to high-paying jobs for them to achieve the elite status of suburbs.
Of course, Wayne (Richmond), Delaware (Muncie) and Grant (Marion) were once strong centers of manufacturing. Today they have long-term problems with underemployment of people and properties.
Are there state programs to revitalize these once prosperous counties? Or will we continue to endorse “rural” programs and the relentless suburbanization of our state?
Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business. Send comments to firstname.lastname@example.org.