Factory’s local cuts warn reliance on national economy comes with perils

The local newspaper rightly sees the loss of 80 jobs at the local plant of a national economy player as deserving of Page A1 treatment.

The report that Alstom is pink-slipping 80 workers makes the top of Page 1 on today’s Chattanooga Times Free Press because it dramatically shows the effect of remote economic factors on local economy.

Because of setbacks in the nuclear power generation field, the local division of the engineering giant is slashing staff. U.S. natural gas is a rising industry cutting into the prospects of atom splitting as an energy source. And the Fukushima nuclear meltdown in Japan and other nations’ fearful reactions to nuclear energy are a second blow to the industry and Alstom’s role.

Buffetings in the national economy make a silent affirmation of the case for local economy, which envisions prosperity for a locale riding upon hundreds of small shops and entrepreneurs rather than a few big ones lured into town by tax breaks under the theory, “There is no alternative.”

The controlling paradigm for “economic development” is TINA, there is no alternative to corporate pork. Implied in the current idea are tax breaks, soliciting big players and government-led “economic development.” In TINA, local officials and chambers of commerce seek economic salvation in luring new arrivals with favors that usually do not pay off, teasers not offered to local entrepreneurs and local small shops. Cities submit to the TINA rationale because subsidy backers with connections to national economy stifle serious public dialogue over the alternative theory of local economy, or local ownership and import substitution.

Alstom invested F$250 million at the old Combustion Engineering site on Riverfront Parkway and receives in return a 15-year tax break from county government. In 2008 it landed a 100 percent abatement for its first year on the spot, and a 14-year abatement of all taxation save that for the government school system. Indications at the time were that Alstom would so rise in its field as to employ up to 300 people within five years.

Corporate pork

Local and U.S. subsidies for the “there is no alternative” are a dirty secret of globalization and national economy and are a major obstacle to local economy. “Recall that TINA enjoys at least $50 billion a year in state and local subsidies in the form of business incentives,” notes Mr. Shuman. “Moreover, the $58 billion identified by Green Scissors [a study] is just part of all corporate welfare doled out at the national level. The libertarian Cato Institute estimates that the federal government annually gives corporations $87 billion per year. The World Resources Institute calculates that the annual federal subsidy to cars and trucks may be as much as $300 billion a year. These are staggering numbers, even in a $12 trillion economy. The politics of pork, to be sure, stand in the way of reform” (Shuman, page 89).

The establishment TINA paradigm assumes yearly tax compulsion on homeowners and local business but tax relief for major corporations such as Alstom. Relying on easy use of tax money, its premise of economics stands against the liberty of the free market. Reform favoring local people will take a generation in Chattanooga. It will come with local pressure against corporate welfare and a shift in allocation of tax money and taxing authority. The city will gain a more equitable arrangement that favors local small players and property holders vs. large profit-seeking global combines.

One way to promote a change in favor of local economy is to admit the existence of a conflict along the lines I propose: local economy vs. national economy. Once we frame our interests that way, the situation becomes clearer. Left and right, environmentalist and libertarian, social gospel types and reformed Christians, conservative senior citizens in 1950s neighborhoods and statist-oriented college students will better see our way out of the insoluble problems facing Chattanooga my hometown, and yours.

Sources: “Alstom to get 15-year tax break,” Chattanoogan.com, June 10, 2008
Michael Shuman, The Small-Mart Revolution[;] How Local Businesss are Beating the Global Competition (San Francisco: Berrett-Koehler Publishers, 2006, 2007),  285 pp. I highly recommend this book.

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