John Akerson's Thoughts

Business, technology and life

What can Governments and Companies afford?

Dell announced that they would be closing their plant near Winston Salem, NC.  That plant closing will eliminate 905 jobs. The plant has been open since 2005.

To open that plant, Dell was given $280 million in state and local incentives. $280 million for 905 jobs = slightly more than $309,392 per job.

If I could be given that paltry sum of $280 million in state and local incentives, I could promise to employ those 905 people, and pay them $50,000 per year – for 6 years each, and they could do NOTHING – or they could make buggy whips. They could make candles, or weave baskets. They could simply spend that money in their local communities.  With what’s left over – I could pay myself $1 million, and donate more than $7 million to local charities.

Sure – I’m not a computer manufacturer – but for Forsyth county, North Carolina, Dell isn’t one anymore… either.

We can recompute these numbers when (if) Dell returns some of that money… but I think there are two points to make

1) Government investment in private enterprise can be extremely foolish.
2) With a single decision, Dell has probably lost sales across the entire state of North Carolina, to businesses headquartered in that state, to agencies operating in North Carolina, to people who have relatives in North Carolina… and in some cases, that business loss will be forever.

The original incentives seemed wonderful. Pictures were taken of North Carolina’s Governor shaking hands with Michael Dell. The original incentives were designed to help a big business, and to bring jobs to a state that has been crippled by unemployment, shuttered textile mills, shrinking market share, mergered banks and higher taxes.  

Instead, the incentives result in 905 people finding misery, a community that feels betrayed, a state that feels robbed and cheated, and a company that will lose massive business.

What government and what companies can afford that?  What can Governments and Companies afford? When can any government or any business afford to have incentives that result in both unemployment and an unending loss of customers, sales and, well, business?

 

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October 8, 2009 - Posted by | Business, Life

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