Editor’s note: Prof. John Quinterno is the Visiting Professor of the Practice in the Sanford School of Public Policy at Duke University, and also the founder and principal of South by North Strategies Ltd., a research consultancy specializing in economic and social policy. WRAL TechWire asked Quinterno to delve deeper into the history of North Carolina’s economic development. This column, written by Quinterno, has been lightly edited for clarity by WRAL TechWire and is printed with permission.
DURHAM – Prior to 2000, North Carolina’s economic growth efforts did not rely on direct cash subsidies, and instead, the state relied on packages centered on support for needed infrastructure and workforce training. The situation changed drastically beginning in the mid-1990s. First, the state lost out in a very aggressive effort to land a Mercedes manufacturing plant that ultimately was sited in Alabama. This shocked many public officials, particularly those connected to the Hunt administration.
Second, other states began to move more aggressively in using direct public subsidies to attract industry, and North Carolina, at least in the eyes of Hunt administration officials, was at a comparative disadvantage. Finally, the state supreme court ruled in 1995 that direct public subsidies to businesses did not violate the state’s constitution, which opened the door to a more aggressive model of subsidy-based growth policy.
Working through the details of what the state’s approach should be took time. Earlier incentive efforts were more targeted and paid considerable attention to trying to promote a better balance of growth between rural and urban areas, as well as between economically distressed and vibrant communities.
Over time, those restraints have fallen away and the view that all growth is good has taken over, combined with spiraling amounts of public subsidies that would have made the public officials of 20 years ago blush.
The state’s economic model also had to evolve. For much of the post-war period, North Carolina favored a strategy of encouraging low-wage, low-value added light manufacturing that was geographically dispersed, both as a way to spread the benefits of economic growth and as a way to keep wages low and dissuade union organizing. As a result, North Carolina was an unappealing location for many more advanced manufacturing industries despite many of the state’s other advantages.
Attracting advanced industries
Over the past 20 years, the state has become more appealing for more advanced industries like aerospace and life sciences. The technical and scientific expertise available in places like the Triangle thanks to the substantial university presence and the kinds of firms that have gravitated to Research Triangle Park (if not actually located in the park any longer) has created a knowledge base.
Additionally, the region has become home to many supporting professionals in fields like law and finance that can support those industries. Combined with the region’s historically high quality of life and comparative levels of affordability, the mix has proven quite appealing.
Meanwhile, state officials have worked diligently to nurture certain industries, such as aerospace, life science, and more recently, battery and related technologies. And despite whatever other political tensions may exist, both Republican and Democratic officials in Raleigh have proven very willing to spend increasingly eye-popping amounts in public subsidies to attract firms to the state, with much of the activity concentrating in the state’s leading metro areas like the Triangle.
The problem with those subsidies is that it often is unclear if they are actually needed. If the firm was going to come to the area anyway, all of the subsidies are wasted money that divert resources that would otherwise be available for public services.
The ‘big Triangle’ approach
For years, economic growth officials have argued that an advantage the Triangle has compared to peer regions across the country is the ability to locate manufacturing facilities in relatively close proximity to research facilities and the kinds of communities in which senior executives want to live themselves. A firm could conduct its research activities in RTP, say, with executives living in Raleigh or Durham. Manufacturing sites could be located in the larger region and take advantage of the comparatively low land costs in places like Chatham or Vance counties.
Taking such a “big Triangle” view would also serve in expanding the region’s economic and workforce base compared to a “little Triangle” view focused on Wake, Durham, and Orange counties.
In all likelihood, however, the senior executives will prefer to live in the Triangle and commute.
A key problem with this “big Triangle” approach is that it promotes sprawl as acre upon acre of more rural land gets purchased and transformed into low-density developments like single-family homes and shopping centers.
While this may be profitable for certain interests, it imposes high environmental costs that are never accounted for in economic impact orders and contributes to congestion and an overall degradation in quality of life as people spend more and more of their days in their cars.
What’s left behind
A major problem with traditional economic growth efforts is that they are incredibly myopic.
Too often, all practitioners care about is “winning” the deal and obtaining “more” — more jobs, more firms, more output, etc. People may pay lip service to quality of life issues, such as the environment or housing, but those concerns are secondary at best.
To borrow from the play “Glengarry Glen Ross,” the attitude is to “always be closing.” That may be great advice for those who stand to benefit financially from growth or who are connected to the favored industry, but it is more questionable advice for existing residents.
Left unchecked, this model of growth can fuel displacement of existing residents, especially those connected to unfavored industries or who work in more modestly paying support industries. These individuals may find themselves priced out of their longstanding communities despite being employed and working hard. And, of course, retired persons, disabled persons, and others on fixed incomes may find themselves pushed out of their communities against their own will and despite having done nothing wrong.
Impact on young adults
Additionally, this model of growth makes it hard for younger adults, even those with good jobs, to put down roots in the community.
The combination of high student loan debts and escalating housing costs makes it increasingly hard for young adults, including those with objectively “good” jobs, to be able to buy a home and access the wealth-building opportunities associated with homeownership.
And these problems are even more pronounced for other young adults who find themselves lacking any real way to get ahead. In this way, any short-term gains may be offset by long-term losses that erode the region’s productive capacities.
While the recent projects announced for the Triangle are positive in many respects, they also have the potential to fuel displacement and to widen economic disparities. Such inequality is a long-term threat to the region, and one that too many public officials have yet to wrestle with in any meaningful way aside from occasional calls for “diversity” and “affordable” housing.