Economic Development: The Wrong Way

A story in this morning’s Albuquerque Journal (subscription required) provides a case study that perfectly illustrates some of the biggest pitfalls of state-managed “economic development.”
First and foremost, having lured the Malaysia-based Green Rubber Global to the state with $2.9 million in subsidies, the plant’s opening had been delayed for technological issues. This is the first major problem with state-managed development — government bureaucrats and politicians don’t know what the next “big thing” will be and, since they are not risking their own money, have fewer incentives to find out. So, we have a state poised to spend millions of dollars to fund a company with technology that may not be commercially viable. Sound a bit like another New Mexico investment in Tesla?
Today’s article is really about the fact that the city of Gallup — where the Green Rubber plant was supposed to be built — and Governor Richardson, who decided singlehandedly to de-fund the project after a disagreement developed over which governing body was supposed to manage Red Rock Park. Sound a bit immature to you? The state is supposedly going to have a new company creating hundreds of jobs for people in a relatively impoverished area and the Governor pulls the funding over management of a state park?
Of course, that is another major problem with state-managed development — they are inherently political and nature and policies can be changed on a whim. Businesses are more likely to demand higher subsidies in order to come to New Mexico because policies may change anytime.
Regardless of the ultimate success or failure of Green Rubber and Tesla, New Mexico must abandon state socialism and instead develop the state economy by means of lowering taxes and adopting fair and equitable regulatory policies. Only then will New Mexico achieve its potential.