Another Stupid Whale Hunt
Governor Kotek is trying to tackle Oregon’s economic slippage. You may have heard of her Prosperity Roadmap or the Prosperity Council that began meeting in January. The Council is charged with putting the brakes on Oregon’s slide into the economic doldrums. You have another couple weeks to share your thoughts, but even though I’m linking the survey, I mean really, why would you?
I’ll save you some time. As someone who worked in and around economic policy the last 25 years, I promise you there’s nothing new to see here. Here’s all you need to know:
The big strategic move is to catch a whale (or a few. Hopefully 15). Get some high-flyin’ high-tech corporations into this state, QUICK!
The hunt is mainly for semi-conductor fabrication plants which pay their employees well, have great multiplier effects and would stablize Oregon’s most important industrial cluster.
Tactics are same ol’, same ol’. Tax breaks, expedited permitting, a big show of bipartisan love (i.e. the Governor just made the former Republican Senate Minority Leader who led the recent Republican legislative walkouts, Oregon’s first Chief Prosperity Officer).
Spread that love around! It’s not just for semi-conductors. The state picked a group of winning industries: aerospace, defense, food and beverage manufacturing, bioscience, medtech, outdoor gear, outdoor apparel, mass timber and advance wood products. If you’re doing any of that and you have $100M to invest (or $40M in rural Oregon), you’re in the VIP lane. Sites will be ready for you and permits will be fast-tracked.
For everyone else, nada.
In fact, if you’re a small business owner buying expensive equipment, your state taxes are going up because you can no longer write off that equipment all at once. Also founders of successful Oregon startups will pay more when they sell their companies because the state dropped the "qualified small business stock” exclusion.
And what about our infamous Corporate Activity Tax (or Gross Receipts Tax), which taxes revenue rather than profit and hits low-margin/high-volume businesses way harder than high-margin tech giants? Yeah, that’s still how we roll here. No one’s touching that in a state with a budget deficit in the hundreds of millions.
In the immortal words of Nancy Kerrigan, “Whhhhyyyyyy???”
Well, it’s not that different from corporatism, really. Even though spreading bets across more industries and smaller companies already here is the smarter long-term play, the state has a fiscal crisis NOW. The published rankings of Oregon’s economic competitiveness are bad NOW. The "Intel Panic” is feverish NOW, and AI chips are in white hot demand NOW. Election cycles are short-lived the same way quarterly earnings report cards are short-lived.
It’s also not so different from venture capital, except that it’s our money being thrown at industrial development (hope someone wants this site!), giant corporations (hope they stay!), and their ongoing tax bills (thank you hard-working Oregonians!). The real venture capitalists at least eat their losses. Our Prosperity Conjurers have us to foot the bill.
Look, I get it. There’s nothing easy about competing in a global economy under a set of rules that suck for everyone except the whales. Play the game or get played. The Governor and her Council are trying to keep us from getting played (by Ohio, North Carolina, Vietnam, etc).
The only problem is it doesn’t work. It sounds like what we’re supposed to do because it’s what everyone does. It sounds right because the rules of capital attraction and taxation have spawned a zombie-ish economic development industry that knows how to play only 3 tunes. It doesn’t get politicians in trouble because it follows a logic that’s hard to argue, and painfully boring to pay attention to.
I have very little faith that anything innovative or promising is happening in Oregon’s Prosperity cockpit.
But there are some green shoots appearing in (where else?) in local communities. A couple of Oregon cities have stopped trying to build conveyor belts for high-tech giants, even as they struggle with their own budget shortfalls. They’re building greenhouses instead, cultivating who’s already here. I’ll write more about that next time.
Until then, I leave you with Myth #1 from Michael Shuman’s “8 Myths of Economic Development.”
Companies that matter are economically mobile.
Wrong! There’s a mountain of evidence proving that local (i.e. non-mobile) businesses are better at promoting jobs, income growth, entrepreneurship, environmental responsibility, charitable giving and political engagement. And local businesses don’t cut and run when the bribe runs out or times get tough.
Prosperity ain’t just about money honey. Ask anyone over 50.