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Governors on the warpath

Illinois and Indiana may be competitors, but it’s mostly over which governor can do the most damage to his state.

Earlier this month, Indiana Governor Mike Pence seemed ready to retire the gubernatorial dunce cap, with his signing and then backtracking on his state’s infamous “religious freedom” law.

But now comes Bruce Rauner, Illinois’s rookie governor, with a virtual declaration of economic warfare on the Hoosiers next door.

“I am going to try to rip the economic guts out of Indiana,” Rauner told the Chicago Tribune. “But we’re going to do it methodically and aggressively. We’re actually going to get it done.

“I am one of the baddest enemies anybody can have,” Rauner went on, sounding like a pro wrestler warming up the crowd. “When I set a goal, we do it. And we’re coming after Indiana big time. We’re going to deliver jobs out of Indiana and into Illinois.”

This isn’t the way grown-ups talk. It sounds like Bruce the Ripper plans to mass Illinois National Guardsmen somewhere south of Danville and march them east to Indianapolis, burning sycamores and soybean fields as they go. Indiana may have to turn the Wabash River into a moat.

Beneath this sound and fury, Chicago Mayor Rahm Emanuel spirited a scouting party from World Business Chicago off to Indianapolis to try to lure companies there to Chicago.

All this apparently is the counter-attack to Indiana’s earlier campaign to lure business from Illinois with a legion of billboards lining highways between the two states, asking drivers if they were “Illinoyed by higher taxes?”

Stung by the latest salvo from across the state line, Indiana’s Pence replied that, “for the sake of the Midwest, we hope that one day Illinois will be able to achieve the same business-friendly status that Indiana has worked so hard to achieve.”

If the well-being of the Midwest counts for anything, it’s hard to think of anything more damaging than this schoolyard slanging match.

The fact is that Illinois and Indiana aren’t in competition with each other. They just aren’t. The real competition is thousands of miles away, in India and China and Mexico, and it’s eating our lunch. Indiana and Illinois share a deeply-rooted economy, divided only by a meaningless state line that is struggling fitfully to meet the challenges of a new global economy.

Both states need all the help they can get, and they should start by helping each other. Joint business promotion would be a good place to start. Cooperation to leverage mutual strengths, such as bioscience and advanced manufacturing, would be a big help. So would concerted efforts to wield the intellectual clout of state universities in Bloomington, Champaign–Urbana, and East Lafayette.

Especially, the two states, plus Michigan and Wisconsin, could get behind efforts to turn the vast urban area around the foot of Lake Michigan into the single economic unit it should be. Joint promotion of Lake Michigan’s freshwater resources would be a good start.

If either governor was paying attention, they would know that stealing businesses from other places has fallen into disrepute among economic development strategists. Most experts agree that the best plan is to create a true entrepreneurial environment that stimulates start-up companies and supports expansion of existing companies.

This makes sense. Most companies that move across a state line don’t add any employees to the over-all economy: the same workers keep working, but just commute in different directions. In the meantime, the “losing” state loses taxes while the “winning” state, having promised the footloose company a tax holiday, gains none.

Neither governor seems to know about business in their own states. If he did, he would know that almost all the existing big businesses are home-grown affairs that started in Indiana and Illinois and grew there. Examples? In Illinois, there are Caterpillar, Deere, Walgreen, Sears, Allstate. Groupon is a recent example. In Indiana, there are Lilly, Dow Agro, Cummins, the big orthopedic firms in Warsaw.

A successful recruitment, such as Boeing or Toyota, is the exception, not the rule. But most states spent their money and effort now on the occasional lucky strike, instead of watering their own economic gardens. One reason is that governors love to be photographed cutting ribbons, and one big opening makes a better picture than a thousand small ones.

The real rewards in the global economy go to the place with the best work force, infrastructure, public services, quality of life, and education. Seldom do companies go to the place with the lowest taxes, except for the bottom-feeders who can always find a cheaper place — think Mississippi — to set up shop. For everyone else, higher taxes spent on strengthening the economy is a lure, not a turnoff.

None of this is a secret. Experts who study real economic cooperation have been saying this for years. Unfortunately, both Rauner and Pence have been too busy talking to listen.


This post was originally published at The Midwesterner