When it comes to economic development, governments have not been shy about using taxpayer resources to start and run their own businesses, or to subsidize others at the expense of both taxpayers and businesses alike. But recent news out of Eastern Europe was surprising even to long-time observers of state interventions: The Romanian government is asking its taxpayers to stick their necks out for a Dracula theme park. In other words, Romanian central planners are telling citizens they want to suck their blood and their money.
What does this have to do with Michigan? Plenty. After all, who’s to say whether, if the evil Count had claimed victims in the Great Lakes State that our own Michigan Economic Development Corporation (MEDC) would not try to put up its own Draculand franchise? The sales pitch for government subsidized entertainment projects right here in Michigan is the same as that now being put to Romanians. It’s all about the jobs government officials think they will create by subsidizing entertainment.
Watch the implosion of a government economic-development project
For example, Flint’s $70 million Autoworld theme park was built in the early 1980s with more than $30 million in government subsidies in response to a decline in the local employment base. It was argued that the facility would draw 900,000 visitors per year and create scores of jobs. It became the state’s poster child for subsidized failures, closing after about six months and later demolished. Kalamazoo’s "Legacy of Flight" was offered $3 million by the state in 2000 to help expand its operations and, it was hoped, bring more tourists to Southwest Michigan. The program folded partly because people remembered Autoworld.
There are plenty of other examples of "investments" made by state and local governments in the name of providing recreation and jobs. For instance, the state of Michigan operates a tourism department within the MEDC that advertises the Great Lakes State as a point of destination. The state owns and operates its own ski resort, conference facility, parks, campgrounds, and indirectly subsidizes the use of hunting lands.
And don’t forget municipalities. There are more than 150 municipally owned golf courses in Michigan alone. Add to that municipal wave pools, fireworks displays, ice-skating rinks, zoos, boat launches, softball fields, a Japanese tea house in Saginaw, and subsidized art.
In short, it’s easy to see that Michigan governments are operating a veritable recreational industrial complex. The extent to which public officials take taxpayer resources and "invest" them on projects they deem worthy is enough to drive one batty.
Which brings us back to Count Dracula. We hereby offer the Romanian Prime Minister the example of Michigan if he wants to understand why he should keep his country out of the state-directed economic development business. We’ve learned many lessons about the inability of bureaucrats to properly "pick winners and losers" in the marketplace. Let’s review the most important.
Count One: Government has nothing to give anyone except what it first takes from someone else. Any time you single out one business for special treatment, you penalize others who don’t receive such treatment. These others are thereby placed at a competitive disadvantage. This is not only unfair — it disrupts the flow of goods in the economy and contributes to economic stagnation.
Count Two: There seems to be an unexamined assumption that bureaucrats from Lansing to Transylvania know more about how to foster wealth and job creation than the business owners, consumers, workers, bankers, families, investors and managers whose collective decisions form our market economy. If anyone should have learned this lesson by now, it’s public officials of formerly Communist countries. Central planners decimated economic growth in the Eastern bloc because they presumed to know what was good for everyone else.
Consider the case of Romania. For over half a century, government, instead of the market, decided employment for Romanian citizens. Indeed former dictator of communist Romania, Nicolae Ceausescu was often called "Vampirescu" for his economic policies, which helped "suck the country dry during 25 years of rule."
Present-day Romania’s struggle to develop has its roots in much the same source. Government continues to make many of the economy’s employment decisions, and many workers continue to earn meager incomes. Schemes like the Dracula theme park idea are only the latest evidence.
Instead of placing taxpayers on an economic roller coaster, politicians both in Romania and here at home would serve their constituents better if they took the advice free-market economists been offering for years: Maintain a fair playing field and offer no special favors; lower tax and regulatory burdens; protect property rights and improve schools.
These are the lifeblood of a healthy economy and the basis for creating and improving jobs in any economy.
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Michael LaFaive is director of fiscal policy for the Mackinac Center for Public Policy. He was the project manager for a report that detailed more than 200 ideas to save Michigan’s 2004 state budget over $2 billion.
Peter Leeson is an adjunct scholar with the Mackinac Center for Public Policy and a Ph.D candidate at George Mason University in Virginia. He is currently conducting field research in Romania on entrepreneurs and economic development._________________________________________
For more information on government "investments" in public entertainment facilities, see