In his article New York Bets on High-Tech to Aid Upstate, Steve Lohr writes “In East Fishkill, the state and local governments pledged tax breaks, grants and incentives of $660 million to ensure that I.B.M. built its factory, which opened in 2002, in the region”. $660 million is a steep price to pay, especially with no guaranteed economic benefits to the area. However, the interests of the people of East Fishkill and those of the I.B.M. Corporation are not the same and that could spell trouble for the future of the Hudson Valley community.
In giving the subsidies to I.B.M. the decision makers in East Fishkill hoped to create jobs and eventually tax revenue to help its citizens. I.B.M’s goals as a corporation are to generate as much product, and thus income, while spending the least, which is one of the reasons they choose East Fishkill in the first place. The belief that the I.B.M. Corporation will continue to build and expand in the Hudson valley region once their subsidies and tax breaks run out is ridiculous and idealistic. Once the subsidy well dries up, I.B.M. will move on and the people of East Fishkill will be stuck footing a $660 million bill instead of the tax revenue they had hoped for.
Similarly, I.B.M. will not have a profound impact on the new jobs market in East Fishkill. The nanotech factories of today’s giant corporations are a far cry from those that once populated the Hudson. The manufacturing positions which formerly populated the Hudson required lots of individual laborers with a relatively low skill level. These factories were the perfect instrument for job creation and many towns were built up around these industries. Today, most of the assembly work is done by machine and the few workers who do work in the factories are highly skilled and well trained. Often times these workers are brought in from different parts of the country or even the world to work there.
Economic growth and expansion is important but it is not worth mortgaging away the future of a community. The nature of capitalism has changed over the years and it is now to the point where the power has shifted from the state to the corporations. The corporations are able to manipulate the towns that are so desperate for the economic boost they believe the corporations will give the community that they cater to every demand of the companies. The deal cut by East Fishkill is symptomatic of this shift in power, serving as a stepping stone in I.B.M.’s climb upward.
2 Comments:
You are right, Ash, that we need to be aware of the intentions of businesses moving into an area. Businesses exist to profit and will make the highest profit they can, even if that means developing in places with lax environmental regulations or low minimum wage requirements. The more a municipality bends to create an environment that is conducive to business, the more control is given up to the business owner.
As you have said, economic growth and expansion are important but not important enough to mortgage away the future of a community. I think we can all agree that economic development is necessary in these failing, post-industrial cities. The question becomes whether or not high-tech development is the right prescription for this problem. The post seems to say that because of the tax breaks given to IBM, the company will have an overall negative effect on the community. However, we need to assess the alternatives.
One alternative is that these river cities could continue on as they are, without new development or revitalization. We could all agree that this is not the answer; some kind of development is needed to provide jobs and spur further investment in business.
A second alternative would be to develop high-end housing in the area in order to generate tax revenue and a support system of restaurants, stores, etc. to serve the new, wealthy population. This relies on the economies and production from other cities; the town itself would be feeding off of the prosperity or New York City instead of producing for itself. This would bring only the lowest paying, service-based jobs to the region. The wealthy residents would work elsewhere and would spend a large portion of their income elsewhere.
A third option would be to allow manufacturing jobs into the city, bringing the city back to its peak industrial conditions. This is unrealistic for 2 reasons. The first is that most manufacturing companies are unwilling to move into the region because they have found it more lucrative to produce elsewhere. To attract these businesses, the municipality would have to subsidize these industries at least as much as they are subsidizing IBM and other high-tech companies in the area. The second reason is that these industries tend to cause a lot of pollution and environmental disruption, which is bad for everyone in the community. A return to this type of economy is simply not realistic or smart for the Hudson River Valley today.
This leaves the fourth option of high-tech development. This will create high-paying jobs, which will in turn bring more lower-paying jobs like construction and service based jobs. These high tech companies like IBM generally produce little waste and pollution. Furthermore, instead of living off of the production of some other city, this economic growth would come from within; the town would be producing and selling products and information to other cities, states and countries.
Is high-tech development perfect? Certainly not. It's true that the state and local governments will subsidize IBM, but, as former governor George Pataki recommended, the government spending will only be (at the most) a quarter of all the spending on the development; the rest will be up to private industry to supply. Even with government subsidies, is high-tech development the best option we have? The emphasis on education, the tax revenue, the jobs created, and the relatively small environmental impact make high-tech development the best option for failing cities.
I agree with Ash, communities cannot sacrifice too much to bring in these new industries. However, I also believe this is the better choice for communities who can support this burden and create a network of industries. In the article AnnaLee Saxenian of the University of California says, “The key for upstate New York, or any other region, is the ability to build the set of social and institutional relationships that encourage innovation.” If they are successful, using tax breaks, in attracting these new companies they might be able as Emma said to create a few new jobs. If these companies become prosperous in the area they will attract similar business, creating that community. Once the base is formed I believe the tax cuts can be lessened and even removed without a major loss of business in the area. A company might be more willing to pay more in an area with a solid base of economy and like minded business, than pick up and start again in a new region.
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