Changing the Big Business and Big Government Incentives That Drive Harmful “Economic Development” Cronyism
Overview:
The Center for Economic Accountability (CEA) will be a 501(c)3 nonprofit organization dedicated to ensuring economic opportunity for all by ending the unfair use of “economic development” policy to enrich private entities and empower government officials at public expense. It will work with like-minded partners to create incentives against this behavior for business and government stakeholders alike, using best practices in advocacy communications to educate and engage audiences at the state and local level across the United States.
The Problem:
State economic development corporations, local downtown development authorities, county property tax abatements, enterprise zones, brownfield tax incentives, refundable income tax credits, stadium subsidies, strategic development funds, government film offices, community redevelopment agencies and other similar initiatives form a thick web of interdependence between business and government across the United States. Seducing the public with rosy claims of economic growth and job creation, these entities and policies serve as the “gateway drug” for the powerful combination of business and government that constantly erodes the fundamental freedom and fairness of America’s economy.
Economic developers’ power is virtually unchallenged, their operations are largely opaque and their impact is overwhelmingly toxic for those who don’t have the power to get them on their side. Their ubiquity makes politicians, not customers, the key to entrepreneurial success for too many businesses.
They’re also handing out real money, to the tune of hundreds of millions or even billions of dollars at a time. It’s getting worse: Nationwide, the annual volume of state and local incentives and subsidies has tripled since just 1990. It’s now as much as $80 billion per year, bigger than any federal agency except for the Defense Department or Veteran’s Affairs, or more than the annual budget of major states such as Kentucky, Michigan, New Jersey or Ohio. Researchers at the Mercatus Center estimate almost half the states could cut corporate income taxes by double digits if they eliminated targeted subsidies. Some states could cut personal income taxes by more than 10 percent, or sales taxes by a third or more.
The local economic development game is also where politicians learn the bad habit of believing they’re responsible for managing the economy and “creating jobs,” with all the problems that mindset creates. This starts small at local planning commission or city council meetings, growing in scope as politicians rise through state legislatures and onto the federal level. After decades of approving local tax abatements as a city council member and state subsidy programs as a state legislator without meaningful opposition, it’s no surprise that a U.S. Senator would view market-distorting policies like steel tariffs, crop subsidies or an export-import bank as appropriate roles for government.
This isn’t a new problem. There’s a lot of power and money involved in economic development, and that’s one of the reasons that efforts to fight it have had only limited success despite compelling academic evidence and a potential bipartisan coalition in opposition. In private, organizations on the right and left that are traditionally engaged in broad economic policy advocacy tell stories of their funding or legislative support for other policy priorities being threatened by both corporate and government interests if they attack economic development programs too aggressively. Those that do take on the issue do important policy work that has resulted in some successes at the state or local level, but in general they are too often hamstrung by limitations on the volume or scope of their advocacy.
Even business leaders who oppose cronyism on principle are too often forced into taking part when these deals become so pervasive in their industry that they would be putting themselves at a fundamental disadvantage to their competitors if they declined to participate in the subsidy game.
For decades, those who support – and benefit from – economic development programs have been consistently influencing public opinion and moving the Overton Window of acceptable policy outcomes away from freedom and fairness and toward cronyism, inequality and central planning. Without organized and consistent opposition, the average person only hears the big government-big business narrative that economic development “investment” is necessary and beneficial to everyone.
For decades, there have been no real incentives against businesses asking for handouts and politicians delivering them on demand.
That changes now.
The Solution:
“Exposing the weakness of rent-seekers’ claims and the naked self-interest behind them is not rocket science, but finding opportunities to do so requires someone to be constantly, carefully building a case and looking out for opportunities.”
– Brink Lindsey & Steven Teles, The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality
The Center for Economic Accountability will be an effective voice across the nation against economic development cronyism at the state and local government levels. It will use best practices in marketing communications, advertising, social media, interactive development, storytelling and media relations to influence the climate of public opinion against the economic development status quo. This will create an environment in which elected officials believe it is in their own interest to support substantive policy change, while corporations weigh financial incentives against meaningful brand reputation costs.
As a single-issue organization, the CEA will not be subject to pressure from funders or politicians holding unrelated policy priorities hostage to good behavior. It will use that freedom to good advantage, engaging allies from across the political spectrum and applying models for influencing public opinion from experts ranging from Richard Wirthlin to Saul Alinsky; from Ludwig von Mises to Michael Moore.
With the ability to hold both government and business players accountable, the CEA can change the incentive equation for those stakeholders by creating reputational costs for engaging in corporate-government cronyism and benefits for refraining from taking part. Politicians will engage in economic development so long as they believe it will help them stay in power; while businesses will do so when there is a net profit involved. In order to change these equations, the CEA will engage the public as both constituents and consumers to withhold support from politicians and businesses that engage in corporate welfare, while reputationally rewarding those that refuse to take part. Through this mechanism of public engagement, we can make participation in crony-capitalist economic development a handicap not only at the ballot box but also on corporate balance sheets.
There is a broad populist audience for this advocacy in America today. Whether they call it “the swamp” or “the one percent,” Americans from across the political spectrum and from all walks of life are concerned about the concentration of power in the hands of an elite few. In a recent Pew survey, only three percent of Americans expressed a great deal of confidence that government leaders “act in the best interest of the public,” while just five percent said the same of business leaders. Whether it’s a progressive concerned about too much business influence in government or a conservative concerned about too much government influence over business, economic development is the rare topic where all sides agree on the need to decrease the size, scope and cost of a government function. And while concerned citizens on the right and left may despair at ever being able to create meaningful change in Washington, D.C. or on Wall Street, they can be engaged to take on traditionally-unaccountable elites at the local level in fights they can plausibly win.
As an independent group with a free-market bent but a trans-partisan mission, the CEA will have the ability to serve an important role in partnership with academic institutions, think tanks, grassroots groups and other organizations across the political spectrum with interest in effectively opposing government economic development schemes. The CEA will add its capabilities to the expertise, local insights and specific research of these organizations to help them fight and win in state and local battles.
The Strategy:
An organization focused on using public opinion as a tool for policy change must have a strong strategic model in place to ensure that effectiveness is measured by change created, not simply by volume of communication achieved. Too often, advocacy fails because an organization is focused solely on “raising awareness.” In contrast, the CEA’s communications strategy begins with raising awareness, then brings the newly-aware audience through a marketing funnel process of building understanding, reaching agreement and finally engaging in activities that help drive policy change.
The core content strategy to move audiences through this process borrows heavily from Reagan campaign strategist Dick Wirthlin’s valuable concept, “Persuade through reason, motivate through emotion.” Facts are not enough to create action, but emotions alone are not enough to change minds. Through storytelling and other engaging content, audience members will move from simply being aware of the issue, to understanding it, to agreeing with our position and finally acting to help create change.
The engagement strategy adopts Ludwig von Mises’ model of three prerequisites for human action: Unhappiness with the way things are, a vision of a better future and the belief that an individual’s actions will meaningfully contribute to that change. Whether through partners, grassroots lobbying or other methodologies, the CEA will help audiences understand how they can make a difference.
The CEA will not shy away from appeals to emotion generated by tactics more commonly associated with firebrand activists than staid policy organizations. For instance, two of Saul Alinsky’s famous “Rules for Radicals” have strong potential in this regard: “Ridicule is man’s most potent weapon” and “Pick the target, freeze it, personalize it and polarize it.” Few politicians and even fewer corporations are skilled at responding to public ridicule or mockery, and those capabilities will be deployed where appropriate.
Through these strategies, the CEA will be tightly focused on creating an environment of public opinion characterized by visibly engaged citizen-consumers. This means the core activity of the organization will be communicating with target audiences through channels that include traditional and social media, paid social and display advertising, video and digital content, email newsletters, speaking engagements, public testimony, partner organizations and other methods.
Media relations will be a key function of the CEA, and it has the potential for real impact by challenging the unquestioned messaging dominance of crony capitalists in the media. Across the largest media markets in the United States, initial research suggests there are roughly 300 reporters whose beats regularly intersect with economic development topics. This presents a manageable and achievable initial strategy of outreach to media who have an outsized influence on state and local policy discussions. By engaging and building relationships with reporters who regularly cover economic development topics, the CEA will be increasing the share of media coverage of such initiatives that includes a dissenting voice with inconvenient facts while building its brand and driving traffic to its other communications channels.
In off-the-record discussions with reporters in this space, many would welcome not only a trustworthy oppositional source on economic development stories, but also assistance in investigative reporting on economic development deals in their communities. The CEA will build a network of partners with expertise in this area, as well as its own toolkit to assist crusading journalists in uncovering scandals.
On social media, the CEA will engage targeted government and business actors directly, forcing them into conversations and debates in a public arena where their budgetary and manpower advantages are less overwhelming and where they can be drawn into making statements on the record for future use.
The CEA will not undertake primary research, but rather leverage the excellent academic and other scholarly research work already done in this space in universities and think tanks. It will work with experts in these institutions to inform advocacy, while further “weaponizing” the excellent work done by academics and researchers in the service of meaningful policy change.
To determine effectiveness in influencing public opinion and identify opportunities for ongoing improvement, the CEA will deploy a variety of measurement and analysis capabilities ranging from industry-standard marketing and PR tools through polling and digital audience sentiment tracking. The CEA is also working with potential partners on developing a model for defining and measuring an “Overton Window” of public opinion on economic development policy, using it to both track effectiveness and identify opportunities for policy change when public opinion has matured.
As capabilities and resources grow, the CEA will begin to take on special projects with the potential for outsized impact in the influencing of public opinion. Representative special project concepts include:
- “A Skeptical Reporter’s Guide to Covering Economic Development” – Practical guide for media covering economic development deals, including “Questions they don’t want you to ask,” “Common FOIA workarounds” and “Useful statistics from academic research.” This would build relationships with media and position the CEA as a reliable and helpful source.
- “Pay for Your Own Damn Stadium” — Localized initiatives in markets where professional sports franchises are attempting to secure public financing for private profit, building brand awareness and engaging an audience that may not generally engage on policy topics. Would include guerrilla branding using team colors/iconography, sports media outreach, social/digital advertising to team fan bases and coordination with local partner organizations for on-the-ground engagement and activism.
- “Responsibility to the Community” – Corporate social responsibility (CSR) initiative engaging existing shareholder activism groups and “ethical investment” managers to factor corporations’ use of subsidies, incentives and other economic development schemes into traditional CSR reporting and activism. This would increase pressure for corporations considering incentive deals and give businesses already unhappy with the subsidy chase an excuse to “flip” and build their brand value through opposition to subsidies.
- Litigation Participation – Many economic development entities play fast and loose with open-records and open-meetings laws and other transparency requirements. The CEA will work when possible with public-interest litigators to identify and serve as plaintiff of record in cases where there is a strong possibility of policy change through strategic litigation.
Launch Project – Taking On Amazon HQ2:
At launch, the CEA will undertake a high-profile project focused on Amazon’s “HQ2” competition, identifying and mobilizing residents of target communities in the U.S. to oppose subsidies and handouts the company is demanding. This will build brand awareness, test draft messaging and engagement, begin data collection on target audiences and serve as a proof of concept for the CEA’s model.
Working with an experienced digital marketing partner, the CEA will deliver targeted social media and digital advertising in those 19 regions to residents who have expressed negative sentiments about Amazon in social media, as well as generally to audiences with political views that traditionally would be opposed to corporate welfare. The advertisements will test messaging concepts and calls to action and identify fertile demographics and interest groups for future targeting.
The messaging and engagement test results will be used to select three cities for highly-focused advocacy. The CEA will develop branded microsites for each city and focus the social and digital advertising formerly spread across 19 markets onto driving traffic to these sites and their associated social media presences. The sites will contain local-specific information and messaging, driving their audiences to engage local political and community leaders against support for Amazon handouts.
Each site will include graphic elements specific to that city suitable for activist use and sharing in social media. These graphics also will be available on stickers, apparel and related items for activists to purchase at cost. These physical items not only increase CEA brand awareness in the community, but more importantly secure valuable physical mailing address information on recipients. The sites will also collect other data on audience members, collecting social and personal information – including email addresses – as appropriate. The CEA will retain this data for future engagement.
As part of the AmazonHQ2 initiative, the CEA will reach out to state-based think tanks, grassroots groups, community organizations on the right and left and other potential allies to build relationships and identify opportunities for joint action. In addition, the CEA will also focus media relations efforts on those markets, tracking coverage of the HQ2 topic in local media and engaging journalists who are covering it. The CEA will present itself as a source for reliable facts, useful insights and a thoughtful dissenting view to balance coverage of Amazon and build credibility for future efforts.
At the end of the project, even if the three target regions are not dissuaded from their pursuit of Amazon, the project will still have generated valuable message and engagement testing data, captured data on engageable consumers, built relationships with third-party organizations, generated critical third-party endorsement through media coverage and given the CEA a foundation from which to build moving forward.
The Leadership:
Executive Director John C. Mozena has been on both sides of the economic development wars. A long-time marketing and communications professional and former journalist, he spent two decades in private-sector agency and corporate roles where his clients often included economic development entities and programs. As a public relations agency account lead, he worked with six downtown development authorities, a major regional tourism bureau and convention center, two national industry trade associations, multiple commercial real estate developers and a variety of other clients with interests in economic development policy. He was the author of press releases and talking points announcing stimulus funding, state tax credits, manufacturing plant openings, public-private partnerships and innumerable other deals and initiatives touting “job creation” and “economic impact.”
After leaving the private sector, Mozena became the vice president for marketing and communications at the Mackinac Center for Public Policy, Michigan’s groundbreaking free-market public policy think tank. At the Mackinac Center, he worked closely with the nationally-recognized research and policy team in its Morey Fiscal Policy Initiative to provide marketing and communications planning and support for their economic development policy work. While at the Mackinac Center, he was active in outreach and engagement for a diverse range of policy allies. For instance, his testimony to Detroit City Council against stadium subsidies to the Detroit Pistons resulted in unlikely cooperation between the Mackinac Center and Rev. Al Sharpton’s National Action Network on corporate welfare topics.
This will be Mozena’s second launch of a national advocacy organization. In the 1990s, he co-founded the Coalition Against Unsolicited Commercial Email (CAUCE), a grassroots organization advocating for policy tools to fight the growing problem of junk “spam” email for consumers. As CAUCE’s primary media contact, he was quoted in the Wall Street Journal, The New York Times, Newsweek, Wired, NPR, PBS, CNN, CNBC, MSNBC, CBS Radio, Fox News Channel, BBC and more than 100 other media outlets.
He is a graduate of the Atlas Network’s Atlas Leadership Academy, including its Think Tank Leadership Training program, and holds an accreditation in public relations from the Public Relations Society of America.
The Future:
The Center for Economic Accountability will provide a missing capability in the struggle against the pervasive power of local and state economic development interests. The CEA’s independent ability to take the fight to the opposition will challenge the unquestioned messaging dominance by big business and big government and help foster an environment in which meaningful policy change can take place.
The CEA will be a partner, testing ground and force multiplier for existing organizations and investments in research, policy development and outreach. It will offer a mechanism for weaponizing the excellent work of existing policy experts and researchers and broaden its dissemination to new audiences. As a new single-issue organization, it will be able to do so with potential allies across the political spectrum.
Through these partnerships and with the necessary resources and a dedicated strategic focus on its mission, the Center for Economic Accountability can make a politician or businessperson’s first experimentation with the “gateway drug” of cronyism a bad trip they never want to repeat. Additionally, principled business and government leaders will see increased brand value and voter approval from refusing to play the subsidy game. With these incentives changed, we can begin to move toward a more free, fair and open environment in which businesses succeed on their own merits and public resources aren’t funneled into private pockets.
The lesson of Amazon, Foxconn and other recent mega-crony capitalist deals is that we’re moving increasingly fast in the wrong direction. It’s time to fight back as hard as we can, by creating new and powerful incentives against the self-serving combination of big business and big government in our communities. It’s time for the Center for Economic Accountability.
John Mozena 