Beware The Law Of Unintended Consequences

August 6, 2004
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When government officials start trying to manage economic forces, it can be tempting to chuckle.

This month, two bills were introduced in the Michigan House of Representatives to prohibit the state from buying goods or services from companies that outsource jobs or relocate to foreign countries.

If the bills pass, it sounds like Lansing effectively would prohibit itself from buying GM, Ford or DaimlerChrysler products. For that matter, Lansing uses paper by the ton and it would have a wicked time finding paper not produced by multinationals.

Actually, the comic unintended consequences probably won’t play out, because the bills appear to be election-year gestures for gullible voters.

On the other hand, Gov. Jennifer Granholm’s two springtime executive orders “to ensure that Michigan taxpayers are not subsidizing the export of jobs,” were not gestures but actions — of the worse-than-useless sort.

This isn’t to criticize the governor’s intentions. She wants to keep jobs in Michigan, and rightly so. But Granholm doesn’t appear to grasp the distinction between trying to retain existing jobs and making Michigan maximally — and permanently — attractive to new investors. One hallmark of that attractiveness is a government that refrains from meddling in commerce.

One of the Granholm orders is an example of meddling. It’s a kind of economic correctness test, requiring bidders to disclose whether they export jobs, whether they use offshore tax shelters and where their employees and operations are located.

At the very least, it’s another paper chase for any company desiring to sell anything to Lansing. It also is a “Warning: Minefield” type of sign for firms operating plants in other states or nations.

Granted, it’s not as bad as the “Get Out” and “Stay Out” signs erected by certain Lansing administrations in the past. But it’s still not good for the governor of a big manufacturing state to be seen as trying to discourage ordinary forms of competitiveness.

The Electrolux decision probably inspired that order. But how could such an order help? Even if the governor somehow persuaded Electrolux to keep paying people $12 an hour to do work that a competitor can get done for $4 an hour in Mexico, the end result would be the same: the Greenville plant eventually would fold.

The governor’s other order dilutes the “competitive” in “competitive bidding,” by giving Michigan firms preference over companies that operate overseas.

This is ill conceived from two standpoints.

First, it militates against the purpose of competitive bidding: to keep the costs of state purchases down.

If Granholm wishes to personally patronize only Michigan-based businesses, that’s her affair. But considering her overly publicized concerns about the state budget, why is she willing to waste tax revenues by paying premiums to firms that don’t happen to have overseas operations?

Second, the order gives the remarkably unfortunate impression that the Granholm administration regards overseas operations as unsavory.

That’s a fairly tactless slap in the face to the boards of firms like Siemens, Smiths Industries, Magna and Sappi — firms that have capitalized jobs in and exported a great many jobs to Michigan.    

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