1A recent jeremiad by Wolfgang Eder, the CEO of Austria’s largest company, Voestalpine, neatly addresses the problems inherent in regional economic development strategies and the attractiveness of the U. S. South for production facilities of European (and Asian) companies. Austria as a place to locate or expand business – “Der Standort Österreich – has become unattractive for new business investments. Taxes are too high, environmental standards are too strict, energy is too expensive, and the government is disinterested in negotiating with businesses about the competitive environment of investing in Austria. Voestalpine is opening up a car parts production facility in Georgia to supply European car manufacturers. The steel giant is also making its biggest foreign investment ever by building a production facility for pure iron production – with which to produce high grade steel in Linz, Austria – in Corpus Christi, Texas. Eder notes that Texas offers cheap shale gas, great port facilities and infrastructure, and a welcoming business climate. He concludes: “At the moment we only consider North America as a location for long-term prospects” (“Im Moment sehen wir nur Nordamerika als langfristig kalkulierbaren Standort”). Other Austrian CEOs join this lament over counterproductive environmental standards, high energy prices, and high labor costs in Austria.1

2Similar complaints about high energy costs can be heard in Germany and all over Europe. The cost of electricity in North America is half the price of Europe’s and gas a quarter to a third of the price of the Russian gas used in Europe – producing that “sucking sound of European business going to the US,” notes a recent story in Forbes . Business giants Airbus, Siemens, BASF, and Michelin built new production facilities in Alabama, North and South Carolina. Particularly in Germany renewable wind and solar energy have driven energy costs sky high and made electricity grids unreliable. These sharply increased electricity costs “could accelerate the de-industrialization of Germany,” argues the Forbes article, “knocking Europe’s strongest economy into depression.” The long consequence might be felt in the next debt crisis that hits EU-Europe Germany could no longer “provide financial assistance to spendthrift European governments.” The author concludes by pronouncing the wind turbine farms springing up in Europe as eyesores “disfiguring the landscape” and producing “carnage” in the bird population. The article concludes by questioning the science of global warming and with the neoliberal clarion call to “unshackle economies and let them grow.”2 Such is the business perspective on investing and planning new production facilities.

3While European CEOs bemoan the lousy business climate in Europe, and American business cheerleaders make fun of European environmental standards, American politicians in the South celebrate the business and investment climate they are creating. Bobby Jindal, the governor of Louisiana, brags about the many investments his administration attracted to the state and cheers New Orleans’ comeback after hurricane Katrina. Governor Jindal credits New Orleans as “one of America’s top centers of entrepreneurship”; Forbes magazine named New Orleans as “the No. 1 brain magnet” in the U. S., and Inc. magazine called New Orleans “Americas’s coolest city.” He boasts “We are going to continue fostering an environment in New Orleans and across our entire state where businesses want to invest and create opportunities for our people.”3 Unlike Austria, Louisiana provides a welcoming business climate is the message. The political argument is usually “new jobs” – not what quality of new jobs. Southern governors usually do not talk about high poverty and low education rates in their states, workers slipping out of middle class status, failing to save, complaining about subpar retirement packages.4 Foreign companies locating in the South like Austrian functional hardware producer Blum in North Carolina is training its own workforce in an apprenticeship programs for local students finishing high school. Education levels for technically demanding jobs tend to be low in the South.5

4Comparing economic development in a regional context both in the South of the United States and in the European Union today raises many fascinating questions. How much money in the form of tax credits and subsidies should communities and states invest to attract foreign investors in the U. S.? Should individual states and communities in the U. S. commit public funds in the form of tax money and tax credits etc. to bring foreign businesses to their shores? Is the argument of bringing “jobs” and more employment home the only argument that should count politically? Or might these generous subsidies doled out to foreign businesses from public funds deprive local populations from improving their infrastructure and public education? What if these foreign investors then locate to other shores if their investments are not profitable enough in the short run? Might foreign investors come to the American South because it has never been unionized like the rest of the country? Is the attraction of the non-union South then only a means to get away from the burdens of stricter worker protection and social programs at home in Germany or Austria or elsewhere? Is the attraction of building plants in Texas and elsewhere in the South accounted for by the cheap price of fossil fuels (including gas from environmentally dangerous “fracking” projects) to run plants, or by less strict environmental protection laws? In other words, is there a “quasi colonial” relationship at work here? James Cobb suggests in his essay that the South has acted for a long time as a place of abundant natural resources and cheap labor, attracting industrial development from the North in the 19^th century and increasingly foreign investors after World War II. But the “giant sucking sound” of European businesses going to the American South for cheap labor and energy, might draw them further South to Mexico today.

5While in the U. S. individual communities and states compete for foreign direct investment dollars, in the European Union such competition is carefully controlled within a set of state aid rules which set strict limits on public support for enterprises. In more prosperous regions of the EU, state aid to business investment is simply not permitted at all where it concerns large enterprises typical of FDI (see also Rogers et al.). Instead the EU has developed programs to foster and finance regional development and the reduction of regional socio-economic disparities, or “convergence”, using funds from the EU budget to promote investment in SMEs, infrastructure and human capital. The overall goal is to heave the less prosperous regions in the European Union – especially in the newer member states of central and eastern Europe and in the Mediterranean south - -out of their relative backwardness. In the process the EU seeks to produce a more balanced pattern of territorial development and in the long-run to reduce the income gaps. Ronald Hall, who works for the Directorate General for Regional Policy of the European Commission in Brussels, analyses the development of this policy from both an historical and an informed insider’s perspective. In the American South the competition is between the individual states to bid for outside foreign investments. In the process states outbid each other in the offering of outsized subsidies to some of the most profitable companies in the world only interested in their own bottom line and without long-time commitments to the entire region’s economic betterment. In the EU, regional economic development is practiced as a strategy of convergence, which seeks to reduce regional disparities through a concentration of resources for investment on the poorest regions and a delivery system based on integrated development strategies that are about much more than direct aid to the business sector.

6Cynthia Rogers, Stephen Ellis and Grant Hayden question the efficacy of offering economic incentives (usually “a combination of direct spending and tax diversions”) to corporations locating in Southern states of the U. S. The “fairyland of subsidies” (Franz Roessler) European companies encounter in the U. S. results from the intense competition among states and local governments for Foreign Direct Investment which drives up the value of subsidies. The generous subsidies offered often do not make sense as public investment, however. If Texas and Oklahoma offer generous incentives to attract foreign investment, such incentives offer little promise of influencing foreign firms and they make even less sense in terms of fiscal impact on these states. Empirically, Rogers and her coauthors suggest, “development incentives, in general, do not work” (emphasis theirs). One wonders whether the likes of Louisiana Governor Jindal, who hands out generous amounts of tax payers money to foreign firms, appreciates the evidence questioning the efficacy of economic development subsidies.

7These papers are based on presentations delivered in a workshop at the University of New Orleans (UNO) on October 20 and 21, 2013. The workshop was jointly organized by the Austrian Marshall Plan Foundation of Vienna and UNO’s CenterAustria. The Austrian Marshall Plan Foundation initiated a chair program at UNO in 2000 with a sizable donation to the university. Since then Marshall Plan Chairs have been appointed annually to teach and research at UNO. After hurricane Katrina struck New Orleans on August 28, 2005, three MP chair holders were selected to study the city’s rebuilding after a major natural catastrophe. Elisabeth Springler and Martin Heintel presented findings from their year-long research stays in New Orleans (Heintel in 2006/7 and Springler in 2008/9). The idea was to contextualize their research on New Orleans both in a historical context and the larger regional context of economic development strategies. We invited James Cobb to present the historical perspective of economic development in the South and Cynthia L. Rogers, Steve Ellis, and Grant Hayden to provide the economists’ perspective on incentives for regional development in the South and the legal framework in which it unfolds. Ronald Hall from the Directorate General for Regional Policy of the European Commission in Brussels provided an introduction to the European Union’s policies of regional economic development. One goal was also to discuss what and whether the two sides could learn from each other in their widely differing approaches to regional economic development. Another goal was to provide frameworks for strategies for recovery from natural disasters. The fact that we cannot provide complete answers to these complex issues should not distract from the fact that some modest suggestions came out of our meeting.

8The workshop in New Orleans concluded with a panel discussion on “lessons of regional economic development” with local experts on and practitioners of regional economic development. Aimee Quirk and Dominik Knoll, the director of the City of New Orleans’ Office of Economic Development and the World Trade Center respectively, presented the success story of New Orleans attracting new businesses to the city after Katrina to the point where it is now one of the most desirable U. S. cities in which to live. Franz Roessler, the Austrian trade commissioner in Chicago, and Jodok Schaeffler, the manager of the very successful Austrian producer of plastic packaging products (like Coke bottles) Alpla, gave presentations on factors that led Austrian businesses to locate production facilities in the U. S. (the Alpla North American Headquarters is located in the Atlanta area).

9We are grateful to a number of colleagues at the University of New Orleans for chairing sessions, namely James Payne (Provost’s office), Walter L. Lane (Department of Economics-Finance), and Robert L. Dupont (History and CenterAustria senior fellow). Their participation added depth and richness to our discussions.

10We are grateful to the Austrian Marshall Plan Foundation for financing the workshop. Eugen Stark, the then executive secretary, was deeply involved in organizing the New Orleans meeting. Ambassador Wolfgang Petritsch, the chairman of the board of the Austrian Marshall Plan Foundation, graced the workshop with his presence and his active participation in the debates. We also would like to thank all board members of the Austrian Marshall Plan Foundation for their support in the University of New Orleans program activities under the auspices of the Marshall Plan Chair program at UNO. We would like to thank all of them for their support in making the UNO programs of the Austrian Marshall Plan Foundation a resounding success. Markus Schweiger, the new executive director at the Foundation, helped with final arrangements in getting the papers published. Claudia Kraif in the Foundation office facilitated the translation of the Heintel paper from German into English.

11The CenterAustria team at UNO as always has been superb in the organization of the workshop. Gertraud Griessner booked hotels and flights and contributed much to make the stay of all participants a pleasant one. Kathrin Lisa Voggenberger, our student fellow from the University of Innsbruck, was highly professional in the design of brochures and posters and advertising the workshop and in helping to format the papers for final publication. Markus Habermann and Martina Prugger, graduate student junior fellows at CenterAustria, also helped with organizational chores such as meeting the AV demands from presenters. Mike Adler from UNO’s Media Office arranged the taping of the final round panel discussion on “Lessons”. Birgit Holzner and her team at Innsbruck University Press were most helpful as always in spiriting the papers through to final publication. We are most grateful to all of them for their eagerness to making the workshop a success and this publication possible.

12April 2014