Just like there is competition between companies in any given market, there is also competition among geographic markets to attract economic activity. Generally speaking, the best way toward increased business is to open markets as much as possible and allowing businesses to flourish. However, in most cases, geographical areas, either large areas such as nations or small areas such as municipalities, do things to incentivize businesses to either relocate or to establish major business centers within their geographic confines in order to jumpstart economic growth.
Libertarian thought would generally look unfavorably upon recruitment of businesses through the use of incentives, such as tax advantages or the offering of free property or infrastructure as enticements. However, there might be a question as to whether crony capitalism is acceptable in localized scenarios where geographic entities wish to compete to draw in greater economic activity.
On a large, international scale, it is almost a necessity that nations form various economic alliances and pacts to best benefit not only their economies, but also for diplomatic purposes. Unless anarchy is in place, if a national government has nothing with which to bargain, such as economic diplomacy, it has little hope of acting in any form on the international stage. It has no way of representing its citizens. Even a minarchist government must interact with other nations and form agreements. Agreements require an offer of something from both sides. If there are no economic items to offer, then there is little to offer at all. I know many libertarians bristle at the idea of foreign trade restrictions, but they are sometimes necessary tools of negotiation.
However, things can get a bit murkier on a more localized scale.
One recent example is Amazon making public its desire to open a new economic center to act as a sort of second headquarters in another part of the US. It made this announcement in an effort to gain proposals from different cities to gain advantages. On Amazon’s part, it is just a business acting as a business to act in the best interests of its owner shareholders. Amazon’s leadership would be failing in its job if it did not seek to maximize income for owners. If municipalities are willing to offer Amazon various advantages, it would be foolish of them not to seek those advantages.
The more ethical question is whether municipalities should offer advantages to Amazon for its significantly large proposed second headquarters. One could argue that municipalities should have nothing to offer in an ideal situation, where municipal governments are too small to have any control over anything beyond a few minimal services. However, if a municipality has the means to offer control over advantages, can it really be faulted for doing what it can to improve the local economy? In Amazon’s case, the new headquarters is likely to benefit local businesses far more than it could harm them. Some local businesses would definitely be negatively impacted from Amazon’s local focus and testing of new ideas. However, the greater economic impact is good for local business on the whole. Local retail business still has lots of advantages over a large company like Amazon that they can exploit.
On the one hand, competition usually benefits all. If geographic regions compete against one another, gains can be made in loosening regulatory hurdles for business and can result in lower taxes. An entire nation can enjoy the results of competition among states and among cities, but in order to have this competition in place, power has to be seeded to these governments in order to have anything to offer.
So, on the other hand, government is a poor protector and distributor of economic advantages. Power granted to government nearly always results in corruption. And so, the question then becomes how much economic power in the hands of local governments is beneficial to citizens? It’s a difficult balance for me in forming my personal opinion. As soon as I rail against the idea of crony capitalism and unfairness in government intervention to favor certain businesses above others, I find myself cheering on when my local government does things to attract new businesses that I know will result in an eventual higher standard of life for my own community.
And so, here I sit, speaking out of both sides of my mouth and telling my readers that I despise crony capitalism and the damage it does to free markets. At the same time, as long as localized governments have the tools to offer advantages for themselves in competing against one another, I also welcome that competition and hope it will result in lower taxes and freer markets overall – eventually ending with governments having offered so much that they have nothing left to offer. Perhaps empowering our local governments and encouraging them to use only what tools have been already granted them to compete, we can eventually get our local governments to do much of our libertarian work for us in eliminating their power themselves. Well, I can at least try to be an idealist and hope so, even if it is a narrow hope.
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