December 13, 2012 11:52:42 AM
The failed Twin Creeks solar panel plant in Senatobia is yet another chapter in Mississippi's story of failed state investments.
The 70,000-square-foot plant, built by Yates Construction, sits empty. The promise of 500 high-paying jobs is gone with the wind. Officials are blaming the failure on price competition by the Chinese. No kidding.
Meanwhile, Mississippi Gov. Phil Bryant, who inherited the mess from Haley Barbour, is suing Twin Creeks for fraud. Bryant doesn't anticipate public losses to exceed $3 million, but it could possibly be tens of millions if the lawsuit fails and the building doesn't sell. Bryant now says he is against public financing for start-up companies.
He'd better tell that to the Mississippi state Legislature, which never fails to offer millions in subsidies to any company promising new jobs. Often these subsidies are passed by huge majorities in special sessions.
Public officials rationalize these subsidies as "infrastructure investments" such as training, roads, buildings, low-cost financing and a dozen other tricks. In essence, it is simply government giving public money to private companies.
Apparently, Mississippi has lost confidence in the private sector's ability to function on its own. Corporate welfare is thriving in our state and throughout the country.
The Nissan and Toyota plants were built with hundreds of millions in government subsidies, tax breaks and guaranties. No doubt, such public generosity is contributing to the empty government coffers.
At the time, car factories were considered a completely safe bet, but that was an illusion. Not long after Mississippi sunk nearly a half billion dollars into the Toyota plant, General Motors required a federal bailout.
Twin Creeks wasn't even close to a going concern. The company itself was a research and development startup trying to create a new type of recyclable, lightweight solar panel. It didn't get off the ground.
Let's hope Bryant and the Legislature have better luck with their $85 million investment in KiOR, which plans to turn pine trees into crude oil. KiOR is planning to invest a total of $500 million in three plants in Columbus, Newton County and Bude. The Columbus plant is now up and running. We will know soon if this is a pipe dream or a tree farmer's dream come true.
The U.S. venture capital industry raises about $20 billion a year to invest in growing companies. In recent years, the consolidated returns on venture capital funds have been poor, causing the industry to collapse after the Great Recession.
Slowly, venture capital is beginning to rebound, but returns are still modest compared to other types of investment funds. For every successful start-up company, there are plenty of busts.
If sophisticated private venture capital investors are barely able to make a decent return, how on earth does the Mississippi Development Authority expect to make a return? No offense, but the MDA simply lacks the brainpower and savvy to play this game.
Not only are these risky deals money losers, but they sow the seeds of corruption. Letting politicians play favorites leads to crony capitalism.
Both political parties are equally willing to dole out public subsidies to their friends and contributors. Republicans pay lip service to free enterprise, but they are as lax as the Democrats on the matter of corporate welfare. If you follow the money closely enough, it inevitably leads back to contributors or political allies.
Mississippi officials give these politically connected companies money without demanding any equity in return. Ironically, outright public ownership of these business enterprises is considered too socialistic.
Public officials shrug their shoulders and argue it's a necessary evil to compete with other states for jobs. Maybe so. But something's not right when some companies get showered with tax breaks and subsidies while other companies get none. Government should not be in the business of picking winners. A better policy would be pro-business taxes and laws available to all. It's hard to stop politicians from making unrealistic promises and doling out special favors.
I'm reminded of that great Merle Haggard song from 1981, "Rainbow Stew."
Eatin' rainbow stew in a silver spoon, underneath that sky of blue.
We'll all be drinkin' free bubble-up, an' eatin' that rainbow stew.
You don't have to get high to get happy,
Just think about what's in store.
When people start doin' what they oughta be doin', then they won't be booin' no more.
When a President goes through the White House door, an' does what he says he'll do,
We'll all be drinkin' free bubble-up, eatin' that rainbow stew.