The strength of enterprise zones; when local, state and federal governments collaborate, EZs can work

Black Enterprise, Nov, 1994 by Edward Irons

There is much current debate over whether enterprise zones (EZs) work. Critics say EZ incentives often create jobs at a higher cost than job creation would be without them. Macroeconomic opponents contend that zone jobs may not contribute to the national income, and to a significant degree merely shuffle existing jobs geographically. The majority of the BLACK ENTERPRISE Board of Economists take these views (see June 1994, "Can Clinton's Urban Policies Really Work?").

I disagree. The nation is seeking to rid itself of an escalating taxpayer burden. We have a debilitating lesion on the body politic and if it requires shuffling national resources to provide a cure, it is in our best interest to do so.

In fact, shuffling jobs is not uncommon. For instance, the nation isn't hurt when industry relocates from New England or the Midwest to the Southeast, the poorest section of the country. If not, why can't the same process work for inner cities? I would argue that with careful design, collaboration between state, local and the federal government, firm commitment, success can be achieved.

Empirical evidence suggests there can be no single model, but that each zone orchestrates a unique set of circumstances. Success comes from a well-conceived plan and a commitment to make it work for all stakeholders.

Puerto Rico is an example. During the first 10 years of its EZ plan, it attracted 750 industries and $500 million. A study of the New Jersey EZ program concluded that "the urban enterprise zone (UEZ) is a cost-effective economic development tool, leveraging almost $2 in state and local taxes for every $1 forgone in state tax revenues...the program is an efficient way to generate jobs, even when the multiple effects of UEZ business activity are not considered."

States can do more than counties and cities because they have more power to grant incentives. Therefore, if zones are to be effective for cities, their incentives should be in accord with the states. Why should states assist cities and counties to attract industry and create jobs? The jobs will ultimately benefit the state in several ways - such as the generation of income taxes from incremental wages and corporate profits derived from increased consumer spending, and the shrinking of social welfare costs.

I urge that federal, state or municipal governments give all firms locating in an EZ a "no tax" incentive, create a capital fund - for both venture and debt - and develop a broad management and technical assistance program. That's what Puerto Rico did.

Of course, the incentives must be sufficient to overcome classic reasons for not investing in cities. Anything short of that commitment is destined to fail.

WORDS IN THE NEWS

"There are no easy answers to the problem of what to do with Haiti because at the heart of the problem is the question of race...Certainly race is not the entire explanation of U.S. policy toward Haiti, but it is part of [it]. How else can one explain the differences in U.S. foreign policy toward Haitian refugees and Cuban refugees. When you strip away everything else, what other explanation can there really be? - Bernice Powell Jackson, executive director of the United Church of Christ Commission for Racial Justice, writing recently about foreign policy decisions involving Haiti.