Inviting Companies…

For years now, states have been inviting companies to set up shop in their states. The obvious reason is to invigorate the economy by creating jobs. But lately, the states have been providing incentives to companies with a clawback provision.

What this means in simple language is that of a company is bought over or has a change in the market geography, there would have to be a payback from the company to the states to the tune of the exact incentives the companies received to make the move more attractive.

Did cities such as NYC, SFO, and the other commercial capitals of the world become so by offering incentives to the companies to do business there and now with every other state offering some incentives, are we going to see a growth of such cities? And, if for some reason, a company has to move, it would have to do so at the peril of angering state officials and paying huge amounts that they received before? Well, if it means that states will dictate where a company does business, which is most definitely bad business, it is the complete antithesis of pure capitalism and free market economy. If businesses are bound by state incentives, are we making these businesses more inefficient? If this is such a big consideration, it is the eternal cost arbitrage chase.