Growth doesn’t require giveaways

Iowa City Press-Citizen
March 23, 2004

The Feb. 18 editorial “Biotechnology expansion right for Iowa” notes that “the proposed expansion of Coralville’s Integrated DNA Technologies is exactly the kind of business growth Iowa should encourage” and urges that its expansion be funded by the Grow Iowa Values Fund.  No reasonable person would disagree with the idea that this is the type of business growth the state should encourage.

But we ought to question whether the state should directly fund individual companies no matter how promising they may appear to be.

Questionable selections

The state has little expertise in picking and choosing which enterprises to support from among the many applicants for such funding.  All too typically, the companies chosen are not those with the best chances for scientific and financial success but those with the best political connections and the better lobbyists.  The Iowa Environmental/Education rain forest project is a dramatic example.  It originally was funded in the congressional energy bill where it, along with a number of other pork projects which, after no debate or examination, leapt over numerous projects advocated by the Department of Energy.  The department’s projects, in contrast, were requested and prioritized after extensive review and consultation by more than 100 non-partisan Office of Science advisers drawn from universities, DOE labs, industry and other government agencies.

Secretary of Energy, Spenser Abraham observed in the introduction to the report on the DOE projects that “fully half of the growth in the U.S. economy in the last 50 years was due to federal funding of scientific and technological innovation.”  He also observed that modern and effective research infrastructure, such as is advocated by the Energy Department, is critical to long-term economic growth and to maintaining U.S. leadership in science and engineering.

You can see the descriptive listing of the “Facilities for the Future of Science” projects on the Department of Energy’s Website (http://www.sc.doe.gov/Sub/Facilities_for_future/20-Year-Outlook-screen.pdf).

It is worth reading.  Some of the recommended projects could be candidates for placement in Iowa.  None has been funded.  But we will have a tropical rain forest right here in Coralville.

We see the same pattern of political decision-making unfold again and again and in state after state, as office holders pursue the Holy Grail of jobs and economic development.

Occasionally the investment succeeds, and the public benefits from an increase in employment and tax revenues.  But the promoters and investors are typically the major beneficiaries, and if the investment fails, taxpayers lose all their investment while the firm’s investors go on to some other scheme.

Biotech center needed

It is difficult for the state not to play this investment development game because it seems to have become the established practice for firms to get states to bid for such projects.  As the editorial observes, all states “dangle dollars” today.

Funding projects such as those the Department of Energy has recommended is a better long-term approach.  Another approach that might be considered is that taken many years ago by North Carolina when it set up its Research Triangle Institute Park.  It made no attempt to pick winners.

Rather, it made land and facilities available in close proximity to its three major universities and developed an administrative structure that encouraged cooperation between the universities and the Institute’s tenants.  Research Triangle Institute changed the economic face of North Carolina.  Oakdale Research Park in Coralville has used a similar approach on a much smaller scale.  Even that small-scale effort has been quite beneficial.

In 1986, when I chaired the Iowa Senate Committee that allocated the anticipated proceeds from the newly-enacted lottery monies, we designated funding for a number of projects that we expected would help stimulate or encourage economic development.  We set aside $5 million annually for a biotech center.  Unfortunately, while the legislation was approved with broad bipartisan support, none of the funding was distributed by then Gov. Terry Branstad’s administration.  We ended up with words on paper – but no action.

Later, a subsequent legislature erased the words and rolled all the funding into traditional programs funded by the operating budget.

Now, more than 15 years later, Iowa is trying to play catch-up.  All states are interested in biotechnology as the engine for economic development.  Perhaps Iowa can pick and choose winners from among the applicants for the scarce dollars.  I wish them well, but I’m not optimistic.

Arthur A. Small, Jr.