Report: Governors Engaging In Crony Capitalism Disguised As Economic Development

By: Wednesday October 23, 2013 7:41 am
Jan Brewer by Gage Skidmore 3.jpg

Governor Jan Brewer

America’s economy is awful. Unemployment is high, young people can’t find decent work, and according to a Wells Fargo survey 37% of middle-income Americans expect to work until they die. It’s not a wonderful life – unless, you happen to have some friends in state government.

In a new report, Good Jobs First details the growing use of “public-private partnerships” (PPPs) to promote economic development and the conflicts of interests they carry. Unlike traditional economic development which is run from a department of government (Commerce for example), PPPs allow private interests to borrow public authority to promote an economic agenda. Not surprisingly, that agenda often benefits the private interests that propose it. What was supposed to be a program for economic development quickly devolved into the most base form of government corruption and crony capitalism.

Three years ago, newly elected governors in several states, most notably Wisconsin and Ohio, decided that the best way to create jobs was to transfer economic development business-recruitment functions to “public-private partnerships.” These experiments in privatization have, by and large, become costly failures. Privatized development corporations have issued grossly exaggerated job-creation claims. They have created “pay to play” appearances of insider dealing and conflicts of interest. They have paid executives larger salaries than governors. They have resisted basic oversight…

We document here again numerous cases in which the public-private partnerships (PPPs) have become embroiled in scandals involving misuse of taxpayer funds, conflicts of interest, excessive executive pay and bonuses, questionable subsidy awards, exaggerated job-creation claims, lack
of public disclosure of key records, and other accountability abuses.

Good Jobs First identifies Governor Scott Walker of Wisconsin, Governor Jan Brewer of Arizona, and Governor John Kasich of Ohio as the chief culprits. This may result from a hostility among those Republican Governors to unions and civil servants which PPPs bypass. Instead PPPs offer an opportunity for governors to pay their friends well above standard government rates for “public” service.

Consider Don Cardon, hired by Arizona governor Jan Brewer in 2011 to run the Arizona Commerce Authority with at least $25 million of taxpayer and private funds to give away. Cardon’s salary was $300,000, triple what the finger-wagging governor makes.

He also got a $50,000 signing bonus, a grand a month car allowance, and the prospect of a $75,000 performance bonus if he was really good at giving away money to companies. That was more than enough to put him well into the top half of one percent of all workers that year. But Cardon quit and thus had to give back part of his signing bonus.

Nice work if you can get it. And you can if you know people in government.

The theory behind PPPs is that by working so closely with the private sector the government will create jobs. Unfortunately after all the goodies were handed out to businesses and their friends on the PPPs, no jobs were to be found.

From Iowa, to Florida, to Ohio – none of the PPPs have proved themselves. After spending millions upon millions of taxpayer money it seems the only jobs created were for those that ran the PPPs at public expense.

Photo by Gage Skidmore under Creative Commons license.