Home
/
RELIGION & LIBERTY ONLINE
/
How Enterprise Zones Lead to Cronyism
How Enterprise Zones Lead to Cronyism
Jul 12, 2025 8:07 AM

Barack Obama calls them Promise Zones while Rand Paul calls them Freedom Zones. But when they were first proposed they were called Enterprise Zones.

In the 1980s, then-congressman and self-described “bleeding-heart conservative” Jack Kemp became the first lawmaker to popularize enterprise zones, which he supported to foster entrepreneurship and job creation. Enterprise Zone policies attempt to incentivize businesses to locate within their borders—usually in blighted urban areas—by offering targeted benefits to particular industries panies. These e in many forms, including business tax credits for investments, property tax abatements, and reductions in the sales tax.

There’s a couple of problems with enterprise zones, though. There’s no evidence they work. And worse, they encourage and perpetuate cronyism.

As a new paper by Christopher J. Coyne and Lotta Moberg ofthe Mercatus Center explains, “Despite good intentions, policymakers often overlook the unseen and unintended negative consequences of targeted-benefit policies.” One of these unintended negative consequences is increased cronyism, the practice of exchanging favors between powerful people in politics and business:

Policies that favor some people panies over others are also vulnerable to distorted incentives. Those who can benefit from the government’s incentive schemes will engage in rentseeking in order to shape policies to benefit their own narrow interests. When such rent-seeking es prevalent, and firms can succeed by winning favorable status from the public sector, a system of cronyism develops whereby firms habitually serve political interests instead of satisfying private consumers, and whereby petition replaces petition. This incentivizes people to redirect their efforts from productive, positive-sum activities to unproductive and even negative-sum activities.

At The Foundry, Kenric Ward highlights some of the “dubious deals” from the study:

• As of 2013, Walmart had received at least 260 special state benefits worth more than $1.2 billion. For every 100 new Walmart jobs, an average of 50 existing jobs disappear as other retailers are crowded out.

• Apple got $370 million in state tax breaks for setting up in North Carolina. With just 50 jobs created, that’s $7.4 million per job.

• New York grantedaluminum giant Alcoa free electricity for more than 30 years (estimated value: $5.6 billion). In return, Alcoa pledged to make a $600 million investment and promised not to fire more than 165 workers. Subsequently, New York raised taxes multiple times on its citizens.

“People respond slowly to labor-market demand, and it may take many years for rent-seeking to e professionalized,” say Coyne and Moberg. “Once it is in place, however, cronyism is hard to root out precisely because those involved in it have an incentive to perpetuate it.”

The example of enterprise zones provides an important public policy lesson: Even poverty-fighting conservatives aren’t immune from the law of unintended consequences when we try to circumvent the functions of the free market.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
O Tannenbaum and Fair Trade
A couple of further points in reply to Micah Mattix’s response on buying Christmas trees, based on his original post here. 1) I think Mattix’s characterization of the buyer as “selfish” goes a bit too far, and is not an accurate characterization of a good deal of market activity. “Self-interested” would be more accurate, and would allow for selfish actors, but would also allow more generally for benevolent actors. For instance, a nun who runs an orphanage has decided that...
The Fountainhead of Bedford Falls
[Note: A version of this article ran last year around Christmastime. I’m posting it again because I love talking about Frank Capra and everyone else seems to love talking about Ayn Rand.] Frank Capra and Ayn Rand are two names not often mentioned together. Yet the cheery director of Capra-corn and the dour novelist who created Objectivism have more mon than you might imagine. Both were immigrants who made their names in Hollywood. Both were screenwriters and employees of the...
Christmas by the Numbers
As the most widely observed cultural holiday in the world, Christmas is a time of produces many things — joy, happiness, gratitude, reverence. And numbers. Lots of peculiar, often large, numbers. Here are a few to contemplate this season: $34.87 – Average amount U.S. consumers spent on real Christmas trees. 33,000,000 – Number of real Christmas trees sold in the U.S. each year. 7 – Average growing time in years for a Christmas tree. $70.55 – Average amount U.S. consumers...
ICCR’s 2013 Proxy Follies
As 2013 draws to a close, it’s time to inventory the year’s proxy resolutions introduced by the Interfaith Center on Corporate Responsibility. ICCR, a group purportedly acting on religious principles and faith, is actually nothing more than a shareholder activist group engaged in the advancement of leftist causes at the expense of their fellow shareholders and the world’s poorest. ICCR recently released its 2013 Annual Report. Its “2013 Proxy Season Recap” (pp. 16, 17) presents a snapshot of initiatives ICCR...
A Living Wage for a Living Tree?
The Ballors went with a live tree this year. We bought it at Flowerland and I do not know the name of the farm whence it came. Over at the American Conservative, Micah Mattix reflects on the Christmas tree market, which in his neck of the woods is “notoriously unstable.” In Ashe County, North Carolina, says Mattix, a dilemma faces the small tree farmer: “It is not sell or starve, but it is sell or go without a new septic...
Alms and Homage
In my Acton Commentary today, “The Great Exchange of the Magi,” I reflect on the fact that, due to the material poverty of the holy family, the gifts of the magi can be considered alms in addition to homage: The magi set forth an example of the heart that all of us need to have when es to stewardship of our material blessings. They knew their own poverty of spirit, and gladly gave the riches of this life for the...
‘60,000 Kids:’ Department of Homeland Security In The Human Trafficking Business?
Judge Andrew S. Hanen, a federal district judge in Brownsville, Texas, is accusing the Obama administration’s Department of Homeland Security of plicit in human trafficking from Mexico. Here is what appears to be happening: a parent pays a “coyote” or smuggler in Mexico to bring the parent’s child from Mexico to the United States, illegally. Typically, these coyotes are smuggling drugs as well. When DHS captures the coyotes, they will then often “deliver” the smuggled child to the parent, despite...
5 Minute Explainer: Competitive Federalism
Concepts you should know about explained in five minutes (or less). Leo Linbeck III, President and CEO of Aquinas Companies, provides an explanation petitive federalism and petition and governance relate in society. See also: 5 Minute Explainer: Subsidiarity ...
Power Tends to Corrupt Theologians Too
John Howard Yoder Photo Credit: New York Times Today at Ethika Politika, in my essay “Prefacing Yoder: On Preaching and Practice,” I look at the recent decision of MennoMedia to preface all of Mennonite theologian John Howard Yoder’s works with a disclaimer about his legacy of sexually abusive behavior: Whatever one thinks of MennoMedia’s new policy or Yoder’s theology in particular (being Orthodox and not a pacifist I am relatively uninterested myself), this nevertheless raises an interesting concern: To what...
Now Available: Kuyper’s ‘Guidance for Christian Engagement in Government’
Christian’s Library Press has just released the first-ever English translation of Abraham Kuyper’s Our Program (Ons Program), under the title Guidance for Christian Engagement in Government. First published in 1879 with the goal of preparing citizens for participation in the general elections, Kuyper’s stated purpose was twofold, as summarized by translator and editor Harry Van Dyke: “to serve antirevolutionaries as a guide for promotional activities and to prepare them for the formal establishment of an Anti-Revolutionary Party.” As for what...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved