By David Tulis
The biggest local economy news in Chattanooga in months is the announcement by Volkswagen it will build an SUV in an assembly line in Hamilton County.
In many ways the big news is not local economy news, but national and international economy news. Yes, 2,000 people will be hired and will live in and around Chattanooga. Yes, these people will need houses; contractors will build subdivisions and real estate agents will more quickly sell houses on the market. Yes, these people will shop at local stores and have their cars repaired at S&S Auto Repair and other shops. Yes, they will put money into local economy, and if they “buy local” they will increase the multiplier effect of every Federal Reserve dollar they put into circulation. Yes, they become Chattanoogans when they move here from afar, and the city is blessed as more people come to it and produce their wares and arts. Yes, the VW move is a vote of confidence in Chattanooga as its U.S. home base, but only by the way; its announcement is a vote in confidence in its own best plan, its product, its marketplace power.
“Rejoice with those who rejoice, and weep with those who weep,” St. Paul advises in his 12th chapter to the Romans. In keeping with this admonition, I here laugh and celebrate Chattanooga’s gain of another VW production line. But the grin lines have worn a crease in my jowls, so consider the following, now that the bubbly bottles sit empty and the goblets are massed on the tray as the waiters haul them back to the kitchen.
➤ Wages are not profit. Employees are the subordinate party in the master-servant relationship that is employment. An employee is paid exactly what he is worth, not a penny more. Wages are an equal trade, labor for money (or the best medium of exchange available). Profit is a different matter. Profit is when an entrepreneur’s revenues exceed all his costs. Two thousand new hirelings in Chattanooga is much less prosperous than if 2,000 people within the next two years were able to start their own businesses.
➤ Ownership = profit. If 2,000 people start their own businesses, the benefit to their hometown is great. Why? Because profitability remains in the city and county. VW employees help OTHER people earn a profit, namely the company and its shareholders. In the case of VW, the takers of profit through 295 million shares is Porsche (51 percent), the German state of Lower Saxony (20 percent), Qatar Holdings (17 percent) and others. In local economy with local ownership, the profit would go to local families, who might spend a good part of their revenues and profits locally. A 4 euro dividend for a share of VW stock may be partly created in Chattanooga. But it is absorbed by people far away.
➤ Tax breaks for big boy a vital concession to the concept of a free market. Because Chattanoogans are subject to commercial and consolidated corporate government, their region is under the heavy burden of regulatory control. To prosper its peoples, the city and county should seek an end to virtually all taxation, which would make the city a global magnet for capitalism and industry. Instead of extending deep tax breaks to all, government makes itself the capital center. It is prime mover, a profiteer, even, drawing on tax breaks from others to run its profit-seeking show (EPB is one, for example). That VW is granted breaks is a concession to the overall argument against taxation. To get the SUV line, the company is rewarded a F$230 million and could qualify for more than F$300 million in grants, credits and other governmental aid over the next 10 years, Mayor Andy Berke said. Would that every homeowner, every small business operator could live and operate harmlessly before his public without licensure, permissions, taxation and other barriers to entry. Based on my review of city and county comprehensive annual financial reports, consolidated government appears rich enough to end or drastically slash taxation for several years, giving Southeast Tennessee a chance to transition to a free market economy.
➤ Profit is the magical fuel of prosperity. Without profit, no business is sustainable. Without locally owned business, no city is sustainable. If everyone in my hometown or yours worked for an out-of-town corporation, the city could not survive. Chattanooga prospers because of its thousands of locally owned business and locally owned franchises; they create profit, are sustained by it, and support families and local economy. Multinational and other alien corporations do just the opposite. They leave in local economy rents and wages, but export profit. Profit is the lifeblood of the city. Volkswagen is here to create a profit for itself. It chose Chattanooga with nary a charitable impulse, but one that is purely rational and numerical, a calculation of using Chattanooga to build an SUV and turn around its sagging fortunes in the global auto market. Corporations serve a colonial interest of exploiting distant resources (including people) to generate profit for shareholders.
➤ Local business establishment and giantism. The Chattanooga-area chamber of commerce understandably focuses on the giant less than the small. Its focus is pro-business rather than pro-free market. There’s a difference. It focuses on programs to create jobs, when local economy really needs a program to create owners. Local economy will be more resistant to national financial debacles if it has less dependence on big foreign corporate players.
— David Tulis hosts Nooganomics.com on Hot News Talk Radio 910 1190 and 1240 AM, a talk show 1 to 3 p.m. weekdays that covers local economy and free markets in Chattanooga and beyond.
Used by permission of Chattanoogan.com, where this essay first appeared.
Sources: Dave Flessner, “Incentives boosted to lure VW Expansion,” Chattanooga Times Free Press, July 15, 2014
David Morton, “New incentives planned for VW expansion,” Nooga.com, July 15, 2014
Mike Pare, “VW to build new SUV in Chattanooga, add 2,000 jobs; impact to be felt for years to come,” July 15, 2014, Chattanooga Times Free Press website
Alfred Adask, “Corporations & the multiplier effect,” The Nature of Money (2002), pp. 202-211. The book is a compilation of essays appearing originally in the AntiShyster legal reform magazine, published in Texas in the 1990s.