Posted by R. Neal

Tennessee Governor Phil Bredesen, along with governors from Southern states including Georgia, Alabama, and South Carolina and other representatives from Florida, North Carolina, and Virginia attended a trade meeting this week in Tokyo. The trade summit is sponsored by the the Japan-U.S. Southeast Association.

The economic impact of Japanese investment in the South is undeniable. During a news conference following the summit, Gov. Bredesen remarked on this:

Bredesen said Tennessee is a "huge beneficiary" of Japanese business investments, with more than 160 Japanese operations in the state, employing more than 40,000 through capital investments in excess of $10 billion. These make Tennessee the No. 2 beneficiary in the U.S. after California, he added.

Bredesen also remarked on competition among Southern states for Japanese investment:

The governor said that while Tennessee is the top recipient of Japanese business investment in the Southeast, other states can offer greater financial incentives.

"Nearly all of our neighbor states are more aggressive in terms of incentives," Bredesen said.

Bredesen would not discuss details about Tennessee's financial incentives offered to Japanese businesses, but he did say that the state had other qualities that were attractive to foreign investment.

Bredesen credited the "critical mass of Japanese expatriates" in the state as a major reason Japanese businesses preferred to develop here.

"It's an advantage we have over any other state," Bredesen said.

Other factors such as infrastructure improvement, job training and a strong work ethic also helps the state bring in businesses, Bredesen said.

Bredesen noted, however, that Tennessee and the U.S. need to graduate [ed. note: and in Tennessee retain] more engineers to become more technologically innovative like Japan.

All of that sounds great, and the South has clearly benefited from foreign investment. But there is also growing concern about taxpayer funded incentives, and Bredesen didn't mention the growing concerns about our basic social infrastructure in the South.

As an example, you may recall that Toyota recently decided to locate a new $800 million manufacturing plant in Canada. In doing so, they gave up hundreds of millions of dollars worth of incentives being offered by Southern states. Why would Toyota make such a decision?

Click "there's more" for the rest of the story to find out...

Score a big one for the constructive role of government in society, especially for Canada's public medicare program and the country's internationally-recognized education standards.

When Toyoto Motor Corp. announced that it would build a new $800-million car-manufacturing plant in Canada, it did much more than give the Canadian auto industry a major shot in the arm. It was also a vote of confidence in the Canadian way of life.

In doing so, Toyota also exposed the hollowness of the anti-government rhetoric routinely pumped out by the corporate sector, its bought-and-paid-for think tanks (like the Fraser Institute) and media flagships like the National Post and most of Canada's open-mouth, right-wing radio.


Predictably, the business press was muted in reporting this aspect the story. But there were exceptions. A notable one was the New York Times.

"Modern American politics is dominated by the doctrine that government is the problem, not the solution," The Times reported July 25 in an article by Paul Krugman.

"In practice, this doctrine translates into policies that make low taxes on the rich the highest priority, even if lack of revenue undermines basic public services. You don't have to be a liberal to realize that this is wrong-headed," he wrote.

"Corporate leaders understand quite well that good public services are also good for business. But the political environment is so polarized these days that top executives are often afraid to speak up against conservative dogma. Instead, they vote with their feet."

U.S. politicians made a mighty effort to convince Toyota to build its new plant on American soil. Several southern states offered hundreds of millions of dollars in incentives. But Toyota turned its back on them and came to Canada.

In doing so, it cited two main reasons - the quality and training of Canadian workers and the advantages offered by Canada's universal medicare system.


"What made Toyota so sensitive to labor quality issues?" Krugman asked.

"There are other reports, some coming from state officials, that confirm (Toyota's) basic point: Japanese auto companies opening plants in the Southern U.S. have been unfavorably surprised by the work force's poor level of training.

"There's some bitter irony here for Alabama's governor. Just two years ago voters overwhelmingly rejected his plea for an increase in the state's rock-bottom taxes on the affluent, so that he could afford to improve the state's low-quality education system. Opponents of the tax hike convinced voters that it would cost the state jobs."

But superior education standards weren't the only reason. Medicare also played a huge role in the company's decision.

"Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States," Krugman wrote.


"So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending," Krugman added.

"But U.S. taxpayers will suffer, because the general public ends up picking up much of the cost of health care for workers who don't get insurance through their jobs. Some uninsured workers and their families end up on Medicaid. Others end up depending in emergency rooms, which are heavily subsidized by taxpayers.

"Funny, isn't it? Pundits tell us that the welfare state is doomed by globalization, that programs like national health insurance have become unsustainable. But Canada's universal health insurance system is handling international competition just fine. It's our own system, which penalizes companies that treat their workers well, that's in trouble.
I'd say that pretty much sums it up. With more effective leadership, and progressive leaders who are able to articulate -- and sell -- the benefits of progressive policies, America should be able to compete.

Instead, we have governors such as Phil Bredesen in Tennessee who may very well be exacerbating the problem instead of leading the way. When faced with an opportunity to reform health care in Tennessee and make it a model for the nation, he instead chose to dismantle TennCare (Tennessee's version of Medicaid). Now, 120,000 more people will be without health insurance, Tennessee will give up $1.5 billion or so in federal funding, and insurance companies, hospitals and other providers including local health departments (translation: taxpayers and policyholders) will pick up the tab. And in the process, we've made our state even less attractive to foreign investors who are concerned with the rising cost of health care, not to mention availability of a trained, healthy workforce.

OK, then.