The fool’s gold of economic development

More than 200 people lost their jobs yesterday in Roseburg, Oregon after Dell closed its call center there. While the closure came as a shock to many employees and the community, no one should be the least bit surprised it came to this. What’s surprising is that elected and economic development officials, desperate for jobs, keep rolling out the red carpet for global corporations whose only long-term allegiance is to making money for their shareholders.

Back in 2002, Dell chose Roseburg for its call center after starting with a list of 3,300 communities as potential sites for the center, according to a December 23, 2002 article in The News-Review of Roseburg. To win the selection process, the city, Douglas County and the state of Oregon agreed to give Dell a package of tax breaks and other inducements. According to The News Review, the package included a property tax waiver of up to three years, a state income tax credit worth up to 25 percent of property investments that relate to online trade, a reimbursement of $250,000 for Dell expenditures on telecommunications upgrades and equipment, and even an agreement to build a 75-car parking lot at no cost to Dell.

In that same newspaper piece five years ago, well-known Oregon economist Joe Cortright warned, “Places that are going after call centers have to be very cautious.” He was very aware that the trend then (and now) was toward moving corporate call centers overseas to save costs. It’s also the case that business conditions change rapidly and companies react accordingly. That same month of December 2002, as the article noted, DirecTV closed its call center in Beaverton, Oregon and laid off 400 people after shutting down its Internet subsidiary.

The warning signs were there five years ago, making what happened yesterday in Roseburg no surprise. Too often winning the chase for jobs from outside corporations is nothing more than fool’s gold. It may look like real economic development, but it is soon followed by the realization that the same thing that draws large companies to a community – lower costs and higher profits – is what sends them on their way when their business declines or better opportunities present themselves elsewhere. Dell is just the latest example of this. As has been widely reported, Dell sales have been falling, and they are in the process of shedding jobs.

So what’s the choice for communities hungry for jobs, like Roseburg, which has long struggled to overcome the deterioration of timber industry employment? It’s doing everything possible to take care of existing local employers and to encourage local entrepreneurship. This is not the quick-fix answer public officials seek, and it doesn’t let them bask in the glow of ribbon-cutting ceremonies with out-of-town corporate fat cats. But independent locally owned businesses are the long-term foundation for a sustainable economy.

One Roseburg resident summed it up well yesterday in comments to The News Review:

“Did anyone know Dell was going to close?” Absolutely! Everyone who has been paying attention to the business world for the past few decades (at least). Small towns bend over backward to give big corporations whatever they want; the companies fail to deliver, and then leave in five years. If half the worth of incentives and tax breaks had gone to supporting locally-owned businesses instead of Dell, the people of Roseburg would be better off today.

August 3rd, 2007


  1. These stories always sadden me. I just read in Business Week about Google opening up a data farm in a North Carolina town. They got a really sweetheart deal from the state, the county and the town, in the form of tax incentives, construction, etc. And Google has promised or offered nothing in return. They say it’s a possibility that people living in the town might be employed by them down the road. But no guarantees.
    What happened is known in economic and sociological circles as an “externality.” The company decides that relocating this particular part of the operation elsewhere will save them money, while the other half of the equation (the town) and the implications for them, aren’t even considered.
    You’d think states and towns would form these kinds of strategic economic alliances, so that it’d be more difficult for these companies to just play them off each other.

    Comment by Jeff — August 6, 2007 @ 3:25 pm

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