Picking The Fast Pony At The Tracks

Much has been made of the Michigan tax subsidies to the movie industry in the past few years.  As some issues tend to be, there’s not much of a middle ground with them.  People are either ardently for them, or vehemently against.  Having had them for a few years now, it’s pretty clear that we’re not going to have them in their current form for much longer.

There are a few states that realized if they  gave out tax breaks to the people who made them, that more of them would be shot in Michigan.  And for a while, it was popular for several reasons.  The first was that it wasn’t the auto industry.  Extending financial support to something that wasn’t going through the financial equivalent of terminal cancer was a nice change of pace for Michigan, as we’d been treated to nearly a decade of financial apocalypse from the Big Three and affiliated economic entities.  The second that it was sexy, fun, and new.  It didn’t involve acrimonious labor negotiations, or the prospect of bankruptcy, and everyone likes movies, right?  And the third was that it would bring jobs to Michigan and possibly foster a new industry that, again, would not be automotive in nature, taking one more Michigan egg out of the automotive  basket.

Now the scope of the tax subsidies is declining, and the reason for that is simple: it’s not clear that the financial gains Michigan or Michiganders have made with new projects being filmed in state have exceeded what we’re losing out on in tax revenue we’d otherwise be capturing.  And, frankly, I’m going to have to, for once, agree with Gov. Rick Snyder for making the first moves that will, in my opinion, likely end this program for good.

Some think that governments should not be in the business of picking economic winners, but global competition doesn’t really allow us the philosophical luxury of seeing if laissez-faire capitalism is really a tenable proposition.  So while I think that governments should strategically champion certain industries and companies, I don’t think it’s TV and film.  There’s two main reasons for this.

The first is that there’s nothing upon which we can build here.  Historically speaking, we do transportation design and manufacturing in the form of cars.   The film money could be better spent on bringing aviation and railroad design, testing and manufacturing jobs to Michigan.  We have the talent, the physical infrastructure, the experience and most of what you’re going to need in order to build a rail and aviation industrial players within the state already.  And just look at what’s happened over the past few years: once you even consider ending the subsidies, the producers bolt.  You can’t do that with a factory or testing laboratory.  Once it’s build, it’s there.

The second is the impact of growth.  The market for movies is pretty much at a saturation point.  About as many movies as people want to see are being made.  Not so with industries such as transportation (there’s about 3 billion people in emerging economies that are going to need more transit in the years to come) or basic and applied biomedical and life science research.  The profit margins on a new drug (however modestly successful) that was designed, formulated and tested at University of Michigan is a hell of a lot higher than on even the most successful movie.  If sustainable profits are truly the goal, healthcare delivery oriented research is a much better pick.

To sum up, if you went to the horse track, you would never go ahead and pick the horse that’s the prettiest one solely on that criterion.  You pick the fastest one that’s going to be able to beat the others, even if it isn’t the prettiest.  Movies are the pretty ponies, and transit and healthcare the fast ones.  Let’s not show, let’s win.

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