The DEDO and Corporate Socialism in Delaware

In his book Governing Delaware: Policy Problems in the First State, William Boyer discusses the merger of the companies Astra, at the time located in southeastern Pennsylvania, and Zeneca, located in New Castle County, Delaware. Pennsylvania and Delaware competed for the location of the new AstraZeneca headquarters. Delaware won. It’s not difficult to understand why:

Without any public discussion or participation, Delaware’s political leaders won over AstraZeneca by putting together the largest incentive package in the state’s history, including $10.7 million dollars in free land, $8 million in cash, and $70 million in road improvements. By locating in Delaware, Astra Zeneca expected to save $155.4 million in corporate tax advantages, $105.8 million in sales taxes on construction costs, plus $30 million in tax credits. (Boyer, p. 31)

Other examples come readily to mind: DuPont, MBNA morph Bank of America, Playtex to name just three*. Considerable taxpayer dollars are designated to make profit-taking cushy for big business in Delaware. Often the taxpayer dollars are simply given to the corporations. This is what passes for “free enterprise” in Delaware.

But notice the peculiar nature of this “free enterprise” system. Many of the costs of doing business for big corporations (particularly startup costs) are socialized in Delaware (born by the state) but the profit-taking is privatized (they belong to the corporation). Socialized risk, privatized profit-taking—that is a sweet deal.

When a state sees the work of its citizens as a revenue stream and itself as a channel directing the revenue stream toward huge corporations, no one should be the least bit surprised when they read news accounts like this one:

The Delaware Economic Development Office skirted state bidding laws on four contracts for professional services in the last three years, and in one case gave inaccurate information to a General Assembly committee questioning one of the contracts, a state audit has found.

The report by state Auditor R. Thomas Wagner also found that DEDO agreed to a job creation incentive grant this year for DuPont Capital Management that was $400,000 bigger than agency guidelines allowed. (link)**

DEDO Executive Director Judy McKinney-Cherry has had run-ins with the General Assembly before, but most of them have been more dramatic than real and have resulted in no detectable remediation (e.g., Ms. McKinney-Cherry’s prompt firing of 10 DEDO employees, which resulted in no action from the General Assembly beyond a little obligatory bluster).

The reason why the DEDO can act on its own authority with only token oversight by the General Assembly is not difficult to understand. The DEDO’s primary mission is to attract big corporations to Delaware and maintain them here. Any arrangement that would smack of democratic control of the DEDO would destroy Delaware’s profile as the “company state” as well as the DEDO’s role of working to serve the interests of big corporations. The citizens’ place in this arrangement is confined entirely to passing on their tax dollars so that the DEDO can transfer them to the corporations. Democracy has nothing to do with the arrangement. In fact, democratic control would be a nuisance.

Therefore, when the General Assembly threatens to strengthen the Council on Development Finance, which oversees DEDO grants, don’t bet your paycheck on anything more than cosmetic changes in the relationship between the Council and DEDO. According to William Boyer, what makes the Delaware’s Republican and Democratic legislators indistinguishable is their servitude to the interests of big business:

[A]nother reason why Republicans and Democrats have exhibited near parity in Delaware politics—and perhaps the most important reason—is the pro-business posture they have shared since the end of the Second World War. Whereas ideological conflicts…had distinguished the parties in earlier years, competitive party politics during the last half of the twentieth century have been notable for the absence of ideological differences….In other words, Delaware’s two major parties have put ideology aside. When it comes to business, they tacitly agree not to disagree. (Boyer, p. 47)

Now we have the complete formula for the creation of the DIP (the Delaware Incumbency Party). It is comprised of two elements:

1. Incumbents looking after one another’s interests regardless of party affiliation.

2. Incumbents joining together for the principal task of socializing the costs of big corporations doing business in Delaware.

As for you Delawarean, don’t get involved, just keep working. Keep making taxable income that can be given gratis to big corporations.

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*When Bank of American (BOA) bought MBNA, Delaware changed its franchise tax laws to give BOA a sweet deal. BOA reciprocated the gesture by laying off close to 1,000 workers in Delaware. Playtex has found it lucrative to effectively extort grants from the state of Delaware by threatening to move its operations elsewhere. I994 it received a grant of over $6 million and in December 2005 it received another grant of $4 million. Playtex received the grant even though it intended to lay off 85 additional employees on top of the 170 employees it had already laid off.

** Readers should consult the News Journal article for the apparent shenanigans and “mistakes” the DEDO employed to skirt the law.