As corporations search for new production sites, governments compete furiously using location subsidies and tax incentives to lure them. Yet underwriting big business can have its costs: reduction in economic efficiency, shifting of tax burdens, worsening of economic inequalities, or environmental degradation.
Competing for Capital is one of the first books to analyze competition for investment in order to suggest ways of controlling the effects of capital mobility. Comparing the European Union's strict regulation of state aid to business with the virtually unregulated investment competition in the United States and Canada, Kenneth P. Thomas documents Europe's relative success in controlling—and decreasing—subsidies to business, even while they rise in the United States.
Thomas provides an extensive history of the powers granted to the EU's governing European Commission for controlling subsidies and draws on data to show that those efforts are paying off. In reviewing trends in North America, he offers the first comprehensive estimate of U.S. subsidies to business at all levels to show that the United States is a much higher subsidizer than it portrays itself as being.
Thomas then suggests what we might learn from the European experience to control the effects of capital mobility—not only within or between states, but also globally, within NAFTA and the World Trade Organization as well. He concludes with policy recommendations to help promote international cooperation and cross-fertilization of ways to control competition for investment.
Table of Contents
Preface
Acknowledgments
List of Abbreviations
1. Bidding for Business: An Unclosable Can of Worms?
2. The Market for Investment
3. European Union Control of State Aid
4. The Development of the State Aid Regime
5. The North American Nonregimes
6. How Much Bang for the Euro?
7. Lessons for Theory, Lessons for Policy
Appendix 1. Notes on Game Theory
Appendix 2. Text of Articles 87-89 EEC
Appendix 3. A Portrait of State Aid
Appendix 4. NGOs Campaigning on Corporate Subsidies/Accountability
Index
Reviews
"The use of locational incentives to divert corporations from one site to another, or to prevent them from moving, is an escalating problem in international political economy. Kenneth Thomas has established himself as the leading figure in uncovering what the facts are (without overstating them), developing the analytical framework to examine these incentive competitions, and spelling out the policy consequences for national, sub-national, and supra-national authorities."—Theodore H. Moran, Karl F. Landegger Professor of International Business Diplomacy, School of Foreign Service, Georgetown University, reviewing a previous edition or volume
"Well researched . . . Intriguing conclusions . . . Could indeed provide interesting policy recommendations in the face of increasing capital mobility. . . . Competing for Capital can provide original insights into the impact of international capital mobility on domestic policies and the competition for investment."—American Political Science Review
About the Author
Kenneth P. Thomas is an associate professor of political science and fellow at the Center for International Studies, University of Missouri-St. Louis. He is the author of Capital Beyond Borders: States and Firms in the Auto Industry,1960-94 (Macmillan, 1997).
