Economic Development at What Cost? The Fantus Company, Financial Incentives, and Working-Class Communities, 1926-1996

Abstract

Why do local and state governments across the United States dole out billions of dollars in tax cuts, grants, and other financial incentives regularly to attract potential businesses, often with promises of low-wage labor, lax economic and environmental regulations, and other overtly pro-business policies that are often a detriment to public welfare? And more importantly, why are all of these policies accepted as normative practice within U.S. economic policy? This dissertation, “Economic Development at What Cost? The Fantus Company, Financial Incentives, and Working-Class Communities, 1926-1996,” addresses these questions by tracing the origins of this practice and its development throughout the twentieth century through an exploration of one entity’s history: the Fantus Company. The Fantus Company, the first site selection consulting company in the U.S., acted as a broker on behalf of both local and state governments and private companies to facilitate economic development agreements. The Fantus Company, through their advising, furthered the competition between states and localities in the quest for economic success in finding employers for their jurisdictions which ultimately depleted their financial resources.My research follows the Fantus Company from 1926 to 1996 and demonstrates how Felix Fantus, a Chicago-based industrial real estate entrepreneur, launched his enterprise in 1926 when he realized he could monetize his knowledge to drive factory relocation for profit. By 1936, in conjunction with Mississippi Governor Hugh Lawson White, Fantus helped craft the Balance Agriculture with Industry (BAWI) program, the first statewide economic development incentive program for this desperately poor former cotton plantation state. Fantus achieved such national stature by the mid-twentieth century that the Kennedy administration recommended its services to chronically impoverished communities from rural Appalachia to urban coastal metropoles that had qualified for assistance from the federal Area Redevelopment Administration. The consulting firm negotiated some of its largest economic development incentives from 1976 through 1992 when they were hired by seven different automotive manufacturers, recommending the mostly foreign automakers move to Southern and Midwestern towns in exchange for these record-setting economic development packages. Ultimately, this dissertation shows how this normative practice of large financial incentive packages and pro-business policies was purposefully crafted and propagated by site selection consultants, with the Fantus Company being the most influential actor because of its longevity and wide-ranging reach.