The following column is the opinion and analysis of the writer.
Earlier this week, Nike decided to cancel production of a Betsy Ross flag special edition sneaker because of objections from former NFL quarterback Colin Kaepernick. Kaepernick contended that placing the flag on the shoe was improper since the flag was in existence during a period in which slavery existed in the United States.
Nike’s decision to cancel the patriotic shoe was a boneheaded, offensive and ridiculous act of kowtowing at the altar of political correctness. After news broke of the company’s actions in this case, I personally vowed to stop purchasing Nike products and swiftly purchased a pair of Brooks Sports running sneakers that proudly displayed Old Glory across the entire shoe.
In a commendable response to Nike’s move, Gov. Doug Ducey directed the Arizona Commerce Authority to withdraw financial incentives that had previously been offered to the company to locate a manufacturing plant in Goodyear. Ducey was right to cancel these incentives — and not only because Nike exhibited poor decision-making. The government should not be in the business of subsidizing private companies in the first place, whatever positions a company may or may not take.
Unfortunately, such subsidies have existed even before the dawn of statehood. In the 19th century, Arizona towns would compete against each other to offer railway companies lavish handouts, only to leave taxpayers holding the bag when the railway went under for building lines the market did not support and passengers did not use.
The founders of the Arizona Constitution were wise to put protections in place to prevent this type of government largesse. Specifically, the gift clause of the Arizona Constitution prohibits subsidies to private interests in the absence of a public purpose and fair consideration. This provision has been used successfully in recent years to challenge taxpayer abuses across the state. Yet despite these prohibitions, governments persist in playing favorites.
In this case, two separate government entities — the city of Goodyear and the Arizona Commerce Authority — each offered Nike large subsidies to locate its plant in Goodyear. Goodyear reportedly offered $2 million in fee abatements and other subsidies, while the ACA offered another $1 million.
For a company that reported profits of nearly $40 billion last year, it seems unlikely that $3 million in taxpayer money is going to make or break a deal. But the more important point is that neither the state nor Goodyear should have been playing the subsidy game at all. In our system of free enterprise, companies ought to rise and fall on their own merits, not the whims of bureaucrats.
There is a substantial amount of economic evidence that shows government subsidies do not work because they distort the market, unfairly disadvantage competitors and simply shift the allocation of resources rather than create new growth.
What’s more, government favoritism is a one-way ratchet: If all goes well, the special interest accrues the benefit, but if something goes poorly, the taxpayer is left holding the bag. Just ask the taxpayers who guaranteed half a million dollars in loans to the now-bankrupt Solyndra.
So let’s all take a lesson from this one and withdraw subsidies not only from Nike, but also to the other special interests that receive taxpayer handouts. The market is better at making economic decisions than bureaucrats are. After all, whatever your opinion as to what happened in this case, you’re free to buy shoes anywhere. I know firsthand that Brooks Sports offers a great pair of new running shoes.