On September 18, 2017, the article "Wisconsin approves $3 billion contract for Foxconn factory" appeared in the business section of BBC News. The article describes a deal put into law by Gov. Scott Walker, awarding Foxconn Company financial subsidies totaling three billion dollars (""Wisconsin Approves $3Bn Deal for Foxconn""). The firm is a well-known contract electronics maker. The agreement calls for Foxconn to build a manufacturing factory for liquid crystal display panels in Wisconsin (""Wisconsin Approves $3Bn Deal for Foxconn""). Time and again, governments have been known to offer subsidies to corporate organizations in a bid to promote investment which enhances economic activities within the intended locations. In return, the promotion of economic activities results in wealth creation and an improved quality of life amongst the citizens ("Wisconsin Approves $3Bn Deal for Foxconn"). The deal above, for example, is a significant boost to the manufacturing economy of Wisconsin. Also, other benefits that would be associated with the establishment of the plant is the creation of jobs for the citizens. The firm confirmed that it would hire well over three thousand workers initially although the number is expected to increase ("Wisconsin Approves $3Bn Deal for Foxconn"). Such jobs include work availed to equipment suppliers, contractors besides other household expenditures. The jobs would be crucial in generating revenues in the form of taxes to the state. Besides, the deal may be vital in enhancing the balance of payments in the country through inward investments. The investment is also crucial in promoting exports and substituting imports ("Wisconsin Approves $3Bn Deal for Foxconn"). As one would expect, it would be highly likely that the prices of the domestic products would also be significantly lower as compared with the substituted imports. The author further notes that the level of investment and hiring will be critical determinants of the amount that the firm will receive in subsidies ("Wisconsin Approves $3Bn Deal for Foxconn"). About this point, from a critical point of view, continued improvement of automation technologies could, however, spell doom for the multitude of workers should the company invest more in automation. Most companies prefer to automate their manufacturing processes as it is more efficient and cheaper. As such, in the future, this might be a critical concern. Of note also is that the display industry is ever evolving. Consequently, this would demand the company to be smart and agile to ensure that the plant’s technology does not eventually become obsolete over time. Notably, in the article, the author reports that a majority feel as if the deal was some form of corporate welfare ("Wisconsin Approves $3Bn Deal for Foxconn"). Corporate welfare is a term used to denote the bestowal of financial aid, tax breaks or other subsidies to corporations by the government ("Wisconsin Approves $3Bn Deal for Foxconn"). The concern here is that in market-based economies, there are risks in granting of extortionate financial incentives to individual corporate organizations. In the report, a majority of the citizens are of the opinion that the incentive package is hefty ("Wisconsin Approves $3Bn Deal for Foxconn"). The taxpayer's money will necessarily pay the hefty incentives. Paradoxically, even for the jobs created by the plant, the salaries for the new employees will still be paid for by the taxpayers. In this regard, the chances are that, to counter for the substantial cost in state tax credits, there might be an increase in taxes which may negatively impact on the same citizens that the government is trying to improve their quality of life. There is also concern over states picking multinational companies that make huge profits at the expense of local businesses ("Wisconsin Approves $3Bn Deal for Foxconn"). As an alternative, governments can create programs to fund these ‘smaller' industries which are confident of contributing to the economy in the long term, unlike foreign multinational companies which are more ‘footloose' and their stay is uncertain.
In a nutshell, irrespective of the advantages offered by the deal as cited in the article, there are also associated disadvantages which are worth being thought of critically. The issue is especially crucial for management students as it helps them to gain insights on emerging issues that concern all at large as well as possible impacts that they might have on the economy both in the short term and in the long term.
Work Cited
"Wisconsin Approves $3Bn Deal For Foxconn." BBC News, 2017, http://www.bbc.com/news/business-41312834.
