3c hapter - Index of

The Local Imperative 59
existing businesses, rather than hunting for “big game.” Studies have
found that the cost of creating a job is dramatically lower when states
focus their efforts on local companies.
In Illinois, which faces a $13 billion defi cit and a woefully underfi
nanced pension system, Terry Lutes, chief operating offi cer of the
Illinois Department of Commerce and Economic Opportunity, and
his team are trying a new approach. “For a long time everybody
bought into the notion that it was all the big bang . . . bring in the
big plant or a company with 200 or 1,000 jobs,” he explains. “In
the process, we all started to realize that we are bidding against each
other and the companies are all using us. Every state has this. We’ve
become a little more cognizant of the fact that they’re playing us off
against each other.”
In late 2004, for example, Maytag Corp. closed a refrigerator
factory in Galesburg in western Illinois to take advantage
of cheaper labor in Mexico. The move eliminated 1,600 factory
jobs—5 percent of the local workforce—and sent a ripple effect
through the local economy, jeopardizing as many as 2,000 additional
jobs. 33 The move came despite $12 million in subsidies
showered on the company just a few years before by state and local
governments. After Whirlpool acquired Maytag in 2005, things
went from bad to worse. The company announced it would close
another Maytag plant in Herrin, Illinois, eliminating 1,000 jobs—
prompting the state to try to recoup almost $200,000 recently
forked over by the state for improvements in the factory (a downpayment
on a total $385,000 promised). And despite promises of
tens of millions of dol lars for a new plant and job training offered
by then- governor Tom Vilsack, Whirlpool went on to close several
more plants. 34
Lutes, a former technology entrepreneur, fi gures that it may be
more cost effective to generate small business jobs. The new math
goes something like this: Illinois has 500,000 small businesses. If
the state could help each one of them hire just one employee, it
could reduce the unemployment rate by 5 percentage points.
Lutes says he is not completely abandoning the big companies,
just taking a more “diversifi ed” approach. But he is clearly
excited by the prospects.