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