About this Texas vs. California thing: Enough Already!

The following commentary is written for publication in LeftWingCapitalist by my good friend and multiple-time guest commentator Guy Heston.

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Toyota Motor Corporation’s recent announcement that it will move much of its United States administrative operations from California to Texas has some Texas officials gloating, especially the governor, and some California officials moaning, especially the mayor of Torrance, where the Toyota offices and about 3,000 jobs are currently and soon to be formerly located. Many of the comments are along the line of Toyota’s decision being proof of the business friendly Texas climate or the business unfriendly climate of California.

There are, however, various problems with the narrative. Reviewing Toyota’s manufacturing infrastructure in the United States, it seems obvious the company’s motivation was Toyota wanting to have administrative functions closer to manufacturing functions.  James Lentz, Toyota North America’s CEO, was quoted in the Los Angeles Times, “It doesn’t make sense to have oversight of manufacturing 2,000 miles away from where the cars were made.” Corporations often move things and people about for logistic improvements and overall efficiency. Synergy and all that. The moving companies love it.

Texas also gave Toyota a $40 million tax credit at taxpayers’ expense. Lots of other states do this sort of thing to attract a company from another state, and as Edward Alden and Rebecca Strauss, a senior fellow and the associate director of the Council on Foreign Relations, respectively, wrote in their May 10, 2014, New York Times column “How to End State Subsidies”, “From a national perspective, this is about as dumb as it gets.” They argued states would be far better off to work together to end such subsidies and invest in education or infrastructure or just lower overall tax rates.

But if you really want to get into this Texas versus California thing, Google “Texas versus California” and pick your hits. Not surprisingly, the business magazine website forbes.com offers a good case that Texas is a better place to do business, while businessinsider.com gives the nod to California as a better place for business and family. About Google, please note it is headquartered in Mountain View, CA, whereas Apple is headquartered in Cupertino, CA, whereas the Walt Disney Company is headquartered in Burbank, CA. Not to brag or anything. By the way, the Yahoo headquarters are in Sunnyvale, CA. How these companies deal with the supposedly awful California business climate I do not know.

Next let’s have a look at the Toyota facilities in Torrance, CA. The loss of Toyota employees is a short term blow to California for sure. But anyone with knowledge of the California real estate market can tell you the Toyota campus (I have been there and it definitely has the look of a beautiful university campus) is primo South Bay property that will be immensely attractive to other employers and well-paid employees.  Jobs move out, jobs move in, and so it goes. Incidentally, the multinational biopharmaceutical company Amgen is headquartered in Thousand Oaks, CA, where it somehow manages to comply with California business regulations and make a tidy profit.

So pick your metric. Lower labor costs, Texas. Cheaper land, Texas. Less business regulation, Texas. A higher graduation rate from college, California (good luck with that metric, Toyota). Stricter environmental protection regulations, California. Higher rate of residents without health insurance, Texas. Oh, before I forget, Lucasfilm, in case you want to watch “Star Wars” or something, is headquartered in San Francisco, CA. Just saying.

But here is my biggest problem with this Texas versus California thing. It is not nice and not neighborly. When did it become OK for a governor like Mr. Perry to fly about the country bragging about trying to take companies from another state and throw people there out of work? Maybe you want to be President or something, but there is no need to be rude. We are the United States, meaning we hope that 50 states that have many differences will still act as one country and support each other state as best we can, regardless of our various regulations and values or whether the governor of our state can remember the three federal departments he is proposing to eliminate. Please Google “Rick Perry Presidential Campaign 2012”.

So congratulations are in order to Texas for getting Toyota and I don’t blame Toyota a bit for moving. The company has been a model corporate citizen in California and I am confident they will continue that tradition in Texas. It’s a nice feeling when you get a company to move to your state or attract a convention in competition with another city, that sort of thing. And it’s OK to go home and brag about it a bit (by the way, Qualcomm headquarters are in San Diego, CA). But it seems awfully impolite to try to rub the other party’s nose in it, especially if the other party is one of the other 49 states. It just seems so, well, un-Texan, un-Californian and not putting one’s best foot forward as an American. Governor Perry could borrow a page from Nebraska, where the state tourism slogan is “Nebraska Nice.” The key word is nice.