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The Foxconn Con

Aug. 1, 2017
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Photo credit: Prachatai (Flickr CC)
Editor's Note: The following are Joel McNally’s opinions. We agree with his observations and his cautions. The Shepherd’s position is that, since Wisconsin has had a dismal job creation record over the past several years, we embrace the idea of taking a risk with Foxconn. We hope that Foxconn delivers close to the number of jobs it is estimating, and we believe that the Walker administration could improve its deal by requiring Foxconn to abide by DNR regulations and, rather than making the annual $200 million tax credit a refundable tax credit, it should be a non-refundable tax credit that can be carried forward.

Why do you think it’s called Foxconn? Politics aside, everyone who cares about Wisconsin really wants to believe all those gushing promises about the staggering number of high-paying jobs about to be created by a gargantuan high-tech facility—three times as large as the Pentagon—guaranteed to transform Racine and Kenosha into a modern-day version of Walt Disney’s Tomorrowland. But it sure would be a lot easier to believe if the breathless announcement hadn’t been made jointly by President Donald Trump, Wisconsin Gov. Scott Walker and Terry Gou, chairman of the Taiwanese electronics company Foxconn, all three notorious public liars.

Many people are familiar with the dubious veracity of Trump and Walker. The Washington Post’s running tally of Trump’s documented lies and misrepresentations averages nearly five a day. Walker once attempted to remove “the search for truth” from the mission of the University of Wisconsin and then lied about trying to do it. But most Wisconsinites are just starting to learn about Gou’s stream of broken promises around the world to spend billions of dollars to create tens of thousands of jobs—$10 billion in Brazil, $5 billion in India, $5 billion in Vietnam, $1 billion in Indonesia, $30 million in Pennsylvania—that came to little or nothing. He sounds like Trump and Walker’s brother from another mother.

An early warning sign the Wisconsin announcement might produce far less than the mind-boggling claims was the mysteriously shrinking number of promised jobs. In January, around the time of Trump’s inauguration, Gou announced he might invest at least $7 billion in the U.S. to create 30-50,000 jobs producing flat LCD screens for TVs and computers. By the time Walker made the announcement, Gou’s investment was claimed to be $10 billion producing only 13,000 jobs. Even that number appeared to be inflated by Walker. Foxconn said it would only be hiring 3,000 workers over four years, and eventually that number might potentially grow “up to 13,000.” Someday. Maybe. Or maybe not.

Walker has a history of promising unbelievable jobs numbers that never happen. Walker’s motive for fabricating Foxconn numbers is obvious. A “transformational,” “once-in-a-century” jobs coup is the perfect start to the re-election campaign of a governor whose greatest political liability is his failed jobs record.

But, while many of those jobs could be imaginary, the historic $3 billion (that’s billion with a “b”) state tax giveaway Walker wants his eager Republican legislature to hand to Foxconn is real, hard cash. If Foxconn makes its promised investment, Wisconsin would literally write checks for more than $200 million a year for the next 15 years to Gou’s multi-billion-dollar company.

 

‘A Guaranteed Loser for the State’

Good Jobs First, a nonpartisan Washington, D.C. research group that tracks government subsidies to private companies, ranked it as the fourth-largest tax incentive deal in U.S. history and unlikely ever to produce enough revenue to justify the enormous cost. “We can only describe this as a gift from Wisconsin taxpayers to Foxconn shareholders,” Executive Director Greg LeRoy told The New York Times. “This is a guaranteed loser for the state.”

Walker swears state safeguards protect taxpayers. If Foxconn doesn’t create 13,000 jobs, he said, it won’t get all of its $3 billion windfall, and anybody who raises questions about the deal can go suck lemons. But when, exactly, over the next decade-and-a-half would Wisconsin decide Foxconn isn’t creating enough jobs and stop writing $200 million dollar checks? After Foxconn’s first billion in five years if it’s only created the 3,000 jobs it promised? After the second billion? And what kind of deal is paying a billion dollars to create 3,000 jobs, anyway? In 2010, with what would now be the second-largest Wisconsin subsidy, Democratic Gov. Jim Doyle saved 3,000 jobs at Mercury Marine in Fond du Lac for a mere $65 million (with an “m”).

Politicians are always thrilled to attract high-tech “jobs of the future.” But high-tech factories almost always mean far fewer jobs. Foxconn’s biggest investments are likely to be in robotics. Foxconn recently announced laying off 60,000 workers at its iPhone 6 factory in Kushan, China—more than 50% of the workforce—replacing them with robotic advanced technology, also produced by Foxconn. 

One of the attractions of Wisconsin for Gou was the anti-union, anti-worker culture Walker has brought to the state. That’s disturbing given Foxconn’s reputation as a dangerous, high-stress work environment. Chinese workers complain of working seven days a week and standing for long hours on swelling legs. In 2010, there was a suicide cluster of 18 workers throwing themselves from Foxconn buildings, with 14 deaths. Foxconn installed safety nets to catch the falling bodies. Two years later, 150 workers threatened mass suicide from the roof of one factory before they were talked down.

Do Walker’s state safeguards for Foxconn’s Magic Kingdom include suicide nets? Mass suicides can put a real crimp in a state’s workforce development.

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