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Our Views: The pitfalls of landing Foxconn

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Sunday, July 16, 2017

The sudden influx of 10,000 jobs in Janesville could only be a good thing, right?

Not necessarily.

News of Foxconn considering and then passing up Janesville as the site of a $10 billion expansion project might have left some people feeling disappointed. But we know from experience the pitfalls of allowing one company and industry to dominate the local economy.

The GM plant closing happened not even 10 years ago. Let's not forget with its closing came the sucking sound of hundreds of people's livelihoods disappearing. When a community relies on a big employer, its fortunes rise and fall with that employer, too. The car industry is notoriously cyclical, and Janesville endured many ups and downs through the years before the bottom finally fell out in 2008.

Officials are portraying Foxconn's planned U.S. plant as a prize to be coveted. President Trump even dangled the expansion during his visit to Wisconsin last month, declaring the state could get a “very happy surprise very soon.” Michigan and other states are supposedly in the running, too. Janesville officials cooperated with Foxconn's inquiry about options for locating in Janesville, and we cannot blame the economic development team for feeling excited about the possibility.

But if Foxconn, a maker of smartphones and other smart devices, were to open a plant here (and every sign indicates they won't), the move would place tremendous strain on the city's ability to ramp up services for both Foxconn and its workers. Had Foxconn picked this area for its expansion, the blessing of more jobs would have collided with the realities of Janesville's infrastructure.

For starters, where would all these workers live? As it stands, Janesville has a shortage of quality rental housing. The housing market remained depressed for several years after the GM plant closed, but it's now struggling to keep up with demand as the economy rebounds.

Look to North Dakota for tales of woe amid an economic expansion. The shale oil boom from 10 years ago brought wealth to the region but also a haphazard collection of temporary housing and other pains associated with overgrowth. Not that Janesville couldn't find a way to eventually absorb Foxconn employees, but our point is that economic booms aren't entirely positive for communities. They come with downsides.

Of course, the biggest downside with a company as large as Foxconn would be inevitable economic downturn, the moment when the company lays off hundreds of employees or even shutters the plant.

The technology industry is particularly sensitive to disruptions, and there's no telling whether smartphones will remain as must-have devices 10 or even five years from now. Is Foxconn nimble enough to switch from its current line of devices to something else? Does it have the expertise or capability to survive the next technological disruption?

Janesville's economy has rebounded through diversification. Janesville seems to have learned its lesson from depending on a single manufacturer, having rebalanced its economic portfolio with stakes in technology, food, distribution, medical and other sectors. If one company shutters or lays off workers, it won't shock the entire system unless the whole economy tanks.

Whichever city lands the Foxconn plant will view itself as a winner, and Gov. Scott Walker and President Trump will surely treat that city as such. Politicians, if they talk about nothing else, tout jobs, jobs and more jobs.

Sure, we're puckering a little, here, from sour grapes, but winning 10,000 Foxconn jobs wouldn't be a perpetual party for the economy. It would come with a hangover.



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