State rankings, like the one CNBC released today, are essentially meaningless, except as tools for pro-business extremists to hurt us

Laurie White, executive director of the Greater Providence Chamber of Commerce addresses the Santander Economic Outlook Breakfast
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State rankings, like the one released Wednesday that put Rhode Island at 50 out of 50 for “business climate,” are essentially meaningless, and simply tools used by pro-business extremists to force local government to reduce taxes for businesses and to make it easier to exploit workers.

The Economic Progress Institute released the following statement that puts the CNBC report into context:

“Today’s release of CNBC’s ‘2019 America’s Top States for Business‘ reminds us once again of the unreliability of such efforts to rank states for business-friendly environments. The CNBC report measures something, though exactly what remains unclear.

“Despite distributing 2,500 points over ten areas, the ranking fails to measure actual business activity, such as the opening and closing of businesses. This year’s ranking of Rhode Island is suspect if only because CNBC grades the state with a D+ for Quality of Life. One of the state’s top grades is for Education.

“The CNBC report figures as one among five or six such rankings, include that of the Tax Foundation. Just within this group of reports, the rankings vary wildly. For example, the CNBC rankings place Virginia in the number one spot, whereas the Tax Foundation’s 2019 report ranks that state at 35. Yet, the Tax Foundation rates Alaska as tied for first place, while the CNBC report places Alaska at 47 out of 50.

“Because such reports rank not business activity, but instead an arbitrarily defined “business climate,” they are more tools for business organizations to advocate for lower corporate taxes than to tell us what business owners actually seek and do. Those individuals starting and growing businesses take many factors into account, and different businesses have varied needs. There is no evidence that the CNBC or similar rankings or the factors they weigh most heavily play significant roles in such decisions by actual business owners.

“The report Grading Places: What Do the Business Climate Rankings Really Tell Us?, produced by the organization Good Jobs First, handily discredits such business climate rankings.

“The website Grading the States provides insight into the specific CNBC rankings. As this website points out, CNBC does not share any of the statistics they use nor how they are weighted or scaled, making the ranking non-transparent.

“‘The CNBC ranking is based partly on underlying factors thought to contribute to growth (such as the education level of the workforce, or the quality of roads and bridges), and partly on measures of actual state performance (such as measures of economic growth or rates of new business formation). This makes it difficult to understand the meaning of the ranking.’

“As the review concludes, ‘In other words, it is not a useful predictive measure since the outcomes it would predict are, in circular fashion, part of the index.’

“Investing in job training and education will do more to attract and grow businesses in Rhode Island than will competing to score better on these mysterious rankings.”

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About Steve Ahlquist 1052 Articles
Steve Ahlquist is a frontline reporter in Rhode Island. He has covered human rights, social justice, progressive politics and environmental news for half a decade.Uprise RI is his new project, and he's doing all he can to make it essential

1 Comment

  1. I have repeatedly asked economists, the media, and political leaders for statistical proof that a “good” business climate increases economic performance or GDP growth rates. Not one politician, economist or media figure has ever produced any evidence of the efficacy of business climate rankings. The reason they can not produce the proof is that every study ever done shows that business climates have no validity or usefulness in predicting how an economy will grow. It is all a big lie, usually funded by the Koch Brothers, who lie about everything.

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