St. Louis’s Lacking Investment Environment
Foreign direct investment, or FDI, can provide great growth opportunities for cities, providing a new influx of capital—and usually jobs—in regions that sometimes desperately need it. Two good examples of the benefits of FDI could come from the St. Louis region and Louisville, Kentucky.
St. Louis is, according to the World Trade Center St. Louis, home to “perhaps the country’s most splintered and geographically spread network of governments.” This splintered set of governments is almost laughable at times; the St. Louis City and County area is home to ninety municipalities, 75% of which are not accredited, according to Better Together, a local non-profit that addresses St. Louis regional fragmentation. This lack of organization has a chilling effect on business and economic development. Some municipalities make it easy to invest by providing clear instructions and online documentation necessary to set up or purchase a business, but some do not. In one municipality, businesses might flourish and tax revenues may be high due to various incentives. Just a few blocks away, a different municipality, still a part of the St. Louis community, may be suffering from lack of investment.
Louisville, by contrast, has a unified city-county government. The Louisville/Jefferson County Metro Government was established in 2003 after a county-wide referendum. This arrangement means that no matter where a business opens up or invests its money, its tax dollars fund the entire metro area. It also simplifies administrative processes by streamlining most services into a larger, more modern governance structure that is more capable of adapting to the 21st century economy.
Louisville, with a population of around 740,000, is roughly half the size of St. Louis City and St. Louis County (total population 1.32 million), but the unified City-County model of government makes Louisville much more attractive for business. St. Louis and its ninety municipalities however, are not as attractive.
Take, for example, Google Fiber. In 2015, there were whispers that Google Fiber would come to the St. Louis region, according to the St. Louis Business Journal. It didn’t. It did, however, come to Louisville. The development of Google Fiber’s high-speed internet service, like many large investments, will require infrastructure to be built around the city and approval from the relevant governmental departments. The key difference in Louisville is that it only needs to be approved from one of each department—the Louisville/Jefferson County Metro Government corresponding authority. In St. Louis, Google Fiber would’ve been required to interact with relevant departments each and every St. Louis municipality—all ninety of them—to bring its services to the population.
This same chilling effect goes for FDI as well. Since 2000, the St. Louis area has received a measly $250 million in foreign direct investment from China, according to a report commission by the National Committee on US-China Relations (NCUSR). Those investments have led to the creation of a remarkably few 150 jobs in the past seventeen years, according to the same study. By contrast, Louisville received $3.4 billion in investment, which led to the creation of 6,020 jobs during the same period.
[su_pullquote]Louisville has half the population of St. Louis, but the Chinese FDI in Louisville was 12 times greater in dollar value, and 360 times greater in job creation. How could this have happened? [/su_pullquote]Louisville has half the population of St. Louis, but the Chinese FDI in Louisville was 12 times greater in dollar value, and 360 times greater in job creation. How could this have happened?
For one, St. Louis’ largest investment project, according to the same NCUSR report, was the acquisition of the video game developer Riot Games by Tencent, the Chinese tech firm best known for the WeChat messaging app. Only 90 jobs were created in the district during the last year, with some of them coming from the Riot Games acquisition. Conversely, Louisville’s largest Chinese investment project was the acquisition of a GE Appliances plant, which led to thousands of jobs. St. Louis’ fragmented political system makes it unattractive for large investment projects that would span multiple municipalities; in a unified city-government, that is not a concern.
St. Louis City and County split in the 1800’s, because the City residents did not want their tax dollars funding development projects in the County. It was probably a bad idea then, but it is absolutely a bad idea now. St. Louis needs a revitalization, and for that, it needs region-wide collaboration.
[su_pullquote align=”right”]For St. Louis to attract large investment projects—those that would cover the whole region—St. Louis needs to modernize its system of governance.[/su_pullquote]For St. Louis to attract large investment projects—those that would cover the whole region—St. Louis needs to modernize its system of governance. Step one is merging the city and county into a unified government, and incorporating small municipalities—DeMun, Clayton, U-City, and 87 more—as subordinate to a larger St. Louis City-County Metro Government, following models in Indianapolis, Louisville, and Nashville.
Jacob Finke ‘20 studies in the College of Arts & Sciences. He can be reached at jbfinke@wustl.edu.