What does a Political Economy look like?

As government becomes more and more involved with controlling the economy, specifically economic development, one has to wonder what this leads to. For example, Democratic Governor of Michigan Jennifer Granholm recently announced that her personally controlled economic council has decided to award $28 million dollars in tax payer credits for firms and businesses that her bureaucrats like and favor. This is all deemed 'economic development', and supposedly will 'bring in' $151M and create 1,254 jobs. How does this work in reality?

In reality, these politically connected companies were were successfully able to lobby government for special insider benefits will not bring in anywhere near that amount of money or jobs. In fact, I would question whether this $28M will bring in $28M in revenue for the state- I would be willing to give fair odds that the state will lose money on these investments, and the net result will be a transfer of wealth from honest tax-paying citizens to business interests, much as you see or saw in states as diverse as Syria (now), Germany (1930's), Italy (1930's), or Iran (now).

For example, Granholm was re-elected in 2006 on the strength of promises to rebuild Michigan's economy by supporting new and dynamic environmental companies. She said that under her direction, even though she had no experience in business or investing, she would direct state funds to build new environmental industries in our state by giving tax breaks to favored companies.

Take for example the solar energy company Energy Conversion Devices in Rochester Hills. This company makes solar fuel cells, and companies like this have had tax breaks and stimulus money thrown at it in spades. And yet, they are unsuccessful- which is why they weren't getting bank loans before the government stepped in. Today Energy Conversion Devices announced that it is laying off 70 employees and closing a plant. It's business plan, its means of being successful, it's only way to restore prosperity, is to get its hands on more government money and stimulus- not to be more efficient, not to produce goods that customers want, not to make our world better- but to get its hands on my money.

This is what the future looks like in a politically directed economy- it looks like Detroit. Look at these links for the sources for this post- here, here, here, and here.

UPDATE: This is what a political economy looks like- federal stimulus money is flowing into Illinois because the President of the United States is from that state. 12% of all federal stimulus money has been sent to the politically connected state of Illinois, which is probably the highest percentage (I would guess that California gets a lot too because Pelosi is from that state, and Nevada probably got a lot too since Reid is from that state). Political connections=money in today's political economy.