Shopping for Government

You can now shop for just about anything online, and the Justice Department's outrageous assault on Microsoft has illuminated what could be a hot new market in e-commerce: shopping for government. We'll call this the "g-to-b" phenomenon, for government-to-business marketing. Thanks to the borderless Internet, market-friendly governments around the world can now compete for capital as never before. And with governments competing to offer low-tax, low-regulation environments for business, this could be a powerful, positive trend for American companies and investors.

Gordon Wilson, Employment and Investment Minister for the Canadian province of British Columbia, recently put out a press release headlined, "PROVINCE EXTENDS WELCOME TO MICROSOFT." Said Wilson, "While we're not talking with Microsoft about relocating to B.C. as some media reports [on June 2nd] have said, we would certainly welcome the opportunity to do so. An investment of this size would generate major economic benefits and thousands of good jobs for British Columbians."

Wilson isn't just offering shelter from the anti-trust storm to the gang in Redmond, Washington. He wants American tech companies of all kinds to look north for expansion. Said Wilson, "B.C. is becoming known as an international high-tech hub that provides ample skilled labour, advanced infrastructure, a strategic location, an excellent quality of life and other advantages. A KPMG report released in April confirmed B.C. offers cost advantages for high-tech investment over U.S. locations."

So Wilson is giving Silicon Valley the hard sell. In fact, his office says he's particularly interested in luring semiconductor firms to trek north of the border. Is Canada really an attractive destination? Well, government-run health care is a big minus for companies who believe that their employees are their most important assets and the winters are a little long.

Canada, of course, is not the only option. With more and more firms dependent on brains and talent as opposed to fixed physical resources, and with the Internet connecting even remote areas to the global economy, a lot of ideas that might seem crazy could suddenly become very reasonable. Where in the old economy Arizona plotted how to lure companies from California, in the New Economy this competition is going global. You might think of the Cayman Islands as a fun vacation spot or as a refuge for securities fraudsters and shady dealmakers. But it could someday become home to US or European multi-nationals.

You want a business-friendly environment? There are no individual income taxes in the Cayman Islands. There are no corporate income taxes. There are no capital gains taxes. The tiny government is funded with a few import and stamp duties. There are no limits on trade. Looking for the downside? Well, regulation is light and taxes are almost non-existent, but on the other hand, the weather is perfect. The Cayman Islands, part of the British West Indies, consists of 100 square miles of land 500 miles off the coast of Miami. Researching this story, I began to wonder why we haven't already relocated the TCS staff. Apparently, this thought has occurred to a few other folks. Due to the light hand of government in the islands and/or the gentle climate, more than 32,000 companies, 550 banks, and 400 insurance companies are either licensed or registered in the Caymans.

Do I think most of the S+P 500 is going to up and move to the Caribbean? Not likely, but isn't this threat a wonderful form of pressure on American policymakers? The Internet, which has brought more competition to so many industries, is now doing it to government. It has never been easier to move money, people and even companies around the world. Politicians should remember that the next time they contemplate new taxes or regulations.