Everyone knows what a good business climate is, right? Chamber of commerce types tell us that states with low taxes and relaxed regulations attract ambitious and talented business leaders, whose accomplishments redound to everyone’s benefit. Journalists like myself receive several reports a year from pro-business think tanks that rank states by the willingness of state governments’ to accommodate these wishes.

A closer examination of this literature reveals several anomalies that seldom receive much press coverage. Even pro-business, anti-tax business lobbies employ rating schemes that arrive at considerably different results. Measuring the tax burden is not straightforward. How much of a property, sales or income tax a business can pass through to workers or consumers will depend on demand for the products and the possibility of substitution. Small changes in calculations of any of these variables can lead to big differences in final state rankings of tax burdens. In addition, small changes in the years covered by particular studies produce big swings in results.

A recent analysis of five such rankings by Peter Fisher, “Grading Places,” came to a startling conclusion. “These five indexes produce widely different rankings of the states. Thirty-four of the 50 states can claim that they are in the top 10 in terms of business climate or competitiveness; they just have to pick which of the five indexes they want to point to. Business interests in just about any state can find at least one ranking to support an argument for cutting business taxes to make the state more competitive.”

All of these studies assume that when business leaders receive low taxes and lax regulation they will deliver on that promise. Yet even much of business literature contradicts this simple assumption. In a keynote address to a forum on state economic policy for the Maine Center for Economic Policy, Boston Federal Reserve Governor Robert Tannenwald cited a prominent Deloitte and Touche’s business location consultant Robert Ady’s conclusion that “taxes are not relatively important when compared with other cost factors, such as labor, transportation, and utility and occupancy costs.” Ady’s analysis of his own case studies suggested to him that combined local, state, and federal taxes amounted to only 4 to 5 percent of the cost shares affecting location decisions, as compared to labor and transportation costs of around 70 percent.

Giving business what it says it wants, low taxes, may not help business or the rest of us if the outcome is an antiquated transportation system and educational institutions that cannot provide the kind of workforce that attracts the most innovative and productive business enterprise.

Just as interestingly, the typical business think tank seldom asks labor, let alone union leaders, what factors make for a good business climate. If the people who work in a business are at least as important as those who hire them, shouldn’t their views also count? Most of the pro-business studies of business climate simply assume that excluding unions improves competitiveness. State and federal laws that make it hard for unions to organize are counted as part of a good business climate.

Yet states and nations may pay an unacknowledged price for excluding and even repressing workers’ voices. In the quarter-century since Ronald Reagan crushed the air traffic controllers’ strike, and precipitated a dramatic decline in private sector unionization, economic inequality has grown. Productivity increases, strangely enough, have lagged behind those of the 1945-1975 period. Economists have no conclusive explanation for this, but it is worth noting, as Sam Bowles, director of the Behavioral Sciences Program at the Santa Fe Institute has pointed out, that with growing inequality in America has come a spiraling need for guard labor.

Private security guards are among our fastest growing occupational categories. American firms spend far more of their resources on surveillance of their own workers than do firms in many other industrial democracies. Guard labor may be necessary in our current political-social environment, but it is hardly productive.

The level of distrust between workers and employers both in Maine and nationally is perhaps the most underreported business story. Perfect harmony of interests and ideas is neither possible nor desirable, but when differences in ideology, lifestyles and class position are automatically treated as signs of enmity, ugly consequences follow. Low taxes, devil-take-the-hindmost workplace and environmental regulation, and autocratic employers may not make for a productive economy. Even if they do, a society characterized by limited education, a trashed environment, and gated communities and workplaces may not be worth the price.

John Buell is a political economist who lives in Southwest Harbor. Readers may contact him at buell@acadia.net.