Chiberia


This post is by Jeff Carter from Points and Figures


Click here to view on the original site: Original Post




It’s Chiberia in Chicago today.  -25 from some of the things I have seen friends post.  That’s not windchill, it’s ambient temperature.  Virtually all schools closed and most businesses will be closed.  It would be interesting if someone hooked up a drone and flew the streets just to see what it looked like. You could film a zombie movie there.

I am lucky to not be there.

There is another coolness spreading in Chicago.  Chicagoans have a love hate relationship with the city.  It’s truly a great city.  It’s a nice place to live. The people are great.   There are lots of great local places that I love.  Walking along the lake on a spring, summer or fall day is absolutely great and there is no other place in the US like it.  The parks are wonderful and there is plenty of open space.  If you live in the

the schools can be top notch. There are incredibly great community colleges and universities.  It’s an incredibly livable city.

However, in Chicago the politicians aren’t nice people.  They are corrupt.  Their hand is always in your pocket.  There is no other word for it.  There is no other way to polish the apple.

The people tolerate it.  There is nothing you can do about it.  If you fight the Democratic Machine, you pay a high price.  The Machine will steal the votes necessary to defeat you  so there is no use fighting it.  If you are a small business, you build the corruption into your business model.  You know that you need to use Madigan or Burke’s law firm to appeal your property taxes.  Turns out in a recorded conversation, we now know the terms.  $3G per year, and 12.5% of all tax savings.  It becomes “fight or flight” and today thousands of people, 37,508 people in 2016, from the poor to the upper middle class are choosing flight.  If they aren’t leaving physically, they are consulting with their estate and tax planners and making sure that their wealth is outside the border of Illinois.

Of course, Madigan is Speaker of the House in Springfield, and Burke was the Chicago Council Finance Chairman.  Their minions were the people who administered the tax rolls so when they “argued” in front of them and “appealed” the tax bill it was all for show.  The real calculus was what was the elasticity of demand.  How much could they charge them combined legal and government before the business would break.

Now, there is an insider who wore a wire. The FBI has it all on tape.

It’s not just taxes.  It’s going to the right insurance guy, the right facade guy, the right guy for this, the right guy for that.  Maybe you need a fence for your property or some other service provided.  It all adds up and it’s the reason so many small businesses in Chicago close and the space either lies vacant or a national chain comes in.  National chains can spread the cost of graft over their entire organization. Small businesspeople can’t.

From Crain’s:

“Even the fear that this is the way things work in Chicago is a real drag on our business environment and our economy,” says Beth Kregor, director of the University of Chicago’s Institute for Justice Clinic on Entrepreneurship, who studies business conditions for entrepreneurs in the city. “A lot of folks don’t want to play that game or feel they can’t afford to play that game. We’re losing out on growth and innovation in Chicago.”

From Front Page Mag:

Entrepreneurs in Chicago are further handicapped by the byzantine regulations and red tape that make it very costly and complicated to run a business within the city’s confines. Violations of these complex rules commonly result in lawsuits. The U.S. Chamber of Commerce has described the litigation environment of Cook County as “the most unfair and unreasonable” of any  jurisdiction in the United States.

Check out the University of Chicago’s Institute for Justice  They provide free legal work for entrepreneurs who try to start businesses in Chicago.  They have case studies on their site that shows how incredibly difficult it is to negotiate the red tape the corruption in the city puts in front of mom and pop businesses.

Here is the problem.  The media refuses to cover it.  They refuse to cover it straight up.  It should be on the radio, television and in the papers front and center each and every day 24/7.  Instead, they go along and help cover it up.  They try to show that it’s isolated rather than a systemic and systematic way of doing business.

I was at a Chicago corporate gathering last summer.  Governor Bruce Rauner chastised the corporations for doing business with corrupt politicians.  They were part of the problem.  If they would have stopped doing business, and actually went public, the problem would start to go away.

One of the great things about the internet is it has the potential to totally unmask things.  We talk about brands being phony and if they say things that aren’t true to their brand, it eventually gets found out.  The same goes for politicians.   It might be too late when you find out, but eventually you find out.

John Kass of the Chicago Tribune, Kristin McQueary of the Tribune, the Illinois Policy Institute, Dan Proft and Amy Jacobson on AM 560, and Mark Glennon of Wirepoints are the only people willing to go out and tell people about the emperor that has no clothes on.  The rest try to be middle of the road which is just incorrect when you examine the facts.  I love that Kristin pinned this tweet to her Twitter.

If I were the FBI or a media person, I would find out what businesses were using the legal services of Madigan and Burke.  I’d start to ask them questions.  If I were the FBI, I might talk about fines, penalties or other things that could happen because they participated in bribes and corruption.  Businesses want to stay in business.

Chicago has a mayoral election in February.  A lot of people are running.  I have winnowed the field down to two that I think can bring a hammer to the corruption in Chicago and will run an on the level government.  Neither of them share my views on economics or how to solve the many financial woes of the city.  But, I am used to that in Chicago.

The corruption and extra costs are a clear threat to the entrepreneurial ecosystem in Chicago and the state of Illinois.  Sure, startups don’t pay corporate taxes because they don’t make money.  But, their employees have to live here and they have to be able to attract talent.  It’s easier to attract talent in places like Austin because the all in cost of living there is cheaper.  Sure, housing might be more expensive in Seattle, but it’s a 0% income tax state with lower sales taxes and property taxes.  You can rent…..and you trade -25 for rain.  It’s a tradeoff.

Every year for the past four, I have deliberately spent a chunk of time outside of Chicago.  I have been to LA, SF, Austin and this year went around various cities in the South.  In Austin and the South, I was surprised at how many people I met who left Chicago.  There is a Cubs bar on 6th Street in Austin, TX.  In LA there were some, but they weren’t going to stay in LA.  In SF, it was the same.  California and NYC are confronted with similar issues that Chicago has regarding flight, but I don’t think it is brazen government corruption that is causing it.

When I talk to Chicago transplants, they miss it.  Chicago is home.  But they aren’t going back.

In an age where workers are mobile and have choice, cities cannot afford to be cesspools of corruption.  Their networks have to be open.