Boeing Is the Latest Company to Escape a Hostile Business Environment

Boeing, BA, Washington

Boeing has decided to move its manufacturing facilities from Washington to South Carolina to avoid a hostile business environment. The trend is likely to intensify as Corporate America recalibrates in the wake of Covid-19. | Image: Stephen Brashear/Getty Images/AFP

  • Boeing is departing the state of Washington.
  • One state senator thinks Washington’s hostile business climate is partly to blame.
  • That’s part of a rising trend of hostile business environments that could lead to significant shifts in the years ahead.

Aerospace giant Boeing has long been synonymous with its roots in the Pacific Northwest. For decades, the company has been a key job creator in the state of Washington. But no more. Last week, the firm announced it was consolidating all its production in North Charleston, South Carolina.

Boeing Move Shows Economic Necessity

Boeing’s business move comes just a few months after the company announced it was considering consolidating operations. The company has seen large refunds in orders this year as air travel levels have been cut by over two-thirds.

2020 Vs 2019 Air Travel
Air passenger traffic is at a fraction of 2019 levels, showing the challenges for the airline industry, including manufacturers like Boeing. | Source: MassMutual

With lower air travel and revenues, airline companies have little demand for new jets. The news couldn’t come at a worse time for Boeing, which is still contending with the fallout over the 737 Max planes. Multiple high-profile plane crashes from the new model marked the beginning of Boeing’s crisis.

But the worst crisis has been politics.

At least, that’s the claim of Washington state senator Doug Ericksen. He sees the state’s hostile business environment as a key reason why it decided to depart for South Carolina.

When I was working on the task force to try to keep Boeing here, one of the constant themes that we got from the Boeing Corporation was every other state they went to, people would roll out the red carpet. And in Washington State, they felt like the governor was just trying to show them the door.

Sadly, Boeing isn’t the first, nor will be the last, company to head to a friendlier political jurisdiction more favorable for business.

Hostile Business Climates Ensure Other Firms Will Move Too

It’s not just a manufacturing company problem. Last year, finance giant Charles Schwab announced a plan to leave its home base of over 50 years in San Francisco for lower-tax, lower-regulation Texas.

JPMorgan Chase has looked at plans to relocate from Manhattan. Yes, that would be an unusual move for a money-center bank, but one that might work in the post-Covid, remote-work era.

As jobs flee from these high-tax, high-regulation states like New York, Washington, and California, workers go with them.

State Income Tax Rates
Workers are moving out of high-income tax states to those with low (or no) state income taxes, usually following businesses that do so as well. | Source: Tax Foundation

Migratory trends show significant population declines in these states towards places like Tennessee, Texas, and Florida. In addition to a friendlier business climate, home prices and personal tax rates tend to be lower.

A great migration is underway, from states with high barriers to opportunity and progress to lower ones. It’s true at a personal level and at a business level.

The real question is: Will this migratory population vote for the same odious policies that spoiled economic opportunity in their old states? If so, eventually, even today’s favorable states may become hostile to businesses as well.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from The author holds no investment position in the above-mentioned securities.

Last modified: October 6, 2020 3:29 PM
U.S.-based money manager and financial writer with a focus on the stock market, options trades, real estate, commodities, and an interest in cryptocurrency and politics. Questions, comments, or snide remarks? Send 'em to [email protected] LinkedIn.
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