Sticky situation.

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What Were You Thinking, North Carolina?

Matthew A. Winkler is a Bloomberg View columnist. He is the editor-in-chief emeritus of Bloomberg News.
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Why would a state making big recent strides in improving its economic health want to be on the wrong side of Google, American Airlines, Apple, Bank of America, Deutsche Bank, Duke University, Facebook, Lowes, Marriott, Microsoft, PayPal, the National Basketball Association, Wells Fargo and Bruce Springsteen?

I didn't get the chance to put that question to the governor of that state, Pat McCrory of North Carolina, when I interviewed him in Raleigh last month to discuss the resurgent Tar Heel economy. Since he took office in 2013, North Carolina has moved past most other states in the accelerating pace of its annual economic performance improvement. That's as measured by a Bloomberg index of economic health based on employment, personal income, home prices, mortgage delinquency, tax revenues and the equity of the state's companies.

North Carolina picked up the pace of improvement faster than any state except Oregon during the first three quarters last year. That's much better than its corresponding gain during 2013 or 2014, when the growth in North Carolina's economic health index ranked 30th and 37th respectively. As the ninth-largest state, with a population of more than 10 million, North Carolina is the fourth-largest U.S. manufacturer and a magnet for corporations.

Until now. The outlook suddenly darkened when the 59-year-old McCrory bowed to his Republican-controlled legislature and signed a law preventing local governments from extending civil rights protections to gay and transgender people while banning transgender people from using public bathrooms according to their gender identity.

Corporate America considers diversity good for growth and discrimination bad for business. PayPal, among more than 80 companies decrying the law (including Bloomberg LP), abandoned plans for a new global operations center with 400 hundred jobs in Charlotte. Deutsche Bank, the largest in Germany, also canceled its expansion for 250 new positions in a technology development center outside of Raleigh.

Anyone wondering what's happening to the Republican Party, led by Donald Trump and Ted Cruz in the presidential primaries, will get more than a clue from the North Carolina governor's predicament. McCrory earlier this month justified his decision as protecting "basic guidelines of privacy." PayPal Chief Executive Officer Dan Schulman wasn't persuaded. "The new law perpetuates discrimination, and it violates the values and principles that are at the core of PayPal's mission and culture," he said.

Springsteen said on his website that "some things are more important than a rock show and this fight against prejudice and bigotry -- which is happening as I write -- is one of them." He canceled a performance in Greensboro.

Governor McCrory, who was locked in a tight race for reelection with Attorney General Roy Cooper before he signed the new law, is the perfect example of the paradox of the pro-business, free-trade Republicans undermined by conservative social agendas eschewed by America's biggest companies. McCrory was elected to a record seven terms as mayor of Charlotte, the state's largest city with a successful light-rail system he initiated. McCrory said he plans to support the eventual party nominee for president even if it's Trump, who said he won't hesitate to wage trade wars while punishing Mexicans, Muslims and anyone else he considers a threat to the U.S.

Until he agreed with his legislature's prohibition against local governments' banning transgender discrimination, McCrory seemed to have everything his constituents could wish for in an elected official. "I'm a very strategic guy," he said in the interview. "I made a point to be a reformer and not accept the status quo and I've stepped on the toes of both the right and the left to do it."

At this point, he should be a shoo-in for a second term. Instead, the booming McCrory economy is compromised by companies reconsidering their commitments to North Carolina just when the governor could be taking credit for his state's accelerating prosperity.

(With assistance from Shin Pei)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Matthew Winkler at mwinkler@bloomberg.net

To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net