Amazon's cynical search for a new headquarters
Amazon is branching out. The digital commerce powerhouse is embarking on an enormous expansion, with plans to open a second headquarters somewhere in North America.
Amazon released a detailed explanation of what it's looking for and how states and cities can submit their bids to be the next Seattle. The list is long and exacting: a population of at least one million, access to airports, good mass transit, encouraging job growth, a well-educated labor force, nearby universities, and available land for the new corporate campus. And of course, if a city wants to throw in land for free or relocation subsidies or tax breaks to sweeten the pot, by all means include those in the bids too.
Communities across the land are already falling over each other to court Amazon's affections.
"If Amazon wants an East Coast headquarters, I don't see any city better in America than Boston, Massachusetts," declared Boston Mayor Martin Walsh. "New York City has the most innovative and diverse tech sector in the nation," piped up New York City Economic Development Corp spokesperson Anthony Hogrebe. Dallas, Chicago, Houston, Toronto, St. Louis, and Miami are are all also throwing their hats into the ring.
It's hard to blame Amazon for just acting in its self interest. Good mass transit and universities and an educated workforce are all valuable things for a company like Amazon. Of course the company wants to be around them!
And it's no wonder that American cities are tripping over each other to woo one of the most valuable companies on Earth. After all, Amazon estimates its new headquarters will employ 50,000 full-time employees, paid six-figure salaries on average. Its original Seattle headquarters pumped $38 billion into the city's economy from 2010 to 2016. "Amazon HQ2 will bring billions of dollars in upfront and ongoing investments, and tens of thousands of high-paying jobs," Jeff Bezos, Amazon's founder and CEO, said in a statement. "We're excited to find a second home."
When you're offering that kind of economic value, in a national economy that's still struggling, why wouldn't you offer it up to the highest bidder?
For Amazon, it makes sense. For Amazon's metropolitan suitors, it makes sense. But from the perspective of America as a national community and economy, there is something cynical about this whole display.
The Institute for Local Self-Reliance and Good Jobs First are nonpartisan research outfits that track these sorts of bidding wars by cities and states for corporate investment, and are generally critical of them. They found that from 2005 to 2014, local governments forked over $613 million to Amazon to attract construction of the companies' various fulfillment centers, and another $147 million to attract its data centers. And it's only ramping up. Since 2014, states and cities have given Amazon well over $1 billion in the form of subsidies and tax breaks.
Now, fear-mongering over deficit spending is foolish and destructive where the federal government is concerned. It controls the currency in which it taxes, spends, and borrows, and thus can never face a debt crisis by definition. (It can cause an inflation crisis, but that's another matter.) But state and city governments don't control the currency. In their case, the old adage that government should live within its means — same as a household — actually applies.
Cities absolutely should want to have thriving universities and robust transit and internet infrastructure and educated workers. But they should want those things because they're good for the people who live and work in those states and cities — not because those things are good for Amazon. And the more public funds local governments give up to attract Amazon, the less they'll have to invest in creating those public goods and services.
But more troubling is the power imbalance on display here, and what it says about our economy.
Amazon is hardly the only company that states and cities try to court by building new factories or setting up investments and tax breaks. This is a time-honored tradition in the U.S. economy. But it betrays a ubiquitous belief that big businesses — and the entrepreneurs, business owners, and investors who run the show — are what bestow good jobs, good wages, and economic prosperity on American workers. So Americans had better remain in the good graces of Amazon and all the other corporate powerhouses out there.
"We have not said thank you enough" to Amazon, as Maud Daudon, the chief executive of Seattle's Metropolitan Chamber of Commerce, put it. You see this attitude all the time. Don't raise taxes, don't impose regulations, and certainly don't unionize, lest you anger and undercut the "job creators" and get left out in the cold. We ought to be grateful for everything these corporate demigods give us.
But the truth is that jobs and wages are determined by the big structural forces in the economy: aggregate demand, the leverage of labor versus capital, etc. Companies like Amazon just respond to those forces the same way regular workers do. The federal government actually wields far more influence over those forces, through its fiscal and monetary powers, labor law, and regulation. And since this is a democracy, that means American citizens can actually do a lot to take control of job creation and wage growth themselves, through their power and votes as public citizens.
But we often don't. Instead, we succumb to fears of debt, of inflation, of taxes, of "government intervention" — and all because we believe we're at the job creators' mercy.
That's why the bidding war over Amazon's new headquarters is unsettling. It might encourage local governments to fiscally self-immolate. And it's also an example of how desperate and powerless Americans feel when it comes to their economic livelihoods, and how we've been suckered into believing that we must forever bow and scrape to companies like Amazon to keep the jobs coming.