Opinion

New York succumbs to the billionaire backlash

Will it regret chasing out 25,000 jobs?

Populist Democrats and the socialist-curious might never pass a 80 percent top tax rate, institute a wealth tax, or break up Facebook, but they have managed to help scuttle the best-laid plans of the world's richest man and one of the world's most valuable companies. Amazon is officially scrapping plans to build an "HQ2" in New York City, adding a stunning professional setback to the personal ones that ultra-billionaire boss Jeff Bezos has already suffered this year.

To be sure, Amazon's plan was plagued by plenty of local criticism. There were gripes that government officials had been overly generous in their efforts to lure the online retail giant. In exchange for Amazon's promise to invest $2.5 billion and create 25,000 jobs as it built a sprawling campus in Queens, the city and state of New York offered some $3 billion worth of incentives. That appears to be a lot more than what the company is getting from Virginia, home of the other HQ2. The New York City Council particularly hated that it had been excluded from the original negotiations, which, by the way, also stripped the council of its veto power over the deal. To some, it looked like corporate power trodding over the democratic process.

But the Big Apple HQ2 also became a symbol of the growing national debate over whether billionaires and big business, especially Big Tech, have too much political and economic power. As democratic socialist superstar and New Yorker Alexandria Ocasio-Cortez tweeted last week, "Can everyday people come together and effectively organize against creeping overreach of one of the world's biggest corporations? Yes, they can." And they did. Indeed, Ocasio-Cortez's win in November "galvanized the party's left flank, which mobilized against the deal," according to The New York Times.

Of course, opposition to corporate subsidies is hardly an issue owned by the left. Conservative economists have long questioned the wisdom of providing relocation incentives, whether to businesses or baseball teams. The research is pretty clear that it's generally a bad idea. A 2017 UpJohn Institute study, for instance, found little correlation between decades of increasing business goodies and improved state economic performance.

Perhaps, however, HQ2 would be the exception. When Amazon first announced it was going build a second headquarters, it seemingly provided a rare opportunity for some lucky city to become a tech hub virtually overnight. No amount of startup incentives is going to turn Columbus, an HQ2 finalist, into Silicon Valley Midwest. But $5 billion and 50,000 jobs from Amazon might have been transformative in a way that local funding for tech incubators never could be. Luck plays a big role, even a decisive one, in creating tech hubs. Seattle originally became one not through smart government but because native sons Paul Allen and Bill Gates wanted to come home and moved Microsoft from Albuquerque.

That said, New York isn't a Rust Belt city trying to catch lucky break. It already is a vibrant tech hub. A month after Amazon made its original HQ2 decision, Google said it would build a new $1 billion campus in Manhattan — without city or state incentives. So the Big Apple will be fine, although certainly its businesses will miss all the spending that would have been generated from those thousands of well-paid Amazonians. On his blog, New York venture capitalist Fred Wilson slammed local city politicians and Ocasio-Cortez as "irresponsible and reckless in their opposition to Amazon while playing politics with something that is without question good for NYC, good for Queens, and good for their voters."

Of greater concern is the creeping hostility toward America's most successful and innovative companies and the people that grew them. We shouldn't worry too much about folks who get superwealthy by providing gadgets and services that we greatly value. Those riches come from competitive capitalism, not crony capitalism. And almost all the value created goes to consumers, not the entrepreneurs or executives.

Moreover, there's a difference between a docile company that dominates a market, and a paranoid one that sees dangers everywhere and invests like it. For years, Amazon never turned a profit because it was taking all the cash it generated and plowing it back into the business, particularly warehouses and its Amazon Web Services cloud business. And it continues to hire and spend. Last year, Amazon invested more than $13.6 billion on information technology, making it the biggest corporate IT spender in the world, according to International Data Corp.

Sort of sounds like a company any city would love to have. Well, almost any city.

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