Picture two worlds. For brevity’s sake, we’ll call them world 1 and world 2. Yes, I know, how creative, but anyway.
World One is the one we currently live in and it rather sucks, but you don’t have to take my word for that! World Two is a bit more ideal.
Got the picture?
On both worlds, there is a company called Amazon---you know Amazon. It’s the behemoth that basically accounts for half of everything sold online in the US and about 5% of all total retail excluding food—although that’s before they acquired Whole Foods. They’re keeping the US Postal Service afloat—they’re essentially the only reason I still have Saturday delivery. The vast majority of books I buy are via Amazon, and increasingly a lot of other things too.
Anyway you also know that on World One—Amazon is having itself a little beauty contest, the winner of said contest gets its second headquarters. 50,000 jobs. Investments of billions of dollars. We’ll say on World Two, they’re doing the same thing.
The difference here is on World Two, cities and states recognize what’s going on---Amazon is quite busy hoping they’ll get billions in tax incentives. On World Two, those places say “thanks but no thanks” or “Thanks but we’ll think about this.”
Not so on World One.
Amazon’s due date was over a week ago and my goodness, the feeding frenzy. From all over North America, places are bending over backwards to give Amazon money to come to their city. Tucson sent a cactus. Several states have their legislatures involved to offer up tax breaks. Some cities might even surrender up all sorts of tax revenue to get Amazon to come. How do I know this? Because they’ve done this for Foxconn, and Amazon, and any other big employer. When the South sucked the manufacturing of New England and the North dry of their industry, they did the same thing with all sorts of tax breaks and incentives (being union-free helped too)
Ok, so granted, the multiplier effect is real. 50,000 people being paid Amazon headquarters cash money is going to trickle down. Those 50,000 people are going to buy houses, go shopping, join gyms, and be part of the community. A good portion of them will find houses of worship where they’ll donate money too. They may have spouses who may or may not work for Amazon. They might have kids. They’ll have to buy things for their kids, and put their kids in school, and if they make Amazon headquarters money (the RFP claims $100,000+) they might buy lots of expensive toys for said kids.
So basically they’ll get the local economy humming along, or even booming.
Amazon’s beauty contest sort of reminds me of the Olympics, on the other hand, most places don’t even want the Olympics anymore. Another thing it reminds me of is sports team franchises.
Sports teams (some of which I’m even a fan of) are really good at extracting lots of public money from cities, and then they threaten to leave if they don’t get what they want (see, the Rams and then the Chargers, and the Raiders.)
Amazon’s process seems a lot like that. Increasingly, it seems corporations do this to cities. Foxconn lied to cities all over the United States. They told them they were coming, which then got cities and states to roll out favorable tax incentives. Then they never showed up. We’ll see if their latest victim client, Wisconsin, actually sees them show up and get to work. However, look at the “deal” Wisconsin is making to get Foxconn to build. It will cost the taxpayers of that state money. Pennsylvania is still waiting for Shell to build its ethane cracker factory in western Pennsylvania (after the state gave away a lot of tax incentives to them).
Amazon works the same way. They set regions competing for their giant warehouses, which then get all sorts of favorable tax breaks. Slate describes here:
Still, this is a contest and some sniping is in order, especially over taxes. New Hampshire offered 620 low-tax acres in Londonderry. Half of the state’s proposal, the Boston Globe real estate columnist wrote, was spent ragging on Massachusetts’ high housing costs. The other half: boasting about the excellent universities paid for by the Bay State’s high taxes. This is typical of how Amazon (and every sports team, and most large companies), use state and local boundaries to create a prisoner’s dilemma. The size of the bounty is unique—Amazon boasts $5 billion in investment and 50,000 jobs—but the hunt, as I wrote last month, is depressingly familiar. Cities and states race to carve out tax exemptions for giant companies, forcing smaller, more rooted enterprises to bear the cost. In a letter explaining the city’s decision not to participate, San Antonio mayor Ron Nirenberg decried the “bidding war” and said the city would not “give away the farm.”
It’s not all bad. Grabar concludes:
The irony is not only that Amazon’s employees will want to live in the kind of place their company is destroying—a city or suburb anchored by a distinctive collection of small shops, a hardware store where the owner remembers what kind of wood you used to build your deck, a guitar store that sponsors Little League teams—but that their presence will help that place thrive. The second headquarters will protect local retail like a seawall in a storm, holding back the water in one place but pushing it higher everywhere else.
Amazon is in fact part of the reason retail has been in free-fall (the other reason being that there is entirely too much of it). Why do I shop online? Because I live 8 miles from Wal-Mart, where I prefer not to spend my dollars, and 30 miles from any other retail, which makes it a hassle. My small town at least has a good number of unique restaurants, so we do spend money in town, but there’s little else.
My region, a region that rarely ever cooperates, managed to put together a bid (most of which is secret, although the coveted former State Hospital Grounds is what they’d love to give to Amazon---and the state so far is okay with that). So did some 237 other cities. Seattle has some tips for those cities who might just win. Pittsburgh also put in, and this CityLabs article was pretty interesting for a city that’s been transforming itself into the Silicon Valley of Appalachia.
We’ll learn next year who wins. At least, unlike Foxconn, Amazon does actually show up once they’ve extracted what they want from government.