Lessons from Boston and New York
In the wake of momentous, and almost simultaneous, decisions by Amazon and GE to essentially back out of huge deals they had struck with New York and Boston, respectively, there came waves of commentary hinting that the era of huge corporate location, or re-location, subsidies might finally be coming to an end because evidence was mounting that they’re just not working.
Analysis
Alas, this is probably, if not almost certainly, wishful thinking. Instead of ushering in an end to this habit of cities, states, and regions handing out billions to billionaires on the promise that they will bring tens of thousands of jobs, the events in Boston, and especially New York, only demonstrate why they won’t be ending anytime soon.
Indeed, while many are praising New Yorkers for standing up to Amazon and saying ‘enough is enough’ when it comes to these corporate handouts ($3 billion in this case), many, many more are lamenting a lost opportunity, criticizing the critics for letting a very big fish work its way off the line. And for the record, New York didn’t really stand up to Amazon. Instead, the corporate giant simply decided it didn’t want to take the heat and the criticism and would much rather go where it was not just welcome, but entirely and unabashedly welcome.
And why not? Seemingly within minutes after it was announced that Amazon would not be building in Queens, elected officials in New Jersey, who finished out of the running in the huge sweepstakes to land Amazon’s second headquarters, said, in essence, ‘our offer is still on the table; take another look at us.’ Please. Please!
No, New York’s loss wasn’t in any way a victory for anyone. It didn’t change the equation, and New York is out roughly 25,000 jobs. Amazon just changed the rules slightly but importantly by saying, ‘give us a huge re-location subsidy and don’t criticize us in any way about taking it.’
And the reality is that it’s on seemingly very safe ground as it says that.
Why? Because as we’ve said many times, jobs are now — and will continue to be for decades to come — the most precious commodity on the planet, and cities and states will do whatever it takes to land them.
Even cities like New York and Boston, which shouldn’t have to compete for them. Indeed, in a perfect world, giant corporations should be paying huge subsidies to come to those cities, which have the skilled workers and the vitality and quality of life to attract more of them. They should be paying subsidies to help those cities battle homelessness, feed the poor, and help the have nots join the haves.
But this isn’t a perfect world. When Seattle’s City Council passed a tax on large employers to fund an initiative to combat homelessness, Amazon threatened to stop major expansion plans, putting 7,000 jobs at risk. Not surprisingly, the tax was rescinded.
Not surprisingly, because City Councils don’t hold the real power in such matters; major corporations like Amazon do.
In the wake of the company’s decision to scuttle its plans for Queens, many are calling what happened a victory for New York and other cities like it. Call us skeptical, but we’re not sure what, if anything, was won unless cities and states are willing to stop playing this game. And we just don’t see that happening.
