Columns

Friedman ’19: Wooing Amazon is a waste of time

By
Staff Columnist
Thursday, February 1, 2018

Just over two weeks ago, Amazon announced the names of 20 cities that had advanced to the final round of selection for its second headquarters (HQ2) location. As these finalist municipalities were selected from a pool of 238 proposals, an acceptance rate of 8.4 percent, Brown students can rest easy knowing that their accomplishments are still more impressive than those of America’s twenty most promising cities, given that Brown’s acceptance rate last year was 8.3 percent. As for the remaining 218 cities, Amazon rejected them much in the same way many internships and colleges probably rejected you recently: with a tone of artificial sympathy and a hollow compliment to boot. “Getting from 238 to 20 was very tough — all the proposals showed tremendous enthusiasm and creativity,” said Holly Sullivan, an executive at Amazon Public Policy in a company statement quoted by CNN. This atmosphere may be indicative of the kind of poisonous mindset the HQ2 bid, which sets the precedent for future tech mega-deals, is creating: one that conjures up the worst elements of the college or internship application process — self-destructive gamesmanship, debilitating competition and zero-sum mentalities.

Amazon was not kidding when it stated that “incentives offered by the local communities … (would) be significant factors in the decision-making process.” It seems that among the twenty finalists — whose qualities of life, academic resources and population sizes are similar — incentives are the only consideration separating one city from another. This, combined with every city’s desire to win the competition at any cost, is generating nonsensical subsidies and tax plans designed for Amazon from the cities still under consideration. Stonecrest, Georgia, famously offered to rename the city ‘Amazon’ in the event of a relocation there; thankfully, it is no longer in the running.

But in economic terms, the deals offered by the cities still in the running are just as illogical. Chicago, for example, offered to let Amazon keep $1.32 billion in tax revenue collected from HQ2’s employees, while the governor of Maryland is offering Amazon a $5 billion package ($2 billion in Amazon-centered road and infrastructure projects and $3 billion in tax breaks) that would represent the largest economic development package in state history in order to lure the company to Montgomery County. Columbus, Ohio, is even offering to waive 100 percent of Amazon’s property taxes for 15 years — equivalent to $456,750 for every $1 million of investment in property. Since the incentives offered specify no requirements for growth on Amazon’s end, the cities bidding to host HQ2 are in a race to the bottom of their budgets in order to win over a company that may (or may not) generate enough economic activity to justify the ridiculous tax breaks proposed.

The unprecedented level of gamesmanship involved in the hunt for an Amazon deal is undoubtedly rooted in each city’s ego — the mayor of Dallas, Mike Rawlings, even stated, “We dream no small dreams here. We want to be the biggest and the best” — and none of the cities entertained the idea of signing a cooperative pact not to offer Amazon any subsidies.

But it may also be rooted in speculation about the future of the tech industry in general. As the economy becomes increasingly dependent on an industry whose economically viable innovations are often unprecedented and unpredictable, American cities likely see Amazon’s HQ2, with its track record of growth and its stable hold on the tech and logistics industries, as a panacea.

But cities are not considering the ways in which landing the Amazon deal may be worse than losing it. Amazon promises to bring at least 50,000 new workers with large salaries to its HQ2 site. That means that housing costs will most likely skyrocket, raising prices even in the suburbs, straining the highway and public transportation network and widening the chasm between affluent and poor residents.  The labor market in the selected city will become significantly more competitive as the city draws more applicants on a national scale. And cities that inherit these problems will most likely have gambled their tax revenue away to the company that precipitated these issues in the first place. While in the long run, Amazon may have a stabilizing effect on the local economy, in the short term, its presence will definitely destabilize the area.

Though it would have been nice to have Amazon internships in our backyard, perhaps the city of Providence dodged a bullet when Amazon passed on its “Providence Station” campus. All we can do now is wait and see how HQ2 ultimately impacts the chosen city. The whole world will be watching.

Andrew Friedman ’19 can be reached at andrew_friedman@brown.edu. Please send responses to this column to letters@browndailyherald.com and op-eds to opinions@browndailyherald.com.