Welfare For The Rich: How Local Governments Offered The World To Amazon
Amazon has finally ended what was dubbed “The Hunger Games” – denoting the intense bidding war that many state and local governments undertook to attract the multi-billion dollar company to their locale.
In an extraordinary show of cronyism (perhaps only extraordinary due to its publicity), governments offered multi-billion dollar subsidies and special favors to the retail giant. The State of Georgia went above and beyond to satisfy Amazon CEO Jeff Bezos’ request for competing city councils to “think big and creatively” when coming up with their offers.
New York and northern Virginia ultimately won Jeff Bezos’ heart, but Georgia made it to the shortlist with big-ticket offers like the building and funding of “Amazon Georgia Academy” on the corporate campus, functioning as a part of the University System of Georgia and the state tech college system. This state-funded Amazon talent factory would have offered undergraduate and post-graduate courses, as well as 24-week “boot camps.” State-sponsored recruiters would have scoured Georgia to “help fill jobs,” according to The Atlanta Journal-Constitution.
Who likes Atlanta traffic? State legislators knew Amazon wouldn’t, and that’s why they offered an Amazon-themed MARTA car for transporting employees and packages across the city. Additionally, Amazon executives would have enjoyed a private lounge and 50 dedicated parking spaces at Hartfield-Jackson International Airport. Not to be too exclusive, regular city-goers could have enjoyed Sunday drives down “Prime Place” and “Alexa Way” surrounding the sprawling campus.
Among 60 potential sites for Amazon’s second headquarters in Georgia, “Amazon, Georgia” was one. The City Council of Stonecrest voted to de-annex 345 acres of its land and name the new town “Amazon,” tentatively.
The total incentive package topped 2 billion in tax credits and subsidies, not including what it would take to fund the aforementioned projects.
A curiosity arises: why? It goes without saying that the ultimate motivation of the bidding states, including Georgia, was the income tax revenue that would be generated by Amazon’s promised 50,000 new high-paying jobs. A more politically prudent way to put it was “a boost to the local economy,” but would Amazon be hiring Georgians? Certainly not at first. As noted by Seattle locals, Amazon did not revitalize their community but replaced it. For at least a decade, transplants would have filled the Georgia HQ.
Space is a finite resource, and should not be discounted when assessing just how much Atlanta offered Amazon. Multiple governments’ public relations teams justified their Amazon offers as “seeking opportunity for community investment,” but how exactly is a massive corporate campus in the Quarry Yards going to help the community — other than old buildings being turned into a shiny Amazon HQ for the public to stare at? All prospects of an up-and-coming, vibrant city section are dashed when a series of corporate offices covers multiple blocks in the middle of Midtown. And what if the company decides to move?
As demonstrated by past real-life case studies like in Detroit, heavy reliance on one industry, let alone one company, is not prudent for a local economy. Investors will always advise diversifying a stock portfolio in order to handle economic downturns. The same logic applies to cities – investments are better made in a variety of small to medium companies. Instead, countless cities, large and small, handed number eight on the Fortune 500 list the entire cake.
Such a practice is certainly not privy to any good economic theory. Subsidies are not good for companies or consumers. State money softens the blow of lost revenue, which only benefits the company in the short-term. Subsidies cloud market signals, which cause the corporation to become too comfortable. Eventually, the company will stop reacting to market signals altogether and slowly fall behind newer, more nimble competitors. This was the story of Kodak.
What if Amazon goes the way of Kodak? According to the American Enterprise Institute, of the firms that topped the Fortune 500 charts in 1955, only 12% remained in 2016. Are billions of dollars in taxpayer money worth it to secure the headquarters of a company that may not exist in 60 years?
Maybe Amazon would become like the banks – “too big to fail,” and kept alive like a dying lung by the respiratory-state. If the local economy relies on it, and the state has invested billions of dollars in it, the state will keep it alive long past its due time. Look to any failed public project for evidence of this folly.
To what avail did governments offer Amazon such large sums? In the case of the D.C. area, Amazon opted for the smaller incentives package, settling in Northern Virginia when building across the river in Montgomery County, Maryland would have landed the company millions more in subsidies. It turns out that showering companies with cash isn’t a reliable way to attract businesses. Before local governments came up with such exuberant offers of corporate welfare, they should have considered more traditional methods of attracting businesses such as lowering tax rates, cutting regulations, or adopting the right-to-work law. These methods would also be of benefit to small, family-owned businesses.
The demonstrations put on by state governments across the country were a true embarrassment for the American body politic. It reveals a reality that was previously unbeknownst, or underplayed to many Americans: the powerful influence of un-elected and un-beholden corporations in our government. While both sides of the aisle can stand united to protect the integrity of our government, conservatives have more reason to be concerned.
Today, corporations are becoming more than simple product and service providers. To make it in the modern economy, a business does not necessarily need to provide a better product. People are buying the association, the brand, instead. Companies have a vested interest in their brand appealing to the masses – hence why corporations increasingly issue political statements (think: Apple, Google, Facebook, Starbucks, the list could go on.) Conservative values aren’t selling, and the CEOs of large corporations are overwhelmingly left-wing. This is yet another reason why conservatives should be concerned about the growing influence of corporations over public life.
This article originally appeared in The Arch Conservative, a magazine published by students at the University of Georgia.
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