Amazon’s much-ballyhooed “competition” for its next major headquarters locations has been quite a spectacle. After months of one of the world’s four most valuable companies basically asking cities and states for handouts and special treatment, it settled on two rather obvious choices: New York City and the DC metro area. Nothing earth-shattering here: DC is where the power is, and NYC is a magnet for the young tech types and hard-chargers one would presume Amazon would wish to stock its ranks with. Indeed, one might imagine that the existing benefits of these locations would suffice as attractors.
On the other hand, eschewing the handouts that government routinely spreads around is tantamount to leaving money on the table, as far as a business of such size and power goes. So, Amazon, acting in self-interest, managed to get New York, aka Governor Andrew Cuomo, to offer $3 billion in tax incentives, aka corporate welfare. It’s amusing to see someone who’s been working double-time to establish a veneer of progressive bona-fides (in almost-certain anticipation of a run at the Presidency some day) lavish such largesse upon the world’s richest man and his company. It simply goes to show that it’s always about the money. Cuomo (and Mayor De Blasio) defended, nay… trumpeted, the deal by asserting the massive return on investment that bringing Amazon to NYC would generate.
Then, something interesting happened. The NY State Senator for Long Island City, Democrat Michael Gianaris, scuttled the deal. The broader narrative lays Amazon’s decision to pull out on the progressives and Democratic Socialists, in particular it-girl Alexandria Ocasio-Cortez, but it was Gianaris who probably drove a stake into the heart of his political future by opposing the deal made by NY’s imperious (and allegedly vindictive) governor.
There is much delicious schadenfreude in watching progressives attack each other, in no small part because it means they’ve less time to figure out how to muck with everyone else’s lives, but again, that’s not news. What was bothersome was the parade of conservatives and self-described libertarians who were unhappy by the deal’s collapse. I’m certain that at least some of that unhappiness was a reflexive contrarianism to all things AOC, since that nattering nitwit has been wrong about pretty much every economic matter she’s spoken of. In the Amazon case, her position was correct, even if her reasons derived from a flawed worldview. The defenses of the deal as Amazon simply engaging in a free market activity, or as a consequentialist “it’s good for the city, because it’ll generate way more than $3B in revenues,” are themselves flawed.
Lets start out with this truth: This wasn’t capitalism or the free market in operation. This was textbook cronyism: a private company of sufficient power cooperating with politicians for disparate benefit. Cronyism doesn’t have to be zero-sum or a straight-up handout. The essential element is a private entity getting something from government that others don’t get. Amazon, by dint of its size, negotiated tax terms better than those every other company in that area would have to operate under. This isn’t competition, this isn’t Amazon vying against Alibaba, Walmart, EBay, and other e-tailers for consumers’ dollars. It’s Amazon getting something from the government that those other companies (and thousands of smaller ones) don’t get.
The essence of free markets is a level playing field where the participants (all private-sector) operate under the same conditions. Government is not a player in the free market. Government is the rules maker, the referee, the umpire, and the replay official. Government is not supposed to have a stake in the game’s outcome. Government can and should write rules (that establish and protect the basics of individual and property rights are protected), and then stand back and let the players play. It’s not supposed to say “if this team wins, it’ll be better for everyone,” and stack the game in that team’s favor. Would it be proper for the NFL to say “the Patriots are such a magnificent team, we believe that if we give them some extra perks, it’ll make for a more lucrative Super Bowl?” Should one team on the football field be given a free yard or two with every first down because the league thinks it’ll put more asses in the seats and draw more eyeballs to the screens?
This is why, on principle alone, anyone who believes in free markets should oppose such cronyism.
But, principle goes out the window in far too many instances when money is involved. This is the consequentialist argument I saw so many times. If government can “invest” $3B to get a nine-fold return, why shouldn’t it do so?
Considered in a vacuum, one might be tempted to say “do it,” even though it violates fundamental conservative and libertarian principles. After all, there have been countless bad deals, so why not back a winner for a change? Thing is, every such deal has been touted as a “winner” by its proponents, who often move on to other things before the true accounting happens, and people keep falling for the same sales pitch. Given the track record of such things, I’m skeptical of the rosiness of the Amazon deal projections. But, even so, even if it falls short, it’s still likely to be a net-positive, no?
This is where we must recognize that this isn’t happening in a vacuum. Encouraging cronyism means there’ll be more of it. More government picking winners and losers. More opportunity for the powerful to leverage their power for benefits and perks that are not available to the little guys. More intertwining of Big Business and Big Government. More of the corrupt and incestuous relationships that both progressives and conservatives claim to despise.
That’s not to say that states and cities should not compete for businesses. They should… but they should by making themselves more attractive, from a tax and regulatory standpoint, to all businesses, entrepreneurs, etc. A level playing field that’s nicer than others’. What’s better, a pro-grade field or a dirt lot full of gopher holes, rocks, and other impediments to free and easy play? If a company like Amazon needs a better tax code to be drawn to NYC, NYC should make its tax code better for everyone. THAT is how governments should compete for wealth creators, not this sordid and oft-failed game of deciding who they want and who they don’t (see: Walmart). Don’t forget, these politicians have very little skin in this game. They’re not gambling their own money, and the ill effects of a poor deal will generally only manifest after their next election cycle. And, don’t forget, there’s nothing that makes them wiser than the free market, where millions of people acting in self-interest produce consistently better results than any central-planning ever has or ever will.
There’s another dirty side of government-for-profit. It was the rationale behind the city of New London deciding to take Suzette Kelo’s home so that Pfizer could build a factory. Some politicians did their math, figured that Ms. Kelo’s property could generate more revenue if it were part of a giveaway to a big corporation, and threw her and her neighbors off their land. In a dark day for liberty, the Supreme Court’s liberals, along with swing-justice Kennedy, voted 5-4 to uphold government’s exploitation of the weak and powerless. And, again, it affirms that progressivism is ultimately not about the little guy, but about OPM, whether they have a lot or a little.
You’ll also find that many supporters of the Amazon deal are people who worry about monopolies, about big companies having so much power that they stifle and crowd out the competition that keeps them from exploiting consumers. Oftentimes, these anti-monopolists scoff at the idea that it is government that creates and protects monopolies. But, isn’t this preferential treatment exactly the sort of thing that expands Amazons’ competitive edge, that moves them a bit more in the direction of monopoly power?
Principles matter, and while it’s sometimes hard to stand on them, when we don’t we abet the creeping intrusion of Big Government into every corner of our lives. And, when we support an against-principles action by politicians because we like the calculus of that particular action, we send the message that it’s OK to keep doing such unfair things.
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https://en.wikipedia.org/wiki/Savage_Inequalities
Kozol writes about similar issues, where schools are failing because of the lack of tax dollar from companies that got tax exemptions to move into poor neighborhoods.
His mistake is similar to AOC’s the lost tax dollars aren’t there, companies wouldn’t move into these neighborhood without the incentives. Are more correctly they would locate elsewhere, where they do get incentives.
It would be interesting to see where Amazon would locate without any of this cronyism.
How much of NYC being this great place to live is do to cronyism, tax breaks for football stadiums, public support for museums and the fine arts etc.
The left screams about Walmart and other big box stores pushing out Mom and Pop’s. Are they happy with Amazon and other online services putting the squeeze on big box stores. Of course this won’t put Mom and Pop’s back on Main Street.
I’m just waiting until 3-D printers put Amazon out of business or whatever the next great innovation is
Get government out of education entirely, abolish the Dept of Education and unions.