The unchallenged march of the market has long established the notion that it is the duty of the governments to woo investors and provide business-friendly environments. This idea has been playing out in a dramatic fashion in the U.S. over the last few weeks, ever since e-commerce giant Amazon challenged cities on September 7 to bid for a new headquarters that it plans to set up, which will bring $5 billion in investment, and 50,000 new jobs. As bids closed on October 19, 100-plus cities submitted proposals, offering a slew of incentives. Amazon will announce the winner next year.
“We’re excited to find a second home,” said Jeff Bezos, Amazon founder and CEO, announcing the search for a place with “more than one million people, a stable and business-friendly environment and communities that think big and creatively”. Amazon also advertised what its presence brought to Seattle, its current headquarters. It “estimates... every dollar invested by Amazon in Seattle generated an additional $1.4 for the city’s economy overall”.
All hell broke loose as Mayors fought hard to get these jobs to their cities and save their own. Among the stunts that they played included: New York City lighting its iconic spots, the Empire State Building, the One World Trade and Times Square billboards in “Amazon orange”, supporting the city’s bid. “We’re going to work very hard at it,” New York City Mayor Bill de Blasio said.
New Jersey had said earlier that their promises of tax breaks could be worth $7 billion — or $140,000 for each job Amazon is promising, for locating the new headquarters in Newark. Tucson, Arizona, sent a 21-foot tall saguaro cactus to Mr. Bezos, the message being that the prospect of growth was high. Birmingham, Alabama, placed giant Amazon boxes around town. Some cities ran digital campaigns and aggressively reached out, while one city, Stonecrest in Georgia, offered to change its name to Amazon!
The growth of tech companies that employ high-earning workers is not entirely a pleasant story for the cities that host them. In Silicon Valley and Seattle, housing costs are beyond affordable for public school teachers, firefighters and police officers. In the midst of the race to woo Mr. Bezos, the city of San Antonio in Texas wrote to him that he was welcome, but no new incentives were on offer. Mayor Ron Nirenberg and Judge Nelson Wolff of Bexar County said in an open letter: “It’s hard to imagine that a forward-thinking company like Amazon hasn’t already selected its preferred location… And if that’s the case, then this public process is, intentionally or not, creating a bidding war amongst States and cities…”
Development subsidies
A 2016 study estimated that governments in the U.S. gave Amazon “almost a quarter-billion dollars in economic development subsidies in the past two years for warehouses”. Seventy-three civic groups from around the country have written an open letter to Mr. Bezos, seeking transparency. “Typically, these kinds of business development deals are negotiated in secret, with public comment only happening at the very end of the process. We believe that, as a 21st century technology company, you should be fully committed to open-sourcing the process of reaching a deal with our whole community… we have great systems of higher education, museums, and infrastructure that helps move people and things from one place to another. But we got that stuff by collectively paying for it, through taxes, and we’re expecting Amazon to pay your fair share if you end up being our neighbour,” they said.
(Varghese K. George works for The Hindu and is based in Washington)
