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Potential loss of Amazon HQ would be a long-term disaster for New York
ON Nov 13, 2018, Amazon announced that New York would become one of two locations for the company's second North American headquarters, ending a competition that had involved more than 200 places, including cities as diverse as Chicago, Atlanta, Denver, Newark and Austin, Texas.
But there was hardly any cheering in New York. State Senator Michael Gianaris and other leaders protested that the agreement was bad for New York and bad for its people. They argued that it is absurd for city and state taxpayers to subsidise one of the world's most valuable companies, owned by the world's richest man, with as much as US$3 billion in taxpayer money.
They are right about one thing. It is absurd that any city would agree to such a deal. But this is how the game is played. Paying companies to relocate has been the American way since 1936, when Mississippi established the nation's first state-sponsored economic development plan. Under that plan, since followed by many other jurisdictions, cities and states agreed to pay companies to relocate by promising them new factories and low or non-existent taxes. With those inducements, numerous businesses relocated in the decades after World War II, usually from the union-dominated Northeast and Midwest to the business-friendly South.
In this historical context, New York's deal for Amazon is not a bad deal at all. But its opponents have condemned it, partly because the negotiations were held in secret and because the constituents most involved in the decision were not consulted. Absent serious renegotiations, they want Amazon to take its promise of 25,000 new jobs somewhere else. The greatest city in the world, they say, need not kneel before capitalist royalty.
Can the Empire City really afford to turn away from this opportunity?
Clearly, New York has overcome dozens of economic crises in its nearly four centuries of history. It was almost destroyed by fire in 1776 and 1778, and in 1835, the Great Fire of New York destroyed more than 600 structures and most of what is now Lower Manhattan. The 1863 Draft Riot took at least 100 lives and continues to rank as the worst civil disturbance in American history. The 1977 blackout resulted in widespread looting and property destruction - the low point in a dark period.
And the worst of all, in terms of the loss of human life, was the attack on the World Trade Center in 2001, which killed 2,753 people. The attack also destroyed more than 10 million square feet of real estate, and the resulting crisis cost the region 223,000 jobs in just two years.
The potential loss of the Amazon headquarters would be more akin to a long-term disaster. During the 20th century, the city lost its two main economic underpinnings: its manufacturing base and its role as the busiest seaport on earth. In 1955, for example, about a million people worked in New York City's factories, and in its crowded harbour, tramp steamers, ocean liners and tugboats struggled to avoid one another. New York was the leading industrial city in the world.
And yet, by 1980, a quarter-century later, the major job centres in the five boroughs had essentially collapsed. In 1900, New York had 90 breweries and was the beer capital of the nation. But by 1976, the last brewery in the city was gone, and Milwaukee and St Louis were competing for beer supremacy. Similarly, in 1950, New York's 300,000 textile workers made most of the women's clothes sold in the United States. The city had no serious rival. But by 2017, only about 20,000 such workers remained.
New York's job losses were not only blue-collar. During the 1970s, the city experienced an exodus of Fortune 500 corporations. Dozens of them moved their headquarters and took their executives with them. Some went to suburbs in Connecticut and New Jersey, but many more decamped for Atlanta, Dallas or Houston. The impact on the city was dramatic. Not only did workers laid off from those companies lose their jobs, but their spouses and children suffered as well. Many of them, as demographic statistics reveal, had to move to other states to make a living. Their departure was hidden by the fact that they were often replaced by millions of newcomers from other countries, but those immigrants could not immediately compensate for all those lost jobs.
The region now faces a calamity almost as bad as anything that has happened in the past. The loss of Amazon would cost 25,000 jobs directly, and those workers would support up to 82,000 more indirect jobs. The subsidies New York has offered to Amazon would have been given to any company promising so many jobs. And Amazon is expected to pay more than US$27 billion in taxes over the next 25 years. Amazon will also build four million square feet of office space in Queens, providing billions more in construction spending.
More important, a new Amazon headquarters on the East River would signal that the future of this metropolis is as great as its past.
If Mr Gianaris and his supporters have their way, and Amazon retreats to Nashville or Atlanta or some other more welcoming city, the mail order house that Jeff Bezos built will probably suffer little. But New York will lose its reputation as a centre of economic opportunity, and the city will sink in status and importance. And its legislators and politicians will solidify their reputation as the most overpaid and incompetent in the nation.
Amazon's opponents should take a longer-term view. If there is no economic opportunity, there are no jobs. If there are no jobs, there is no tax revenue. And without taxes, jobs and opportunity, New York will no longer be first among cities. NYTIMES
- The writer is a professor of history at Columbia University and the editor-in-chief of The Encyclopedia of New York City.