It’s not often that supporters of the free market find themselves agreeing with the newly elected Congresswoman and posterchild of Democratic socialism, Alexandria Ocasio-Cortez. However, in the wake of Amazon finally announcing which cities will house the company’s new headquarters, many market economy advocates have found themselves nodding in agreement as Ocasio-Cortez decries this as an act of corporate welfare.
Amazon’s New HQ2
For nearly a year, cities all around the country have been bending over backwards trying to convince Amazon to choose them for the company’s HQ2. Finally, less than two weeks ago, the company announced that two cities had been selected. After an intense search, Northern Virginia and New York City have been declared the winners of this contest.
To be sure, the two new locations will result in the creation of almost 50,000 new jobs, which is a major benefit to our economy. However, while this number is certainly impressive, it comes with about $2 billion worth of tax incentives.
Congresswoman-elect Alexandria Ocasio-Cortez has no problem spending taxpayer dollars on social programs. She does, however, see Amazon’s recent move for exactly what it is: corporate welfare at its finest. After the new HQ2 locations were announced, she took to Twitter to express her thoughts:
Her initial Twitter comment eventually evolved into a thread where she laid out her concerns that Amazon was using this opportunity as an easy access point to taxpayer dollars. She also condemned Amazon for its claim that the new headquarters will benefit the local community by creating jobs when these jobs will likely be filled by those living outside of the city.
Typically, when Ocasio-Cortez makes any sort of economic commentary, many who favor the free market have been inclined to disagree by default. After all, the young Democratic socialist has voiced extremely radical beliefs that support an ideology that has claimed far too many human lives. In fact, according to Free the People’s Matt Kibbe, socialism has claimed the lives of at least 100 million people just under the regimes of Vladimir Lenin, Joseph Stalin, Mao Zedong, Kim Jong-un, and Kim Jong-il alone.
And when it comes to supporting public services, the New York City Subway system is not the most deserving recipient of tax dollars either. However, when it comes to chastising Amazon for its use of corporate welfare, the young Congresswoman-elect is absolutely correct.
The Race for Tax Incentives
When Amazon made the decision to build a second headquarters, it could have also made the decision to quietly conduct market research until it determined which city made the most sense and could meet the needs of the massive company. Instead, it chose a different route, one that resulted in pure pandemonium as cities competed to make themselves desirable to the company.
The announcement that Amazon was looking for a location for its HQ2 sent cities all around the country, and Canada, into a bit of a competitive craze. In fact, a recent article highlighting the just how absurd this competition got highlighted some of the more ridiculous perks that cities offered up to Amazon to prove their undying loyalty.
Montgomery County, Maryland took things to such extremes, its proposal for the company included over $6.5 billion in tax incentives. The incentives were included in the PRIME Act, as it was so appropriately called, and would have been the largest economic development package in the state’s history. Stonecrest, Georgia also went to extremes and in addition to tax incentives, offered to change the name of the town to “Amazon, Georgia” and offered Jeff Bezos the role of permanent town mayor. Boston, Massachusettes offered up its cities most impressive scholars to the company and even offered to pay their salaries with tax dollars.
The only sane city in the mix was Toronto, Canada, oddly enough, which according to Buzzfeed:
“…offered Amazon no incentives, in the most Canada move ever. Toby Lennox, the CEO of Toronto Global, which represents the business interests of Canadian municipalities, told the CBC, ‘Others may provide large subsidies and tax breaks, but like the Province of Ontario, we in the Toronto Region don’t want to play that game, and frankly we feel we don’t need to play that game.’”
Some cities, like Manhattan, even offered Amazon relief from zoning laws that might otherwise prevent or make it more difficult for the company to open up shop. One can only wonder how much the city might benefit from offering this perk to smaller companies who cannot afford to pay off the government in exchange for less restrictive regulatory oversight.
Amazon’s Corporate Welfare Problem
Amazon’s slow evolution into a corporate welfare queen has been a hard pill for many free market advocates to swallow. After all, the company’s entire existence was a testament to the power of the market and the process of creative destruction.
Amazon initially rose to prominence by doing what traditional bookstores did, only it did it better, completely dissolving the need for brick and mortar stores like the now-defunct Borders bookstore. Eventually, Amazon moved from books and encroached on just about every other retail category you could possibly imagine. In fact, Amazon can likely be tied to the end of Toys R Us and other retailers.
But again, this was all part of the market process and earned Amazon a lot of praise from market economy advocates. But over the years, Amazon’s market practices have dissolved and morphed into something else entirely.
As Wired reports:
“This isn’t the first cronyistic stunt Amazon has pulled. After Sen. Bernie Sanders called attention to the fact that many of Amazon’s employees relied on food stamps and other government programs to get by, the company announced it was raising its lowest wage. Amazon CEO Jeff Bezos then promptly lobbied Congress to increase the federal minimum wage in an effort to force his company’s competitors, like Target and Walmart, to raise wages for their employees. In other words, Bezos attempted to use Congress as a tool to disadvantage his competitors.”
Creating new jobs for Americans is absolutely something to be praised, as is voluntarily raising the minimum wage for your employees. But the fact that Bezos has had to utilize the government, whether through lobbying Congress or using tax incentives, to bring about these changes speaks volumes.
Amazon is a rich and powerful company, it does not need taxpayer dollars to maintain its success. And yet, that is what Bezos has resorted to in his quest for continued success. And this reliance on the government has become such a problem, it has led to the unprecedented agreement between market economists and Democratic socialist Alexandria Ocasio-Cortez.