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Business Commentary Progressives may not have sunk Amazon’s HQ2 hopes, but they have a point

There was always something unseemly about Amazon, which is controlled by the richest man in modern history, accepting “bids” for its second North American headquarters.

Amazon chief executive Jeff Bezos became the first person to surpass US$150-billion in net worth in 2018, just as the company was pitting cities – many of which have gross domestic products of less than US$150-billion – against one another to lure Amazon’s HQ2.

At the time, mayors and economic-development agencies had no qualms about promising major tax breaks to Amazon. Some 238 cities or regions submitted bids, including many Canadian ones from Halifax to Vancouver and several points in between.

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Not all of them offered tax breaks. Toronto, the only Canadian candidate to make Amazon’s 20-city short list, instead touted its public health care and pool of tech talent.

In November, Amazon selected two sites, splitting its HQ2 between the New York borough of Queens and Crystal City in the suburbs of northern Virginia across the Potomac River from Washington. The company promised to create 25,000 high-paying technology jobs over 10 years in each region in exchange for almost US$3-billion in state and local tax breaks in New York and more than US$800-million in incentives from Virginia.

“These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come,” Mr. Bezos said. “The team did a great job selecting these sites, and we look forward to becoming an even bigger part of these communities.”

What looked then to be a public-relations coup for Amazon, however, ended up making it a lightning rod for the anti-capitalist, anti-billionaire politicians who have risen to the fore of the U.S. Democratic Party. Faced with a backlash by activists, who accused Amazon of bad corporate behaviour in its hometown of Seattle, the company last week announced it was abandoning plans to invest US$2.5-billion in the new campus in Queens.

Far from placating its critics, however, Amazon’s move only seemed to prove their point.

“Today was the day a group of dedicated, everyday New Yorkers & their neighbours defeated Amazon’s corporate greed, its worker exploitation and the power of the richest man in the world,” Democratic superstar Alexandria Ocasio-Cortez tweeted.

Massachusetts Senator Elizabeth Warren, a candidate for the 2020 Democratic presidential nomination, said on Twitter: “One of the wealthiest companies on the planet just walked away from billions in taxpayer bribes, all because some elected officials in New York aren’t sucking up to them enough. How long will we allow giant corporations to hold our democracy hostage?”

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Amazon’s announcement that it was pulling out of its deal with New York led politicians in many cities that submitted unsuccessful bids for HQ2 to ask for a second chance. So, the opinions of Ms. Ocasio-Cortez and Ms. Warren may not be representative of overall public opinion toward Amazon outside of progressive bastions such as New York and Massachusetts.

Still, progressives are not wrong in arguing that Amazon and other tech giants have contributed to a housing-affordability crisis almost everywhere they set up a technology hub. Progressives also argue that Amazon’s hostility toward unions leads to precarious, low-paying jobs for its warehouse employees, most of which are located outside high-cost tech hubs.

Amazon did nothing to endear itself to progressives last year by opposing a Seattle tax on large employers aimed at raising funds to fight homelessness. Instead of making communities better for everyone, the company was blamed not only for pricing low-income workers out of a place to live, but also for being unwilling to take responsibility for the dislocation it helped create.

Democratic socialists such as Ms. Ocasio-Cortez are wrong in thinking that slapping punishing taxes on corporations and millionaires will make the United States better off. Her proposed Green New Deal, which includes “a job guarantee program to assure a living wage job to every person who wants one,” sounds great in theory. It almost certainly could not work in practice, or not without causing economic inefficiencies that would eventually end up impoverishing everyone.

Nevertheless, that doesn’t mean that North American cities, states and provinces should rush to offer tax breaks to the likes of Amazon, Google or Microsoft. The vast majority of cities that bid for Amazon’s HQ2 didn’t stand a chance at winning, mainly because they lacked the critical mass of highly educated tech workers the company was looking for.

New York likely didn’t need to offer any tax breaks to lure Amazon. Indeed, the city is already such a magnet for talent that the company will still end up adding thousands of jobs in New York without officially locating a second (or third) North American headquarters there. Greater Toronto, too, will be a net winner for the same reasons.

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The mistake most of the HQ2 bidders made was to fall for Amazon’s stunt in the first place.

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