ROBERT SCOBLE VIA FLICKR
WANT YOU TO WANT ME: Amazon's goal in coyly searching for a new HQ location is all about taxpayer-funded incentives, the Brookings Institute writes.
As Leslie Peacock wrote earlier today
, Little Rock Mayor Mark Stodola's goal of luring online retail giant Amazon
to set up its second headquarters in Central Arkansas seems
like a pipe dream. The company has listed criteria that it specifically wants from a city; for starters, Little Rock's metropolitan area is a few hundred thousand people and one international airport short of the basics.
A piece from Richard Shearer at the Brookings Institution
further illustrates the silliness of the idea. Amazon will want a metropolitan area "large enough to supply up to 50,000 professionals and/or house a large influx of these workers and their families over the course of the next few years" and which has at least one research university housing a "highly ranked engineering or management school."
Shearer says the company's list likely includes "only the nation’s 10 or 12 largest metropolitan areas," and that once other factors are included — such as local politics — Amazon is likely looking at just three cities in the U.S.
But the larger point is that the entire premise of Amazon open invitation to courtship is likely a farce, the point of which is to cynically milk a heavy dowry from taxpayers in the form of economic incentives. The company's much-publicized search for a second home will gin up false hopes among many cities, including those (like Little Rock) with little to no hope of ever really being in the running. And whatever city does land Amazon will end up paying for the honor by handing over millions in tax credits and other sweeteners intended to entice the retailer — despite the fact that the company may very well know in advance where it's intending to place its headquarters.
However, whether or not Amazon already knows where it would like its second headquarters to be, its competition will create a net loss nonetheless. The competition will create more costs for the communities that make bids for its headquarters than Amazon can ever hope to recoup through the tax incentives it ultimately receives. It will lure many places into spinning their wheels to propose a deal they never had any real chance of closing. These places will waste valuable staff time, including that of elected officials, organizing themselves and their pitch for naught. This is an opportunity cost—time and effort that could have gone into solving other problems. What is worse, this game will create hope that is destined to be dashed. Smaller big cities do have a lot to offer and they tend to be rather proud of that. But many of them have seen company after company pull out of their place over the last thirty years, creating a nagging sense of loss. Because of the number of these places, they are destined to lose in these competitions more often than they win. Though they may not have wagered anything all that tangible, those losses can be devastating all the same. They lead to a lot of consternation, antipathy, and finger pointing after the fact.
Read the whole thing.
This game reveals a lot about the power of large companies and their distorting influence on places today, especially in local economic development. It is not Amazon’s game. Like many companies before it, Amazon is playing a game that states and local governments have designed themselves and that only they can lose. State and local governments happily accept this. They have proven over and over that they are all too willing to give up their tax base for growth that would have occurred somewhere anyway. And while that growth, if it arrives, may benefit some of that state or metro area’s residents, the competition itself isn’t going to fix any one of the many, many economic and social challenges American communities face today.