NYC and Amazon: It is Business as Usual in the Global Economy
By OREN M. LEVIN-WALDMAN, Ph.D.

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NYC and Amazon: It is Business as Usual in the Global Economy By OREN M. LEVIN-WALDMAN, Ph.D.

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          NYC and Amazon: It is Business as Usual in the Global Economy By Oren M. Levin-Waldman

Oren M. Levin-Waldman, Ph.D., Professor at the Graduate School for Public Affairs and Administration at Metropolitan College of New York, Research Scholar at the Binzagr Institute for Sustainable Prosperity, as well as faculty member in the Milano School for International Affairs, Management, and Urban Policy at the New School. Direct email to:
olevin-waldman@mcny.edu

After months of wooing Amazon and then being selected as the location of its new second headquarters, Amazon decided not to come to New York after all. To listen to the protestors that opposed the expenditure of $3.4 billion to lure Amazon, this was a great victory for the forces of good that resist the evil of billionaires on behalf of working Americans. According to Alexandra Ocasio- Cortez, the freshman congresswoman from The Bronx and Queens, the people of New York stood up to the world’s richest man.

Ocasio-Cortez may or may not be the principal person to blame for this pullout, but the deal that she and others decried, is nothing new. Rather it has been characteristic of urban politics for decades now, especially as cities have had to deal with the fallout from the transformations from industrial-based manufacturing to post-industrial service economies. To put it bluntly, urban politics has been about development and redevelopment. At the state level, these politics have amounted to a race to the bottom.

What, then, would the Amazon deal have meant to New York? Well 25,000 new jobs would have been created. By no means would these jobs have been replacements for industrial manufacturing jobs lost over the last few decades. On the contrary, they would have been high paying jobs for workers with considerable skills. In all likelihood, they would have attracted workers from the outside, in which case low-skilled and low-wage workers in the immediate area would not have derived any immediate benefit. Rather the increase in demand for housing would have driven up housing prices and apartment rentals, thereby forcing these workers out to the periphery.

AOC claimed that because Amazon was opposed to the new facility becoming unionized, her protests against Amazon really protected those who would have worked for Amazon from being exploited. Really? Are workers earning a minimum of $150,000 a year exploited in the same way as low-wage workers who can’t even earn $15.00 an hour?

Socialism may feel good for some, and maybe the apparent victory of David over Goliath will give  comfort to some workers. But let’s not kid ourselves. The protest here demonstrates nothing more than an ignorance of economics and the nature of urban politics in the real world. Yes, the deal was going to cost New York taxpayers around $3.4 billion, but it was expected that it would generate over $27.5 billion in state and local revenue over 25 years. Moreover, there likely would have been tertiary benefits, as new Amazon workers would be patronizing businesses in the local economy. And these are the businesses that over time might have hired those workers closer to the bottom of the skills and wage distribution.

When politicians celebrate this type of loss, they clearly don’t understand what their function in Congress is supposed to be. Nobody from her district in the Bronx and Queens sent her to Congress to be the leading spokesperson for Green energy, let alone to sponsor a new Green energy New Deal. That is a luxury one may indulge in after, and only after the interests of her district have been represented. AOC was sent to Congress to bring back “bacon” to the district.

Either she is supposed to ensure that jobs are created through private investment or from federal dollars that bring in programs that will serve her constituents. Of course, Amazon’s investment was negotiated by state and local officials, which means that AOC had nothing to do with it. But to kill a deal and brag about it? That would usually be a ticket for defeat in the next election.
And yet, it isn’t only that New York will lose the 25,000 jobs, but other future investments that others might have made. All other investors need to do is look at what happened here and conclude that the business climate for investment in New York is simply unfavorable. Of course, we already knew that. After all, if it were favorable, then why does New York need to spend $3.4 billion to lure business here?
In an ideal world, investors would come here because of all the amenities that New York has to offer. That state and local officials around the country engage in these types of competitions for investment and efforts to create favorable business climates says much about the real nature of urban politics in the global economy.
To create favorable business climates state and local governments not only offer tax abatements and relax regulations, but they strive to reduce overall costs, especially municipal costs, by contracting out for services, like sanitation, to private contractors who can pay their workers less than municipalities were paying their municipal workers who for the most part were unionized.
Because state and local governments have been willing to create these types of favorable business climates, investors have come to expect it, and in some cases demand it. These efforts have only epitomized what can be referred to as the new public-private partnerships. Under the old public-private partnerships, the public sector would provide an infrastructure and education in an effort to ensure that workers were prepared to work for new firms coming in. The private sector in turn would create jobs.
In the new public-private partnership, state and local governments spend money at taxpayers expense to attract investment. In many cases they feel their backs are against the wall. The most egregious example of this was Poletown, a Detroit neighborhood during the late 1970s. GM informed Detroit officials that it would build two new Cadillac plants and create 6,000 jobs if the City of Detroit would acquire land through its powers of eminent domain, and then prepare it for the construction of the new plants. GM specifically wanted the plants to be located in Poletown, an ethnic neighborhood.
This partnership involved bulldozing a community, destroying homes, schools, cemeteries, houses of worship, and other civic organizations. Community groups fought it, but this was real investment and Detroit officials were hard pressed to say no. And the courts held that the public interest of job creation outweighed individual property rights to finance the public expenditures required, Detroit not only received money from the state, but from the federal government. Of course, GM wanted its usual tax abatements and a relaxation of regulations. In the end, only 6,000 jobs were created, and a few years later GM ended up closing the plants.
Amazon may be different because it isn’t clear that it would have involved destroying a community. But in their bid to attract the HQ2 investment, state and local officials were offering prime real estate and the use of eminent domain authority to acquire and clear properties so Amazon could build its new campus.
Could public monies be better spent? Perhaps if taxes weren’t so high, these types of deals wouldn’t be necessary. But to reduce taxes would really require deep cuts in expenditures, which would include the social safety net. Surely improving the educational system and investing in human capital would mean more workers prepared for the types of jobs offered by our new global economy. And yet, until we are prepared to rethink the public’s role in the necessary public-private partnership, then companies like Amazon will continue to make these types of demands and state and local officials will continue to indulge them.

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Restoring the Middle Class through Wage / Oren M. Levin-Waldman / Palgrave MacMillan

 https://www.palgrave.com/us/book/9783319744476

This book makes the case for minimum wage as a way to improve well-being of middle-income workers, reduce income inequality, and enhance democracy….

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Minimum Wage: A Reference Handbook / ABC – CLIO

https://www.abc-clio.com/ABC-CLIOCorporate/SearchResults.aspx?type=a 

The Minimum Wage: A Reference Handbook By Oren M. Levin-Waldman. As of 2014, the minimum wage in Seattle is $15 an hour — double the federal minimum wage.

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“Wage Policy, Income Distribution, and Democratic Theory” By Oren M. Levin-Waldman

http://www.routledge.com/books/details/9780415779715/#reviews

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Dr. Oren M. Levin-Waldman, Ph.D., Professor at the Graduate School for Public Affairs and Administration at Metropolitan College of New York, Research Scholar at the Binzagr Institute for Sustainable Prosperity, as well as faculty member in the Milano School for International Affairs, Management, and Urban Policy at the New School. Direct email to: olevin-waldman@mcny.edu 

 

eHeziNYC and Amazon: It is Business as Usual in the Global Economy
By OREN M. LEVIN-WALDMAN, Ph.D.

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