Did New York Lose Anything with Amazon’s Rejection? It’s Complicated

The problem is the race-to-the-bottom communities engage in when heaping tax subsidies on companies that would create jobs no matter what.

For public finance, it is one of the purest examples of a prisoner’s dilemma one could think of. And just as in that thought experiment, it is entirely obvious how to get to an outcome that is better for everyone: cooperation.

Other economies have done so successfully: The EU limits direct subsidies to individual companies, shifting competition to areas that benefit all companies and citizens as well, such as education, safety, public transit, reasearch, or even low taxes, as long as they apply not just to those that are large and mobile.

The results speak for themselves: Ireland has become a knowledge economy powerhouse, not primarily with their illegal subsidies to Apple, but with lower taxes across the board, plus some rather good universities and the English language.

Eastern Europe has managed to attract manufacturing, especially automotive. Over the last 20 years, they have experienced a massive economic rally. Meanwhile, old economies like Germany aren’t exactly hurting, either.

There used to be an argument against that seemingly made sense, namely that subsidies may be the only tool poorer communities have to attract investment and catch up.

But if anything, this debacle has exposed that argument as hollow: it wasn’t Detroit or Kentucky winning HQ2, it was New York. Financial competition seems to favor the already rich, to everyone’s surprise.

The trouble seems to be a sort of fetishisation of market mechanisms: citizens favoring tax competition makes about as much sense as a union disbanding because “this really isn’t fair to McDonalds”.

Focusing on New York shifts the debate onto a side issue, namely that economic indicators do not always perfectly correlate with quality of life. Because NY would have seen a benefit in the former, without a doubt. But the impact would have been distributed somewhat unequally amongst the population. That’s a debate to be had, and one where a clear answer eludes me. But it’s tangential to the unique features of this incident, namely the reality-show competition and massive subsidies.

Nonsense. If the bay area were a competitor, that's where Amazon would have wanted put their new HQ, not New York. Amazon doesn't have an HQ in San Francisco.

Nevermind the fact that New York has been experiencing a tech boom for the last decade or more, with Apple, Facebook, and Google all buying campuses similar in scale to Amazon's proposed one, and without demanding bribes from the state before doing so.

Bombardier, here in Montreal, is maybe the biggest private employer. They are one of the few companies that provides high end jobs like 'designing products'.

Bombardier makes big planes - they might need special status at the airport, special access to certain things etc..

In a negative case, Bombardier was about to go bankrupt on the tail of a recent bad project. They needed a bailout which the market was not interested in really. If the government did not step in, the company could have folded and would have been devastating. The devastation would have been one thing for Bombardier investors, but probably much worse for so many regular people involved. That fact should express the degree to which these investments are 'important' to parties aside from investors.

Consider for a moment why 'they market' wasn't interested in the first place: because they couldn't make huge bank. Too much risk.

Why does Softbank plow zillions into WeWork and not Bombardier? Because they, Softbank - wants to make 'all the surplus' - not the community. With WeWork, investors 'make bank'. With Bombardier, most of the surplus goes to other parties.

Bigger picture, consider that 'a company' is a balance of power between 1) shareholders/debtors, 2) executives, 3) workers, 4) buyers and 5) suppliers.

In the case of Bombardier - shareholders stand little to gain. The 'winners' of the perpetual equilibrium are the suppliers, buyers, employees.

In many cases, it can be demonstrated that the overwhelming amount of money and surplus generated when a company comes to town is generated for parties 'other than' the investors. (I'm not saying this is always the case of course)

Since to this day, Amazon doesn't even make a lot of profit, and almost 100% of their proceed are invested in jobs, or surpluses for customers ... it's those participating in the system i.e.

For the most part, Amazon is an 'efficiency machine' that provides structure for smart people to work in, to collaborate effectively to do cool new things.

The are 'mostly' a positive force who's investors hardly claim a dime in profit (at least for now).

It's reasonable that some accommodation was made for them, though the $3B seems high, it's actually a small deal especially if it's tax incentives commensurate upon future returns.

That's machine in the American political sense BTW