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“Winners” in Amazon Sweepstakes Sure to be the Losers

Photo Source James N. Mattis | CC BY 2.0

Jeff Bezos, the world’s richest person, wouldn’t seem to need the money. Nonetheless, huge sums of money will be diverted from social needs to line his pockets — a cost that won’t stop there, as gentrification will be accelerated still more in New York City and the Washington area.

In all, Mr. Bezos scooped up nearly US$3.7 billion worth of subsidies this week. Does someone worth $112 billion and owner of a company that has racked up $7 billion in profits for the first nine months of 2018 really need such largesse? Corporate subsides are hardly unique to Amazon, but this to all appearances represents the most blatant example yet seen.

Incredibly, these astronomical sums of money don’t represent the biggest giveaway offers, even in the “winning” areas’ metropolitan areas. The state of New Jersey, then under the governorship of Chris Christie, offered $7 billion to Amazon to build its second headquarters in Newark, and the state of Maryland offered $8.5 billion to Amazon to build in Montgomery County, which borders Washington on the opposite side of the Potomac River from Arlington, Virginia.

Many other locations across the United States offered gigantic subsidies, as Amazon did all it could to initiate a bidding war. But as the two locations chosen (splitting in two the original proposal to create a single “second headquarters”) were picked because of the available workforces and city amenities, were these gargantuan subsidies necessary? It would seem not, making them all the more hideous. One strong clue is that Google is rapidly expanding its presence in New York City without, as far as the public knows, any subsidies.

New York’s governor, Andrew Cuomo, justifies Amazon’s subsidies by claiming that “It costs us nothing,” going so far as to assert that the city and state will get back nine dollars every dollar given away in subsidies. This sounds dubious, to be put it mildly, given that once all the state and city incentives are added up, the cost will be approximately $100,000 per job — a total amounting to all the state and city income taxes that will be paid by all the Amazon employees for the 10-year period of the subsidies, according to an analysis by Josh Barro, a former fellow at the conservative Manhattan Institute.

Writing in New York magazine, Mr. Barro wrote:

“The problem with [Governor Cuomo’s] analysis is it assumes all the economic activity we’re buying with the subsidy package wouldn’t happen without the subsidy package. And that’s not true. Google’s impending expansion in Manhattan — where it will develop a campus nearly as large as the one Amazon plans — shows a mega-tech firm might locate here even if you don’t give it billions of dollars.

Plus, when we do bring Amazon in, it will tend to crowd out other businesses and especially other people that might have located where Amazon is going. New York is crowded — there’s more demand for housing than supply, and the number of top development sites is limited — so the case that subsidized economic development means more net economic activity is much weaker here than it might be in, say, Cleveland.”

A dictated outcome that will facilitate gentrification

A city councilman, Brad Lander, was still more direct in his criticism. At a demonstration the day after Amazon’s announcement, Councilman Lander said, “This is not only an assault on Long Island City [the neighborhood where Amazon will build]. It’s not only an assault on housing affordability. It’s not only an assault on transit capacity. This is an assault on our democracy.” The reason behind that last statement is that the plan to throw $3 billion at the world’s richest man was hatched and negotiated in secret, and will be forced through via a state agency so that local officials will have no say whatsoever.

The exception to that is Mayor Bill de Blasio, who is kicking in $900 million in city tax credits plus allowing Amazon to apply for a program that would enable it receive property tax abatements for up to 25 years. Mayor de Blasio, the Barack Obama of New York City who is far from a progressive although he plays one on television, continues to do his his part to facilitate gentrification as he continues the legacy of his billionaire neoliberal predecessor, financial-industry titan Michael Bloomberg.

The waterfront area where Amazon’s new campus will be built is not virgin land. It is an area of warehouses and other businesses with blue-collar jobs but is located adjacent to a waterfront area that was once industrial but is now full of high-rise luxury housing, most of which has been built in the past decade. Although it is true that manufacturing has long been in decline in waterfront neighborhoods such as Long Island City, it is also inescapable that city policy under snarling Rudy Giuliani, technocrat Michael Bloomberg and duplicitous Bill de Blasio has centered on accelerating gentrification by using zoning changes and developer incentives to force out industrial operations and replace them with million-dollar high-rise condos. Long Island City, and the nearby neighborhoods of Astoria, Greenpoint and Williamsburg (particularly the latter two), are rapidly changing under the tremendous pressures of uncontrolled real estate speculation.

Jobs at the existing businesses will be lost in the redevelopment to benefit Amazon, and still more pressure will be placed on the already dwindling stock of affordable housing, adding to the pressure from the mushrooming upscale housing. There will also be more strain on an infrastructure (including a decaying, underfunded subway system) already unable to handle the number of people living and working in these areas. Gentrification doesn’t just happen — it is a process assisted by a local government under the sway of local corporate elites, and is centered on dramatic increases in commercial and residential rents such that the people and culture who are being removed find it increasingly difficult to remain.

To provide a working definition, gentrification is a process whereby an organic culture originating in the imagination, sweat and intellectual ferment of a people living in a particular time and place who are symbolically or actually distinct from a dominant moneyed mono-culture is steadily removed and replaced by corporate money and power, which impose a colorless chain-store conformity. Make no mistake, Amazon’s arrival will not only accelerate gentrification in Long Island City and the nearby waterfront neighborhoods of Greenpoint and Williamsburg, but kickstart gentrification in Queens neighborhoods further from the East River. This will displace not only people but local businesses as New York City becomes ever more a homogenized corporate shopping mall.

Alexandria, Virginia, will surely not escape this fate, either, as the Washington area undergoes it owns process of gentrification. The state government of Virginia and the city of Alexandria are handing out $573 million in subsidies, equivalent to $22,000 per job. That doesn’t include another $223 million in promised transit improvements. Amazon will also be receiving $102 million in subsidies for a new operations center that is projected to employ 5,000 people in Nashville, Tennessee.

The biggest but far from the first Amazon subsidies

Subsidies, unfortunately, are nothing new for Amazon, although never before has it received giveaways of this scale. According to Good Jobs First, Amazon had already received $1.6 billion in subsidies for its warehouses, data centers, film productions and its WholeFoods supermarkets from 146 separate programs. Just in 2018 alone, a total of 17 subsidies from governments in 13 states gave the company at least $237 million.

Amazon’s profits are rapidly rising — not to mention making Mr. Bezos the richest person in the world. The company reported net income of $5.4 billion for 2016 and 2017 before racking up $7 billion in the first three quarters of 2018. As an owner of 80 million shares in Amazon, Mr. Bezos is in no danger of losing his fortune. The harshness of working conditions at Amazon, well documented in numerous reports, means that he gets rich off the sweat of his workers, not only through the massive subsidies showed upon him.

Although it is skilled at the art of taking public money for its private profit, Amazon is far from unique, One good example is Wal-Mart, which greedily gobbles up subsidies while racking up gigantic profits. Wal-Mart is a company that pays it employees so little that they skip meals and organize food drives; receives so many government subsidies that the public pays about $1 million per store in the United States; and is estimated to avoid $1 billion per year in U.S. taxes through its use of tax loopholes.

Wal-Mart is a company that has reported net income of $70 billion over the previous five years, and in which three heirs of founder Sam Walton are each among the world’s sixteen richest people, worth a combined $139 billion. The Walton family owns about half of Wal-Mart’s stock, and last year “earned” from collecting dividends alone about $3 billion just for being born. They need not ever lift a finger to haul in these fantastic sums. The Donald Trump/Republican Party tax scam of 2018 that provided windfalls for U.S. corporations has showered still more money on Wal-Mart, which like most of its corporate peers, used the largesse to fatten profits and shower more money on its stockholders. Wal-Mart announced that in its last fiscal year it handed out $14.4 billion to shareholders in dividends and stock repurchases.

None of these appalling results are unique to Wal-Mart or to Amazon. The University of California Berkeley Labor Center calculates that low wages costs United States taxpayers $153 billion per year in public support for working families. Nearly three-quarters of United Statesians receiving public support are members of working families, the Labor Center reports, adding that more than half of combined state and federal spending on public assistance goes to working families.

So much has been written about inequality, stagnant or falling wages, corporate tax dodging and good old-fashioned capitalist class war what new can be said? Capitalism, alas, is working as it is supposed to.

More articles by:

Pete Dolack writes the Systemic Disorder blog and has been an activist with several groups. His first book, It’s Not Over: Learning From the Socialist Experiment, is available from Zero Books and he has completed the text for his second book, What Do We Need Bosses For?

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