How Amazon Left New York at the Altar

Coincidentally, I was on a business trip in New York when the news broke that Amazon abruptly canceled its plans to build #HQ2 in #LongIslandCity. This expansion by #Amazon would have brought 25,000 jobs to the city averaging $150,000 per year in salary. In exchange for HQ2, the city government would provide one of the largest incentive packages offered to a company, and according to The New York Times, this governmental incentive package would total $3 Billion dollars.

Mayor Bill de Blasio

When my morning meeting was over, I sat in the conference room and read through several articles by CNN and The New York Times on the decision, and quite honestly, I was shocked at the vitriol expressed towards the supporters of the inventive package. I wasn’t shocked because a comparatively small percentage of people disagreed. I was shocked at the intensity of their disagreement. According to Business Insider, nearly 70% of New Yorkers supported the deal, however grassroots opposition was stimulated by the Democratic Socialist Party, of which Representative Alexandria Ocasio-Cortez is a member.

Alexandria #OcasioCortez is the elected official that represents the district where HQ2 was to be built and was vehemently outspoken against the decisions made by Gov. Andrew Cuomo and Mayor Bill de Blasio to provide such an unprecedented incentive package to “the richest man in the world.” When news of the cancellation broke Thursday, Ocasio-Cortez went on record as saying, “This is incredible...ordinary Americans have more say in this country than the richest man in the world.” The passion of Ocasio-Cortez is evident and laudable, but it appears as if her political activities in this specific situation are based upon a flawed premise. Before that premise is clarified, let’s provide a brief comment on the hot-button, and very real topic, of gentrification.

Fiery Representative of Long Island City

In today’s language, gentrification is the process of upgrading neighborhoods to meet the demands of the constantly-expanding middle-class. Although somewhat true, this isn’t the history of gentrification. Historically, gentrification was the process of systematically removing poorer residents, primarily African Americans, from urban communities in favor of white, middle-class Americans and developers. The negative results of both the present and the historical understanding of gentrification, at a minimum, are displaced residents and increased homelessness. With this in mind, let’s return to Alexandria Ocasio-Cortez and Amazon.

It seems as though Ocasio-Cortez has the historical understanding of #gentrification firmly in mind as she celebrates Amazon’s cancellation of HQ2 in “her” city. The reason why I speculate that her political actions in this situation are based upon a flawed premise is that the historical perspective, as legitimate and horrendous as it was, isn’t the only perspective of gentrification. As briefly mentioned earlier, there is a contemporary perspective that isn’t always racist in intent or execution. It’s the consequence of legitimate supply and demand. Here’s what I mean in short order.

When a company the size of Amazon seeks expansion, there are only certain US cities and locations that are feasible for such an undertaking. Millions of dollars are spent on feasibility studies to create a short-list of potential locations. When the short-list is announced, the elected officials of those cities create incentive packages to lure the company to choose their city over the others. Why do cities do this? They do this because job creation is near the top of the list of every city’s strategic priorities. Without jobs, residents don’t earn income. When residents don’t earn income, residents are unable pay income tax, pay property taxes and spend money on goods and services within the city. Without the above, tax revenue (the largest sources of revenue for a city), aren't generated. When tax revenue isn’t generated, or in layman’s terms, when a city doesn’t get a paycheck, the support services provided by the city are reduced or eliminated. Similarly, when an individual experiences a reduction or elimination of income, he or she must make decisions about what expenses to cut.

Amazon Founder & CEO Jeff Bezos

As real of a situation as #gentrification is in both is historical and modern context, what’s equally real is an economic misunderstanding by both politicians and the “average citizens” touted by Ocasio-Cortez. Clear evidence of economic misunderstanding is found when she is on record as saying, “if New York was willing to "give away $3 billion for this deal, then those investments could be used to hire teachers or fix the subway.” First, according to the New York Times, the incentive package would have included nearly 1B in actual cash with the remainder being non-cash incentives and credits. So, the first evidence of economic misunderstanding is that her words skew the perspective of the “average citizen” who actually thinks the city was to write a 3B check to #JeffBezos, whose already the richest man in the world.

The second evidence of economic misunderstanding is the idea of hiring new teachers or fixing the subway with the 3B, instead of giving it to an insanely rich company. It’s already been stated that the city was to write a check of about about 1B, but in addition to that, where does Ocasio-Cortez think the money comes from to hire teachers, fix the subway, or even support the homeless and subsidize rents? The money for such real projects comes from growing tax revenue, which as already stated, is primarily the outcome of job creation. If jobs aren’t created in a greater proportion to people moving from the city, being fired or laid off, then there isn’t additional revenue to sustain the projects she proposes.

I’m certainly not implying the city of NY or Amazon is cash-strapped, but legislation to support the hiring of teachers, fixing of subways, addressing #homelessness, etc is the result of politics, which is her role. Her role shouldn't be pushing away a company like Amazon, but the backend legislative strategy for allocating a portion of the tax increase to specifically address gentrification, teacher retention, and hiring of the disadvantaged. Seriously, which fight makes more sense:

  • Rejecting Amazon, cheering big business bowing to average Americans, and now fighting for money to serve an already growing problem of poverty and gentrification or

  • Accepting Amazon, cheering 25,000 direct jobs and nearly 100,000 indirect jobs, and being concerned enough about poverty and gentrification to fight for backend legislative action

The third evidence of economic misunderstanding is the seeming rejection of what activity is the prime mover behind the sustainment of much of the endeavors she and others on the socialist spectrum appear to champion—wealthy companies and wealthy people. Ocasio-Ortez and others on the Socialist spectrum radically believe that the government must subsidize or fully fund nearly every social vice that plagues our country, while at the same time, rebuffing the expansion of so-called big business, all the while desiring more US job creation. Subsidize #healthcare, housing, food, transportation, education, etc. while the federal deficit continues to spiral upward to ridiculous and impossible-to-pay-back proportions regardless of how much big-businesses are taxed. Let’s just say this idea (the idea of subsidizing or fully funding), is theoretically true, how is it to be perpetually and increasingly funded?

The current and best overall strategy for funding is through business activity in the private sector and accompanying legislative action to support those who are “outside” the growth loop. Private-sector business activity creates multi-stream revenue options for the organizations that support those who are outside the loop of growth. Consider, where do the vast majority of viable, highly-engaged non-profit organizations get their money? To whom do they appeal for the bulk of their annual budget? Where do politicians appeal for the bulk of their campaign contributions to support their efforts of reform and support for the disadvantaged? Benevolent business owners, corporations and foundations funded by wealthy individuals is where they appeal.

Since we know this is true, is rejecting big business, in this case, Amazon, the logical answer? Is celebrating this “win for the average person” really a celebration? Will Representative Ocasio-Ortez and others turn down money from wealthy individuals, foundations and corporations and only raise money from “average” Americans to serve average Americans? Is not Rep. Ocasio-Cortez in office to serve all those in her district and not only the “average” American, of which, the majority agreed with Amazon coming? We know the answer to these questions, yet many get sincere but willfully ignorant about the economics behind funding for the disadvantaged? Is this perspective logical and rational? Are controls needed for big businesses? Of course. Are controls needed for politicians who want to willfully spend money that doesn't really exist? Again, of course.

Governor Andrew M. Cuomo

Gentrification is a very real issue, both in its historical and modern context. From an #AfricanAmerican perspective, we must keep in mind that in most instances blacks were systematically and intentionally kept outside the loop of growth. As a result, historical gentrification, had a compounding, psychological effect within the black community in urban areas. This psychological effect has scarred the black conscious towards the modern, less or non-racist perspective of gentrification, which unfortunately, is necessary for growth in urban areas where land is relatively scarce and condensed.

At the same time, there are those who are willfully ignorant of the historical actions of gentrification and expect African Americans and other minorities to just “get with the program.” What most African Americans know experientially is that history isn’t on the side of the disadvantaged. What many on the so-called progressive side seem to ignore is that economic growth in an imperfect world doesn’t automatically provide benefit to all parties. Guaranteed benefits for primary parties are on the front end, other benefits for secondary parties in the mid-term and back-end benefits for disadvantaged parties must be contended for through legislative action. A scarred psychology on one hand and willful insensitivity on the other creates a cocktail of misunderstanding and social negligence around economic growth.

Hence, for politicians to “cheer” at this loss of an unprecedented economic growth and mark it as “incredible” ignores the multi-sided factors surrounding growth and the inevitability of supply and demand. Eventually, these same politicians will bloviate over the absence of job growth and career opportunities. At the same time, for others to go “all in” for economic growth without clear back-end strategies to address the realty that a rising tide doesn't lift all boats is equally careless. This blog certainly isn’t “the” perspective, but I believe the ideas put forth does take NY and other cities grappling with people inside and outside of the growth loop in the right direction. Until then, Amazon's HQ2 is unmarried and New York remains at the altar infuriated.

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