Opinion

Amazon New York move an unlikely victim of globalisation

Clash between capital and stagnating living standards of workers crystallised

Activists who opposed Amazon’s plan to move into Queens rally in Long Island City in celebration of the company’s decision to pull out of the deal. Photograph: Drew Angerer/Getty Images

Suzanne Lynch's face
Suzanne Lynch
Sat Feb 16 2019 - 01:32

Amazon’s announcement this week that it is abandoning plans to build a headquarters in New York has raised interesting questions about the economic dividend offered by tech companies.

The company shocked investors on Thursday by announcing it was pulling the project due to community-wide concern over its impact on the local housing market and other services.

Just three months ago things were very different. In early November the tech giant announced that Long Island City in the New York borough of Queens and Arlington, Virginia, just outside Washington DC, had been jointly selected to host the company’s new headquarters.

A growing chorus of voices questioned whether the investment was good for the city

It followed an unprecedented public beauty parade which saw more than 230 cities across the United States line up to offer Amazon lucrative tax breaks and financial incentives.

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One town in Georgia offered to name a new city Amazon; Newark in New Jersey reportedly offered a package worth $7 billion to lure the company.

In November, Amazon announced the winners to great fanfare.

But while the decision was greeted with cheers in Arlington, the reaction in New York was very different. Though the governor and mayor supported the proposal, a growing chorus of voices questioned whether the investment was good for the city, despite the promise of 25,000 new jobs.

Faced with spiralling housing costs and increasing gentrification of the Long Island City area east of Manhattan, some residents queried why New York state was granting nearly $2 billion in incentives to one of the world’s richest companies.

Tax breaks

Local concerns were picked up by political figures. Alexandria Ocasio-Cortez, a New York congresswoman who was elected in November’s midterm elections, weighed in.

“Amazon is a billion-dollar company. The idea that it will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need more investment, not less, is extremely concerning to residents here,” she said after her election.

Signs that the project could be running into difficulty intensified last month when Michael Gianaris, a state representative strongly opposed to the project, was appointed to a state board with powers to veto the investment.

As rumours swirled about Amazon’s commitment to the project in recent weeks, on Thursday the company pulled the plug.

In a mixture of ruthlessness and disdain that only deep-pocketed companies can command, Amazon said it was taking its business elsewhere, stating that the company required “positive, collaborative relationships with state and local elected officials who will be supportive over the long term”.

In developed economies such as the US and western Europe the distribution of wealth has left many people less well off than their parents' generation

Presumably its announcement sent last year’s runners-up scrambling to brush up their application forms, hoping for a second bite of the cherry.

The Amazon headquarters story has obvious parallels with Ireland.

Successive governments’ policy of attracting US companies to Ireland has come up against the reality of an acute housing crisis, particularly in Dublin where tech giants continue to increase their workforce.

As Irish workers and families are priced out of the housing market, the obvious question emerging is who the booming tech industry serves exactly.

Though Intel’s pledge to invest $8 billion in its Leixlip plant has been broadly welcomed, for example, it is unclear if its claim that it is unlikely to adversely affect the local housing market has been fully tested.

While the Amazon controversy has crystallised the clash between the onward march of investment and stagnating living standards of ordinary workers in urban centres, in reality that tension has been brewing for some time. San Francisco is in the grip of a major housing and homelessness crisis spurred in part by Silicon Valley’s successes.

Companies such as Stripe, founded by the Collison brothers from Limerick, have woken up to the problem, with the online payments company recently donating funds to a housing advocacy organisation in the city.

Google recently submitted development plans that includes provisions for affordable housing, having taken a novel approach to the housing crisis by building temporary prefab accommodation for its own employees.

Reinvention

Amazon’s announcement on Thursday spawned predictable reactions, with pro-business policymakers accusing Ocasio-Cortez of nimbyism at best, at the very least a reckless misunderstanding of economics.

Some more thoughtful commentary pointed out that New York – which incidentally has one of the most effective rent-control systems in the US – has continually had to reinvent its industrial base over the centuries to ensure investment and good living standards for its residents.

Though the lessons of the Amazon controversy have yet to be drawn, it is taking place at an important political moment that should give politicians of all hues pause for thought.

While globalisation may have lifted millions of people out of poverty, in developed economies such as the US and western Europe the distribution of wealth has left many people less well off than their parents’ generation. International Monetary Fund managing director Christine Lagarde, for example, has spoken of the need to address rising inequality and ensure globalisation’s benefits are evenly spread.

The growing disconnect between the economic success of big tech and other global companies and a huge swathe of people in the West whose standard of living has not improved much since the 1970s is one of the defining political trends of our time. In different ways it contributed to the Brexit vote, Donald Trump’s unlikely victory in the 2016 US presidential election and the gilets jaunes protests in France.

Ocasio-Cortez and her supporters may be dismissed as socialist ideologues by their detractors, but they have hit on a genuine concern felt by many of their constituents.

Communicating to voters that they too can benefit from globalisation will be one of the key challenges for Democrats as they prepare to take on Trump in the 2020 presidential election.

Suzanne Lynch is Washington Editor

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