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Why Amazon's Snub Of Boston Is A Good Thing

Jeff Bezos, CEO and founder of Amazon, at the introduction of the new Amazon Kindle Fire HD and Kindle Paperwhite personal devices, in Santa Monica, Calif., Thursday, Sept. 6, 2012. (Reed Saxon/AP)MoreCloseclosemore
Jeff Bezos, CEO and founder of Amazon, at the introduction of the new Amazon Kindle Fire HD and Kindle Paperwhite personal devices, in Santa Monica, Calif., Thursday, Sept. 6, 2012. (Reed Saxon/AP)

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Bostonians, who’ve been known to douse each other with champagne on beating New York in baseball, should be pouring the bubbly after losing out to the Big Apple as host of Amazon’s second headquarters. Or rather, hosting half a headquarters, as the online retailer will divide “HQ2” between Queens and Crystal City, Virginia, near Washington, D.C.

The two locations must split evenly the 50,000 jobs Amazon dangled before cities and states that offered the company millions or billions in incentives. (New York’s bid included $1.5 billion in grants and tax credits over a decade, while the Washington area pledged “significant” tax breaks.) With each winner netting just half the promised jobs, some observers wonder if they’ll get to scale back their incentives commensurately.

Even if they do, and even if 25,000 jobs remain “very big numbers,” as an analyst told The New York Times, Amazon played them and all the other competitors for saps.

Why’d Amazon put 236 cities through the bidding process if they knew where they wanted to go all along?

On the surface, it seemed that Beantown kept its wallet prudently pocketed with regard to HQ2, foregoing the lunacy-level bids of New Jersey ($7 billion) and Maryland ($8.5 billion). But to entice Amazon to bring 2,000 jobs to the Seaport in a separate move, Boston had already given $5 million in property tax breaks, which some called an indirect lure for HQ2 as well.

The city said the Seaport operation was worth the tax package, since the site currently is an unlucrative parking lot. Yet Massachusetts also ponied up $20 million in transportation infrastructure for Amazon’s neighborhood, even though the developer of the area had already agreed to pay for it.

In a nation where so many hysterically warn against the dangers of socialism, I missed the memo about how we repealed the free market: where companies succeed without government handouts.

Yes, Amazon revolutionized American business (and saved me during at least one Christmas season, when we got behind in shopping for our son). But “why are we going to hand out hundreds of millions or billions to a trillion-dollar company and the world’s richest man?” University of Toronto urban studies professor Richard Florida scoffed to the "PBS Newshour" after the HQ2 news leaked. Of the New Jersey and Maryland bids, Florida said, “There’s no way that 25,000 or 50,000 jobs are worth that.”

Other experts said Amazon knew perfectly well where it wanted to site HQ2, with its competition between communities merely elaborate kabuki to coax corporate welfare from its hosts. Florida said he predicted that Amazon would choose New York City or the Washington area at the beginning of the year, failing to foresee only the split decision for both.

That the fix was in for those locations was an easy call, according to the professor. Bezos has a mansion in Washington and owns The Washington Post, while New York is “the greatest global city in the world … with more headquarters than any other metro, where Jeff Bezos owns a condominium in the Time Warner Center.”

Florida and others were asking, quite reasonably: Why’d Amazon put 236 cities through the bidding process if they knew where they wanted to go all along?

Of course, companies have been scamming governments for welfare forever. For the latter, this game often ends badly. Boston and the state ponied up $150 million to recruit GE two years ago. The company has delivered millions in charity and other benefits, but its swooning stock value has put full payment of its promised 800 jobs on hold.

Amazon's new office in Boston's Seaport District will create 2,000 tech jobs in the city. It is expected to open in 2021. (Courtesy Amazon/Business Wire)
Amazon's new office in Boston's Seaport District will create 2,000 tech jobs in the city. It is expected to open in 2021. (Courtesy Amazon/Business Wire)

Former Gov. Deval Patrick’s fishing trip for companies, using the lure of public subsidies, was largely a bust. And not just here. The inevitable roller coaster of the business cycle means any public investment in a company is never a sure bet; several companies that were given scores of millions annually in public subsidies shuttered factories during the recession.

Many jurisdictions often don’t know how much they’d given away, how many jobs companies created in exchange for subsidies — and whether they’d have created those jobs anyway.

When I first questioned this unseemly Let’s Make a Deal a year ago, some of my millennial friends agreed, but for a different reason: Amazon has a bad reputation when it comes to its labor practices. It's a fair point, as Amazon implicitly conceded when it announced it would pay a minimum wage of $15 an hour to all U.S. employees.

But even if Bezos personally fanned and fed grapes to every package stacker he employed, bobbing for HQ2 would fall into the same category as all corporate welfare: dumb.

Boston, pop a cork. You’ve already spent enough on the Seaport Amazon.

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CorrectionAn earlier version of this commentary misstated the amount of property tax breaks Boston has offered Amazon for its Seaport expansion. We regret the error.

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Rich Barlow Cognoscenti contributor
Rich Barlow writes for BU Today, Boston University's news website.

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