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Amazon pulls out of the New York City deal

Is this a message about the new economy in America?

Just days ago, Amazon abruptly canceled plans for a much-heralded New York City headquarters:

While polls show that 70% of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City. … We will proceed as planned in Northern Virginia and Nashville, and we will continue to hire and grow across our 17 corporate offices and tech hubs in the U.S. and Canada. “Update on plans for New York City headquarters” at Company News, February 14, 2019

Opponents cited a number of issues including the risk that Amazon’s offer of $2.5 billion in investment in exchange for $1.5 billion in tax-friendly incentives for creating 25,000 jobs would not benefit current residents but rather attract outsiders, with a predictable rise in property values.

As one tech writer put it, “A promise of 25,000 jobs isn’t exciting anymore—it’s ominous:

Moreover, if you have paid attention to the experience of other global tech capitals, most notably my home of San Francisco, you know that the arrival of high-paying jobs is typically accompanied by an extraordinary rise in rents. The rising cost of living can push homeownership even further out of reach for most workers, and may ultimately send even highly paid workers packing to the exurbs. Casey Newton, “What Amazon got wrong about New York City” at The Verge

Although a clear majority of New Yorkers polled supported the new headquarters (69%, Harris Poll), many commentators celebrated the urban activism that kited the deal:

In particular, Queens and Bronx Congressmember Alexandria Ocasio-Cortez opposed the deal and rallied many online against it.“Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world,” she wrote on Twitter after the news broke. Katharine Schwab, “The war against Amazon was a war for cities–and cities won” at Fast Company

Some blame Amazon:

Amazon was apparently unprepared for popular opposition to a backroom deal that would have given the company almost $3 billion in incentives and tax breaks, and the prospect of a clash between New York governor Andrew Cuomo and a state board with the power to veto the plan proved too much for Amazon to handle. L.V. Anderson, “How Amazon Went From Picking Queens For HQ2 To Pulling Out: A Timeline” at Digg

Amazon does not have a great record as an employer. European workers have staged strikes, for example on Black Friday 2018 (November 23). One employee explains:

We work hard, and diligently, to make Amazon run. While our collective efforts produce astounding results, we are supervised ever more intensively. Through the use of digital trackers and indicators, our workday is managed down to the second, with each task timed based on a “rate” set by managers who push us ever faster. Work is often organized to keep workers from talking or even taking breaks, with this time considered “off-task”. Like factory workers on the assembly line, we are essentially extensions of the machine. Anonymous, “Our new column from inside Amazon: ‘They treat us as disposable’” at The Guardian

Some tech media are urging boycotts of Amazon Prime memberships in sympathy with the workers. Of course, Amazon’s PR has also been hurting from a recent machine learning debacle in which a since-dismantled machine learning program disadvantaged women in hiring calculations, principally due to faulty input.

However, many see another side, a bigger story. They view the US$15/hr wages as a way for people in struggling communities to advance their personal goals. Consider Doug Ford, premier of the Canadian province of Ontario, who gained a majority in 2018 on a grow-our-economy platform. He had already been looking forward to doubling the number of Amazon jobs in his province before the New York pullout. The company’s plan to redistribute the jobs “across our 17 corporate offices and tech hubs in the U.S. and Canada” will find ready support among legislators elected on promises of economic growth.

New York City mayor Bill di Blasio wonders whether his city’s opponents of the deal understand that a foregone tax revenue/incentives package is not the same thing as keeping money in the bank to spend on something else, as some of their statements seem to suggest. It is an investment that, wisely or unwisely, will not be made:

In an interview with NBC’s Chuck Todd, the host said the tax breaks offered to Amazon weren’t “money you had over here. And it was going over there.”

“Correct,” de Blasio replied. “And that $3 billion that would go back in tax incentives was only after we were getting the jobs and getting the revenue.”

To clarify, Todd said, “There not $3 billion in money…”

“There’s no money—right,” de Blasio said. Leah Barkoukis, “Bill de Blasio: AOC Didn’t Understand Amazon Deal…at All” at Townhall

Some noted the irony that “tech titans” like Amazon’s owner Jeff Bezos are comfortable with the values of the progressive left but that is precisely the group that chased out Amazon’s global digital mall. Others wonder whether chasing away such jobs is consistent with the prosperity needed to maintain a modern urban infrastructure.

We asked Jay Richards, author of The Human Advantage: The Future of American Work in an Age of Smart Machines. for his thoughts on the pullout. He thinks that, though it is a complex issue, there are clear winners and losers:

The American founders created a federal republic, and understood that states could compete with each other. There’s nothing wrong with that. But it’s a problem when cities and states carve out special favors, subsidies, and tax breaks for specific companies.

They should compete in ways that don’t create unfair preferences for one business over another. For instance, Texas can compete with California by having lower taxes and fewer anti-business regulations. But it shouldn’t offer, say, Amazon, a sweet deal that isn’t available to other companies.

New York and many other cities had offered tax breaks and other enticements to woo Amazon’s HQ2. This is a form of crony capitalism, plain and simple. It’s legal but it ought not to happen. This crony capitalism gave Alexandria Ocasio-Cortez and other New York progressives a fig leaf of legitimacy in their campaign against Amazon. Nevertheless, what they did exhibits staggering economic illiteracy and a disregard for their constituents.

The reality was that other locations had offered Amazon far more in the way of financial enticements. Amazon chose the Queens location in large part because it seemed to them to best fit their needs for a large talent pool. Amazon would have brought tens of thousands of good jobs to the area, many of those in AOC’s district. And it would have almost surely brought in tax revenue that would have more than offset the subsidies it was promised ahead of time.

From the beginning, it was clear that Amazon was seeking to build a second headquarters because of the extremely hostile climate of Seattle, where it is headquartered. AOC and other progressives in New York did everything they could to repeat the mistakes of Seattle.

And Doug Ford? He has given Amazon a “direct line” to his office at Queen’s Park in Toronto, Canada. Doubtless, American mayors and governors are keeping abreast and making discreet arrangements as well. We live in interesting times.

Note: You can meet and talk with both Jay Richards and professor of computer science Robert J. Marks over coffee at The Human Advantage – An Eastside Symposium: Will Artificial Intelligence Supersede Human Intelligence? in Austin, TX on March 11, 2019, 6:30–9:00 pm

Jay Wesley Richards
Jay Wesley Richards

Jay Richards is a research assistant professor at the Busch School of Business and author, with Jonathan Witt, of The Hobbit Party: The Vision of Freedom that J.R.R. Tolkien Got and the West Forgot. His most recent book is The Human Advantage: The Future of American Work in an Age of Smart Machines.

Robert J. Marks is the Director of the Walter Bradley Center for Natural and Artificial Intelligence and holds the position of Distinguished Professor of Electrical and Computer Engineering at Baylor University.

See also: Jay Richards asks, can training for an AI future be trusted to bureaucrats?

Is the future of jobs over?

Will AI lead to mass joblessness and future unrest?

and

Did AI teach itself to “not like” women? (what really happened with the “sexist” machine learning system)


Amazon pulls out of the New York City deal