12 ms·

Something about this just makes my stomach sick... A massive corporation is pitting governments against each other for its own gain, often to no benefit of the

by wyattk 9y ago

Something about this just makes my stomach sick... A massive corporation is pitting governments against each other for its own gain, often to no benefit of the local population. I'm scared to see the numbers of "incentives" that local politicians try and hand out to Amazon. There's little evidence that the public money used/lost will ever be recouped. One of the worst cases of this happening so far is the Foxconn deal in Wisconsin that will cost taxpayers around $4.5B [1], and I feel that numbers for Amazon will dwarf those Foxconn numbers. The US is far removed from the days of trust busting [2], and keeping massive corporations (monopolies and oligopolies) and their market distorting effects in check, for the long-term benefit of the entire economy and the people. There seems to be a lot of similarities between now and the late 1800s and early 1900s. We live in a strange time. I get the feeling there will be a strong resurgence of antitrust cases and similar progressive policies. I'm curious to see where the near future takes us. 1: http://host.madison.com/wsj/news/local/govt-and-politics/memo-foxconn-cost-to-public-nearing-billion/article_83a3ab6e-6c7e-553e-ba97-976c9c32fe76.html http://host.madison.com/wsj/news/local/govt-and-politics/mem... 2: https://en.wikipedia.org/wiki/Presidency_of_Theodore_Roosevelt https://en.wikipedia.org/wiki/Presidency_of_Theodore_Rooseve...

sweetishfish 9y ago
With regards to your first point - it's not really costing taxpayers in Wisconsin $4.5B . At least for the tax credits portion, those are taxes that would not have been paid in Wisconsin otherwise.
- dtauzell 9y ago
  They are refundable tax credits so WI could be paying money they wouldn't have.
- drcode 9y ago
  I guess I also don't need to pay taxes anymore, because if I don't pay taxes those are just taxes that wouldn't have been paid otherwise.
  - ringtail 9y ago
    Are you paying 5+ digits tax and in the process of moving ? Then yes you can get the same special treatment while paying fraction of what you used to pay.
  - CGamesPlay 9y ago
    If you are outside of a tax jurisdiction, then yes, you shouldn't pay taxes inside that jurisdiction, because those are just taxes that wouldn't have been paid otherwise.
- simplicio 9y ago
  Kinda, but if no one offered such incentives, than Foxconn would've presumably still built its factory, and someone (maybe even Wisconsin) would've collected those taxes. So while for any particular state you can say that those taxes wouldn't have been collected, the general system of States competing for large businesses means someone somewhere won't collect taxes from Foxconn that they otherwise would've. Plus, the taxes exist for a reason. Companies rely on public goods like roads, schools, etc for their business. So if Foxconn never came to Wisconsin, Wisconsin wouldn't have had to pay those taxes, but they also wouldn't have to pay for whatever extra public goods are consumed by the factory. Of course, in reality, someone somewhere is going to pay for Wisconsin's schools, police, etc. So what really will happen is that Foxconn shareholders (who presumably don't, generally, live in WI) will have their share price subsidized, while other companies, or Wisconsin workers, or property holders or some combination thereof will make up the difference.
dudul 9y ago
Why do you think that it will be to no benefit of the local population? I'm uncomfortable with this process too, but isn't it gonna be great for the city that gets chosen?
- xyzzy_plugh 9y ago
  I think this sort of thing results in a net loss for the public. Politicians love talking about creating jobs, but not about at what cost. Whatever city wins will be handing out subsidies and tax breaks to the point where only Amazon shareholders benefit.
- varroa 9y ago
  One can imagine if the bid process is sufficiently competitive & transparent, if HQ2 brings $10b in economic good, cities might bid eachother down asymptotically to offer $10b in incentives, which in net would result in nearly zero economic good for the winning city or the parent country, and transfer all that value to Amazon & it's shareholders. There's also the concern that negative impacts are being ignored, such as increased demand on infrastructure, ala the Olympics, wherein by most accounts the winning city actually winds up economically worse-off.
slg 9y ago
>I'm scared to see the numbers of "incentives" that local politicians try and hand out to Amazon. There's little evidence that the public money used/lost will ever be recouped. It is a classic example of the winner's curse[1]. If Amazon is auctioning off the HQ for tax breaks, the government that wins is likely going to overestimate the value that winning the bid will provide. Those odds greatly increase when you throw in the fact that governments have misaligned incentives. Most politicians will choose the continuation of their career over the good of the people they govern. "Winning the Amazon bid" might be enough to get a politician elected to a higher position long before any economic reprecussions are felt. You see this same scenario play out all the time when public money is used to build sports stadia. [1] - https://en.wikipedia.org/wiki/Winner%27s_curse https://en.wikipedia.org/wiki/Winner%27s_curse
- abhinavkulkarni 9y ago
  If that's the case, then perhaps we should lay (some of the) blame on the people who would chose to 'continue' the career of the said politician, no? Lets not deny agency the people have in making informed decisions.
- speby 9y ago
  Yep, this is a common case with everyone's favorite repeat offender: Which city gets to host the Olympics? And that has been shown, time and again, to be a huge money loser and not at all something that invigorates the economy or somehow makes a city "more legit" in the global sphere. It is, at best, symbolic and at worst, charitable [on the part of the host city].
  - 8note 9y ago
    Calgary made money on the olympics; our HQ2 bid isn't shortlisted though
  - thrden 9y ago
    While that's generally been true on a global level, the olympics have generally been profitable endeavors for American host cities. the 1984, '96 and '02 all turned a profit for host cities.[1] Further, if olympic upgrades are done responsibly the games can act as a subsidy for local improvements to mass transit, universities and other civic spaces even if the city doesn't turn a profit. [1]https://en.wikipedia.org/wiki/Cost_of_the_Olympic_Games https://en.wikipedia.org/wiki/Cost_of_the_Olympic_Games
gist 9y ago
> often to no benefit of the local population Not true. My first thought when hearing that a town not far from where I am made the 20 list was 'where can I buy property so that I can rent it to others that come as a result of the economic development and new desirability of the area'. Property values will increase and property tax will go up vacancies will be reduced. This would not happen for a smaller company that nobody cares about either. This is perhaps similar (not for sure but could be) to when Disney decided to locate in Orlando Florida and bought up land in secret but also cut many deals to allow them benefits that others do not get. https://en.wikipedia.org/wiki/Reedy_Creek_Improvement_District https://en.wikipedia.org/wiki/Reedy_Creek_Improvement_Distri...
- wyattk 9y ago
  No net benefit of the local population. I forgot to include that one word, net. I admit it does make a difference, but perhaps not to the point where people will fixate on that and ignore everything else. I understand what you are saying, but these things can be quantified and accounted for in economic models. We can wave hands all day about "I think the economy would do this" but that is often the enemy of applied economics (heavily mathematical) and progress. There is a point when the incentives for the company can turn negative for the community. There is also the consideration in the community that those taxpayers (and voters) do not want to subsidize a massive corporation's shareholders. Politicians can be aware of this point, but with a massive corporation trying to pit them all against each other for its own gain, competition will erode those profits to or even past the point of neutral cost-benefit to the community. As Peter Thiel likes to point out "Competition is for losers."
  - gist 9y ago
    I am aware of what you are saying. However living in a place that is 'moving and grooving' because there is economic activity has benefits that simply can't be measured. For example you can live in a nowhere ghost town with little restaurants and nobody around and think you have it great. But just the same people with any ambition will move out of that area and leave it even more isolated. Empty main street. If you try to quantify you will often come up short. And w/o knowing the exact numbers who knows. But much of it is for tax (credits) which they wouldn't get anyway. The places in many areas that are being offered have been vacant for years. So we are not talking about Manhattan when you look at Navy Yard in Philly. It has land because nobody wants that land. And it could take forever to get it occupied. Economic activity where there is little currently and no prospects is all around good. In the case of where I live (within 20 miles of one of the sites) I am thinking 'wow if they locate there people will end up buying used houses where I am and property values will increase and then people will spend money and they will build more restaurants and things will all around be good. So maybe I will stay in this area and not move in that case'. By the way Amazon has not invented this process. It's currently being done where counties compete against other counties for lesser known prizes. Very common you just never hear about it. In many cases the company moving has no intention of moving either. Welcome to the world of business and how it works.
jimmywanger 9y ago
> often to no benefit of the local population. Considering they'll be hiring a lot of locals, and property values will most likely rise, and the associated peripheral startups will start flourishing due to Amazon expats, I don't see what your point is. It's not like they're building a NFL stadium, which is almost always a huge boondoggle. Would you rather have Amazon HQ, a football stadium, or watch your city fade into irrelevance?
noetic_techy 9y ago
50,000 new non-McJobs as well as the follow on service jobs is no benefit to the local population? Tell that to all the non-silicon valley mini-tech hubs like Austin, Seattle, Miami, Dallas, etc. If amazons foothold is the seed for a new techhub to emerge, that's a true net boon for that city and its people / culture.
- shrimpx 9y ago
  It's beneficial in an overall sense, but it sucks for the many individuals and families who will be gentrified out of the city, because they don't have the skill/background/age/race/gender to partake in the new orgy.
  - biocomputation 9y ago
    << skill/background/age/race/gender to partake in the new orgy. The word for that is injustice.
  - OrwellianChild 9y ago
    When attempting to counter an un-alloyed good like "50k new high-paid jobs" with potential negatives, can you please be clearer about the alternative outcome you desire? I can't tell from your objection whether you: 1) Support the 50k jobs, but want extra effort to be taken to support existing populations/communities 2) Prohibit the 50k jobs so things can stay the same 3) Let the 50k jobs go elsewhere so they're not a local problem 4) Something else entirely that I'm missing
JKCalhoun 9y ago
> Something about this just makes my stomach sick... Ditto. I just don't know what you can do about it though short of some sort of federal law that makes it illegal.
wfo 9y ago
It is terrifying how this power is being wielded. Cities try to compete to see who can be more obsequious and subservient to corporate interests in the hope that they win some "victory" -- the company moving to their town -- which in the end does very little for the actual city or the people in it. It is just an impressive line item on the mayor's resume when they try to move up in politics, "I got Amazon!" Seattle hates Amazon and what it has done to the city. They provide nothing for the city, do nothing to help ameliorate the problems they create, they overcrowd every area with ultrawealthy out of towners who push actual Seattleites out of the neighborhoods they've lived in for generations, replacing local culture with bland silicon valley tech-ennui. And the jobs they offer aren't even good. They create new white-collar sweatshops in their office buildings to mirror their blue-collar sweatshops in the warehouses. If they are paying attention, people in all of these cities should be praying to god that Amazon doesn't choose their city. If they can, they should protest, riot, refuse to let it happen. If you want a left-wing prospective on this general issue (which is called "lotteryism") there's a great podcast that does media analysis on this and issues like it. As it turns out, for example, reporting describing the supposed 'benefits' Amazon could bring to a city are literally copied without attribution or further investigation from Amazon press releases. There is a reason Jeff Bezos bought a huge newspaper, and it's not charity. https://soundcloud.com/citationsneeded/lotteryism-part-i-how-the-rich-manipulate-the-press-to-divide-us https://soundcloud.com/citationsneeded/lotteryism-part-i-how...
- closeparen 9y ago
  TIL software engineers aren’t actual residents of the places we live.
  - biocomputation 9y ago
    TIL software engineers think it's okay to participate in the economic and social destruction of neighborhoods in which people have lived for decades.
    - deadmetheny 9y ago
      If you've been on HN for any extended period of time, this should not come as a surprise to you.

by wyattk 9y ago

sweetishfish 9y ago

With regards to your first point - it's not really costing taxpayers in Wisconsin $4.5B . At least for the tax credits portion, those are taxes that would not have been paid in Wisconsin otherwise.

dtauzell 9y ago
They are refundable tax credits so WI could be paying money they wouldn't have.
drcode 9y ago
I guess I also don't need to pay taxes anymore, because if I don't pay taxes those are just taxes that wouldn't have been paid otherwise.
- ringtail 9y ago
  Are you paying 5+ digits tax and in the process of moving ? Then yes you can get the same special treatment while paying fraction of what you used to pay.
- CGamesPlay 9y ago
  If you are outside of a tax jurisdiction, then yes, you shouldn't pay taxes inside that jurisdiction, because those are just taxes that wouldn't have been paid otherwise.
simplicio 9y ago
Kinda, but if no one offered such incentives, than Foxconn would've presumably still built its factory, and someone (maybe even Wisconsin) would've collected those taxes. So while for any particular state you can say that those taxes wouldn't have been collected, the general system of States competing for large businesses means someone somewhere won't collect taxes from Foxconn that they otherwise would've. Plus, the taxes exist for a reason. Companies rely on public goods like roads, schools, etc for their business. So if Foxconn never came to Wisconsin, Wisconsin wouldn't have had to pay those taxes, but they also wouldn't have to pay for whatever extra public goods are consumed by the factory. Of course, in reality, someone somewhere is going to pay for Wisconsin's schools, police, etc. So what really will happen is that Foxconn shareholders (who presumably don't, generally, live in WI) will have their share price subsidized, while other companies, or Wisconsin workers, or property holders or some combination thereof will make up the difference.

dudul 9y ago

Why do you think that it will be to no benefit of the local population? I'm uncomfortable with this process too, but isn't it gonna be great for the city that gets chosen?

xyzzy_plugh 9y ago
I think this sort of thing results in a net loss for the public. Politicians love talking about creating jobs, but not about at what cost. Whatever city wins will be handing out subsidies and tax breaks to the point where only Amazon shareholders benefit.
varroa 9y ago
One can imagine if the bid process is sufficiently competitive & transparent, if HQ2 brings $10b in economic good, cities might bid eachother down asymptotically to offer $10b in incentives, which in net would result in nearly zero economic good for the winning city or the parent country, and transfer all that value to Amazon & it's shareholders. There's also the concern that negative impacts are being ignored, such as increased demand on infrastructure, ala the Olympics, wherein by most accounts the winning city actually winds up economically worse-off.

slg 9y ago

>I'm scared to see the numbers of "incentives" that local politicians try and hand out to Amazon. There's little evidence that the public money used/lost will ever be recouped. It is a classic example of the winner's curse[1]. If Amazon is auctioning off the HQ for tax breaks, the government that wins is likely going to overestimate the value that winning the bid will provide. Those odds greatly increase when you throw in the fact that governments have misaligned incentives. Most politicians will choose the continuation of their career over the good of the people they govern. "Winning the Amazon bid" might be enough to get a politician elected to a higher position long before any economic reprecussions are felt. You see this same scenario play out all the time when public money is used to build sports stadia. [1] - https://en.wikipedia.org/wiki/Winner%27s_curse https://en.wikipedia.org/wiki/Winner%27s_curse

abhinavkulkarni 9y ago
If that's the case, then perhaps we should lay (some of the) blame on the people who would chose to 'continue' the career of the said politician, no? Lets not deny agency the people have in making informed decisions.
speby 9y ago
Yep, this is a common case with everyone's favorite repeat offender: Which city gets to host the Olympics? And that has been shown, time and again, to be a huge money loser and not at all something that invigorates the economy or somehow makes a city "more legit" in the global sphere. It is, at best, symbolic and at worst, charitable [on the part of the host city].
- 8note 9y ago
  Calgary made money on the olympics; our HQ2 bid isn't shortlisted though
- thrden 9y ago
  While that's generally been true on a global level, the olympics have generally been profitable endeavors for American host cities. the 1984, '96 and '02 all turned a profit for host cities.[1] Further, if olympic upgrades are done responsibly the games can act as a subsidy for local improvements to mass transit, universities and other civic spaces even if the city doesn't turn a profit. [1]https://en.wikipedia.org/wiki/Cost_of_the_Olympic_Games https://en.wikipedia.org/wiki/Cost_of_the_Olympic_Games

gist 9y ago

> often to no benefit of the local population Not true. My first thought when hearing that a town not far from where I am made the 20 list was 'where can I buy property so that I can rent it to others that come as a result of the economic development and new desirability of the area'. Property values will increase and property tax will go up vacancies will be reduced. This would not happen for a smaller company that nobody cares about either. This is perhaps similar (not for sure but could be) to when Disney decided to locate in Orlando Florida and bought up land in secret but also cut many deals to allow them benefits that others do not get. https://en.wikipedia.org/wiki/Reedy_Creek_Improvement_District https://en.wikipedia.org/wiki/Reedy_Creek_Improvement_Distri...

wyattk 9y ago
No net benefit of the local population. I forgot to include that one word, net. I admit it does make a difference, but perhaps not to the point where people will fixate on that and ignore everything else. I understand what you are saying, but these things can be quantified and accounted for in economic models. We can wave hands all day about "I think the economy would do this" but that is often the enemy of applied economics (heavily mathematical) and progress. There is a point when the incentives for the company can turn negative for the community. There is also the consideration in the community that those taxpayers (and voters) do not want to subsidize a massive corporation's shareholders. Politicians can be aware of this point, but with a massive corporation trying to pit them all against each other for its own gain, competition will erode those profits to or even past the point of neutral cost-benefit to the community. As Peter Thiel likes to point out "Competition is for losers."
- gist 9y ago
  I am aware of what you are saying. However living in a place that is 'moving and grooving' because there is economic activity has benefits that simply can't be measured. For example you can live in a nowhere ghost town with little restaurants and nobody around and think you have it great. But just the same people with any ambition will move out of that area and leave it even more isolated. Empty main street. If you try to quantify you will often come up short. And w/o knowing the exact numbers who knows. But much of it is for tax (credits) which they wouldn't get anyway. The places in many areas that are being offered have been vacant for years. So we are not talking about Manhattan when you look at Navy Yard in Philly. It has land because nobody wants that land. And it could take forever to get it occupied. Economic activity where there is little currently and no prospects is all around good. In the case of where I live (within 20 miles of one of the sites) I am thinking 'wow if they locate there people will end up buying used houses where I am and property values will increase and then people will spend money and they will build more restaurants and things will all around be good. So maybe I will stay in this area and not move in that case'. By the way Amazon has not invented this process. It's currently being done where counties compete against other counties for lesser known prizes. Very common you just never hear about it. In many cases the company moving has no intention of moving either. Welcome to the world of business and how it works.

jimmywanger 9y ago

> often to no benefit of the local population. Considering they'll be hiring a lot of locals, and property values will most likely rise, and the associated peripheral startups will start flourishing due to Amazon expats, I don't see what your point is. It's not like they're building a NFL stadium, which is almost always a huge boondoggle. Would you rather have Amazon HQ, a football stadium, or watch your city fade into irrelevance?

noetic_techy 9y ago

50,000 new non-McJobs as well as the follow on service jobs is no benefit to the local population? Tell that to all the non-silicon valley mini-tech hubs like Austin, Seattle, Miami, Dallas, etc. If amazons foothold is the seed for a new techhub to emerge, that's a true net boon for that city and its people / culture.

shrimpx 9y ago
It's beneficial in an overall sense, but it sucks for the many individuals and families who will be gentrified out of the city, because they don't have the skill/background/age/race/gender to partake in the new orgy.
- biocomputation 9y ago
  << skill/background/age/race/gender to partake in the new orgy. The word for that is injustice.
- OrwellianChild 9y ago
  When attempting to counter an un-alloyed good like "50k new high-paid jobs" with potential negatives, can you please be clearer about the alternative outcome you desire? I can't tell from your objection whether you: 1) Support the 50k jobs, but want extra effort to be taken to support existing populations/communities 2) Prohibit the 50k jobs so things can stay the same 3) Let the 50k jobs go elsewhere so they're not a local problem 4) Something else entirely that I'm missing

JKCalhoun 9y ago

> Something about this just makes my stomach sick... Ditto. I just don't know what you can do about it though short of some sort of federal law that makes it illegal.

wfo 9y ago

It is terrifying how this power is being wielded. Cities try to compete to see who can be more obsequious and subservient to corporate interests in the hope that they win some "victory" -- the company moving to their town -- which in the end does very little for the actual city or the people in it. It is just an impressive line item on the mayor's resume when they try to move up in politics, "I got Amazon!" Seattle hates Amazon and what it has done to the city. They provide nothing for the city, do nothing to help ameliorate the problems they create, they overcrowd every area with ultrawealthy out of towners who push actual Seattleites out of the neighborhoods they've lived in for generations, replacing local culture with bland silicon valley tech-ennui. And the jobs they offer aren't even good. They create new white-collar sweatshops in their office buildings to mirror their blue-collar sweatshops in the warehouses. If they are paying attention, people in all of these cities should be praying to god that Amazon doesn't choose their city. If they can, they should protest, riot, refuse to let it happen. If you want a left-wing prospective on this general issue (which is called "lotteryism") there's a great podcast that does media analysis on this and issues like it. As it turns out, for example, reporting describing the supposed 'benefits' Amazon could bring to a city are literally copied without attribution or further investigation from Amazon press releases. There is a reason Jeff Bezos bought a huge newspaper, and it's not charity. https://soundcloud.com/citationsneeded/lotteryism-part-i-how-the-rich-manipulate-the-press-to-divide-us https://soundcloud.com/citationsneeded/lotteryism-part-i-how...

closeparen 9y ago
TIL software engineers aren’t actual residents of the places we live.
- biocomputation 9y ago
  TIL software engineers think it's okay to participate in the economic and social destruction of neighborhoods in which people have lived for decades.
  - deadmetheny 9y ago
    If you've been on HN for any extended period of time, this should not come as a surprise to you.