New York and Virginia Are Giving Amazon $3 Billion in Corporate Welfare

Amazon has selected a pair of cities to host its new, expanded headquarters: Crystal City in Arlington, Virginia, and Long Island City in Queens, New York. Amazon’s decision came after a 14-month search that saw cities around the US promise tax breaks, taxpayer-funded infrastructure and business-friendly ordinances in an effort to win what Amazon says will be $5 billion in new investment and thousands of jobs. But many local politicians have openly criticized authorities in New York and Virginia for backing the deals, which will create a total of 50,000 jobs. We host a roundtable discussion about Amazon and corporate welfare. We speak with Ron Kim, member of the New York State Assembly, who recently co-wrote an opinion piece for The New York Times headlined “New York Should Say No to Amazon”; Greg LeRoy, executive director of Good Jobs First; and Stacy Mitchell, co-director of the Institute for Local Self-Reliance.

Transcript

AMY GOODMAN: This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman, with Juan González.

JUAN GONZÁLEZ: Well, we continue to look at Amazon and corporate welfare as New York and Virginia agree to give Amazon over $3 billion in tax breaks to build new office complexes in New York and near Washington, D.C. According to the Bloomberg Billionaires Index, Amazon CEO Jeff Bezos’s net worth on January 1 was $99 billion. On May 1st, it was $132 billion, meaning it rose $33 billion in just a few months. If you divide that difference by the 120 days of that period, you’ll find that he made $275 million dollars per day. Divide that by 24 hours in a day to get about $11.5 million per hour, the equivalent of roughly $191,000 per minute—or, the clincher, $3,182 every second. That according to Bloomberg.

AMY GOODMAN: And you compare that to the median Amazon employee’s salary, $28,000. Jeff Bezos makes more than that, Time magazine reports, in 10 seconds.

We’re expanding our conversation. Joining us from Washington, D.C., is Greg LeRoy, executive director of Good Jobs First, which has closely tracked public subsidies given to Amazon. In Portland, Maine, we’re joined by Stacy Mitchell, co-director of the Institute for Local Self-Reliance, directs its Community-Scaled Economy Initiative. She’s the author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses. Earlier this year, Mitchell wrote a cover story for The Nation titled “Amazon Doesn’t Just Want to Dominate the Market—It Wants to Become the Market.” And still with us here in New York is Assemblymember Ron Kim, who’s introducing legislation to block the Amazon deal and redirect taxpayer money away from Amazon subsidies and toward student debt relief.

Let’s begin this segment with Greg LeRoy. Your response to the deal, and your concerns?

GREG LEROY: Well, I support everything that the assemblyman just said in his concerns. Look, we know that the price tag of the incentives alone in New York City is well over $2.8 billion. There’s some parts of it we can’t even put a price tag on yet. A lot of it’s automatic and should have been capped. It’s way too big for a single project. We know that there’s unreported subsidies in the Virginia end of the deal, as well, so that the total packages together exceed $4.6 billion. Amazon is clearly, in the way it worded its own press statement, trying to downplay and kind of play a shell game with the numbers and hide some of these bigger numbers that are coming from New York. And look, everybody knows that Long Island City is very hot real estate. It’s another example of Amazon getting paid to do what it would have done anyway. It wanted to be in the financial capital of the world—of the country and the political capital of the country, so no surprises about its location. And we’re massively subsidizing, yet again, a company to do what it wants to do anyway.

JUAN GONZÁLEZ: Stacy Mitchell, I’d like to ask you about this whole issue of job creation, because the politicians are always touting that it’s important to put out these subsidies to be able to create jobs. But one of the unwritten stories I’m thinking you’ve been tracking is the job destruction, and especially of small businesses, that Amazon represents as it continues to grow in our economy.

STACY MITCHELL: Yeah. I mean, Amazon is really concentrating a lot of economic power. And as it does that, it’s pushing other businesses out. We’ve lost about 85,000 independent small retailers in the last 10 years. We’re seeing small and midsize manufacturers getting squeezed, laying off staff and disappearing, because Amazon increasingly is the gatekeeper to consumers. It increasingly picks winners and losers, and it uses that power to push others out of the marketplace and to gain more power for itself. And as it does that, it’s actually, as you noted, eliminating far more jobs than it’s creating. I mean, Amazon is a highly efficient, highly automated company, and so it’s eliminating a lot of retail jobs. Our calculations suggest that we’re losing about two retail jobs for every one job created in an Amazon warehouse.

But the picture for working people is even worse than that, because, you know, pathways to the middle class, being able to start your own business, to have a diverse economy with lots of different opportunities, that’s really disappearing. And we think that one of the reasons that wages have not been growing, really at all, has to do with concentrated power and the fact that we no longer have that kind of dynamism in the economy.

JUAN GONZÁLEZ: And also, Amazon, much like Uber, has a business model, a long-term business model, of capturing the market but then increasingly relying on robots to do its work, so that eventually the labor force will be reduced. Can you talk about that?

STACY MITCHELL: Yeah, that’s right. I mean, Amazon’s warehouses have become increasingly automated. They haven’t figured out yet quite how to do everything that humans can do, but it’s safe to say that, really, humans are literally cogs in a machine in an Amazon warehouse. These are highly automated. Humans fulfill the roles that only they can fulfill. But over time, we’ve seen Amazon’s employment numbers, relative to its sales, actually decline. And that’s a measure of this increasing automation. And we expect that, you know, fairly soon, Amazon will begin to have robots that can do the things that only humans can do.

But again, I think the jobs inside Amazon, you know, these are jobs maybe that we shouldn’t—you know, they’re hard jobs. They’re not necessarily jobs that we want to preserve. I think the bigger problem, from a jobs standpoint, is that when you have a company that has a stranglehold on the economy—I mean, normally, if you go back in time, we’ve had technological progress that has at times wiped out entire sectors, entire areas of employment. And that’s OK if you have an economy that’s dynamic, where you have new businesses coming along, new industries, new creations. But what we’re seeing, because of Amazon’s market power, is that we’re not getting those new businesses. We’re not getting those new industries coming along and creating new jobs. And that’s the real problem.

AMY GOODMAN: On Tuesday, New York City Mayor Bill de Blasio applauded the Amazon decision.

MAYOR BILL DE BLASIO: We’re going to have an opportunity here for tens of thousands of New Yorkers, everyday New Yorkers, kids who come up through our public schools, kids who go to our community colleges and our 4-year colleges, to have opportunity at Amazon. And not just at Amazon, but we know that Amazon’s presence is going to help to build the entire tech sector. In this city now, that tech ecosystem is about 350,000 jobs. Just got a huge boost from Amazon’s decision to come here. But we know that’s only going to spark a lot more growth. We see a future where that tech community could be a half-million jobs or more.

AMY GOODMAN: So, New York State Assemblymember Ron Kim, if you could respond to the mayor and also this Business Insider report? Amazon is going to be placed in Long Island City in Queens. “Long Island City real estate brokers told The Wall Street Journal [that] they had witnessed a flurry of inquiries over the past week. Some of these people were even buying units, sight-unseen, via text message, The Journal wrote on Tuesday morning.” “This is the first time in my 20-year career that I have seen the market go from a buyer’s market to a seller’s market overnight, based on a rumor,” said Patrick Smith, a Stribling agent in New York City, a real estate agent. So, if you could respond to both this, what de Blasio is saying, a massive growth in the tech sector and jobs, good jobs, for New York’s kids and students and people in this city, and what’s going to happen to real estate?

ASSEMBLYMEMBER RON KIM: I think this is a great example of a misguided technocratic Democrat who is hiding behind big tech and pushing out the narrative to the public that the big tech will solve every single problem in our communities and to humankind. That is not the case. This is a clear example of how big tech artificially raises value. This isn’t real value. As Stacy has said, real value comes from innovation, creativity, small business, local economies, circulation of wealth at the very bottom of our economies. That’s not happening. Amazon, Uber, you name it, all of this is all based on an extraction economy that is designed to extract as much money and value out of our communities, and it’s not going to add to sustainable job growth or economic growth.

JUAN GONZÁLEZ: Greg LeRoy, I’d like to ask you, in terms of the trend nationwide in terms of these government subsidies for job creation—obviously, the Foxconn example in Wisconsin is another one. Could you talk about what these governments, local governments, are doing and what they’re getting in return for these subsidies?

GREG LEROY: I’d be glad to. And I just want to footnote something on the de Blasio quote there. You know, we know that about four out of five, typically, of the new job takers at a project like this will not be current residents of New York or Arlington. They will be people moving to the area from outside somewhere. And that means a lot of growth getting induced, a lot of schools having to be expanded and infrastructure built and public services provided. Guess who’s going to get stuck with that tax bill if Amazon is not paying to help cover the costs of that induced growth.

This whole issue of what we call persistent megadeals—that is, these nine-figure, 10-figure subsidy packages, hundreds of millions, billions of dollars for individual transactions, whether it’s HQ2 or Foxconn or data centers like Apple, Microsoft, Google, Facebook—it’s a crazy a dynamic. You know, there’s a long history in America of a very corporate-dominated site location system. It’s actually about 80 years old and was born in New York City with a company called Fantus Factory Locating Service in the late 1930s. Today, we have even a president who has endorsed this race to the bottom, this war among the states, so-called, by sponsoring and assisting Terry Gou, the chairman of Foxconn, when he parlayed that auction last year, whipsawing a bunch of states against each other, for the big subsidy package in Wisconsin.

That Foxconn package now is really melting down. I mean, it was valued at about $3 billion from the state, to begin with. It’s now north of $4.7 billion, because there’s been a ton of local and infrastructure aid put on top of it. And now we’re getting different product lines, high degrees of automation, rumors of—reports in The Wall Street Journal of Chinese engineers having to be brought in because they are having trouble recruiting a sufficient white-collar workforce. You know, it’s no secret that Governor Walker, put out by the voters last week, had stopped touting that deal on the merits, because it was melting down so badly.

AMY GOODMAN: And jobs dropping from 13,000 to something like 3,000.

GREG LEROY: Correct. Yeah, the cost per job keeps going up, because that denominator keeps shrinking. It’s the great disappearing deal of all time.

JUAN GONZÁLEZ: And, Greg LeRoy, I wanted to ask you about the Virginia aspect of this deal and the—what’s often overlooked is the amount of business that Amazon does with government agencies, defense contractors in its cloud business—and what its decision to locate in the suburbs of Washington, D.C., will mean.

GREG LEROY: Yeah, I’m so glad you brought that up. A lot of people don’t realize that Amazon has historically made very few profits, and only recently any profits at all, on its retail business. Most of the profits, including all of the profits for some years, come from its cloud computing services, from Amazon Web Services. It’s the biggest cloud computing company in the world. It has roughly a 40 percent market share. And among its most lucrative clients in that space are the Pentagon and the Central Intelligence Agency and other federal agencies. And as Stacy and others have pointed out recently, Amazon is now pushing very aggressively to gain more control over federal procurement lines and also state and local government procurement lines. So, this footprint—people don’t notice, but this Crystal City footprint that they have now said is going to be one of the HQ2s is very close—literally, practically a stone’s throw from—the Pentagon.

AMY GOODMAN: Democratic Congressmember-elect Alexandria Ocasio-Cortez tweeted, “Displacement is not community development. Investing in luxury condos is not the same thing as investing in people and families. Shuffling working class people out of a community does not improve their quality of life.” I wanted to ask Assemblymember Kim about the progressive letter you referred to. This was the former City Council Speaker Melissa Mark-Viverito, Ydanis Rodriguez, Jumaane Williams, Nydia Velázquez, the congressmember—all progressive leaders who signed on to the letter asking Amazon to come to New York. So, what is progressive about this deal?

ASSEMBLYMEMBER RON KIM: Well, I think many of my colleagues are regretting that they signed the letter. They didn’t know what they were signing on to. So, I want to make sure—I want to be clear that many of them are saying now that they no longer have signed—they are no longer willing to sign on and keep their name to the letter.

There is nothing progressive about Amazon coming to New York. This is a corporate giveaway to the richest man on this planet. And we need to make sure that we can go back and claw back the agreement, to make sure that the taxpayers go where it’s desperately needed: to the working- and middle-class families who are living with so much debt in the city of New York.

AMY GOODMAN: I wanted to put a question to Stacy Mitchell in Portland, Maine. In the piece you write for The Nation, the subtitle is “The company is a radically new kind of monopoly with ambitions that dwarf those of earlier empires.” Explain.

STACY MITCHELL: That’s right. You know, I think Amazon is so dominant in so many areas. It’s now capturing one out of every two dollars that Americans spend online. As Greg noted, it controls the underlying infrastructure for a lot of the internet—you know, over 40 percent of the world’s cloud computing capacity. It’s increasingly moving into shipping and package delivery. It’s taking on UPS and the Postal Service. It has the largest market share in home voice systems, through Alexa. And on and on it goes.

But I think, rather than think about Amazon as being dominant in any of these markets, the way to understand what this company is all about is that Amazon is about controlling the essential infrastructure that other companies need to use in order to reach the market. Its online platform, more than half of all product searches online now start at Amazon’s website. And what that means is that if you’re any company producing or retailing anything, increasingly, if you want to be able to reach consumers, you have to become a seller on Amazon’s platform. And what that means is that Amazon now controls your business. They have the ability to gather data on what you’re doing, to use that data to compete against you. They can levy a kind of tax on your trade. They can demote you in the search results. They can retaliate against you if you complain.

I mean, essentially, what has happened is that Amazon is privatizing the market, if you will. In a democracy, a market should be an open place, where the rules are set by the public, that there are public rules that govern the buying and selling of goods and how we’re going to structure our markets. But what Amazon is moving us toward is a situation in which commerce occurs in a private arena, and Amazon sets the terms of trade. It basically creates the rules and regulations by which other companies and other participants are allowed to operate. And I think, in light of that, it’s no surprise that Amazon is expanding its presence in Washington, D.C., because, you know, we have anti-trust laws that are designed to put a check on this kind of concentrated economic power. I think Jeff Bezos very clearly sees that as really the only threat to his future growth, and so cozying up to federal government is part of his strategy.

JUAN GONZÁLEZ: I’d like to ask Greg LeRoy, on this, the whole issue of whether Amazon needed to be courted and provided all these subsidies to relocate to New York City or—the reality is that because of the model that they’ve created of delivering products, the same day, in some cases, to people around the country, they need to be in certain places, especially in population centers. My students at Rutgers University did a whole series of articles about the 10 Amazon warehouses that had developed in central New Jersey to serve the Philadelphia and New York City markets. Fifteen thousand jobs were created virtually with no subsidies, so that they actually need to be in certain spots, and the politicians perhaps had more leverage than they themselves understand.

GREG LEROY: You’re right, exactly, Juan. In fact, we’ve been—long before the HQ2 auction came out, we had been publishing about all the subsidies being given to the warehouses, making this very point. If you look at the history of the company, in the early years, they grew their market share by having the price advantage of not collecting sales tax. And they were legally able to avoid that by avoiding what’s called nexus—that is, a sufficient physical presence in a state so that the state could compel the collection of sales taxes. They had a small number of warehouses in states without sales tax into which they shipped into the other states that do have sales taxes.

But over time, with the Prime business model evolving to rapid delivery—two-day, one-day, same-day—it was inevitable that they would have to locate lots of warehouses close to all those ZIP codes with lots of Prime household members. And so they started caving on this issue back in 2011, 2012, sometimes under pressure from states who found that they were skirting the law and actually locating in states without collecting sales tax ahead of time. So, over time, they had to do that.

And yet they still got paid. They discovered that they could “create jobs,” even though, as Stacy pointed out, they’re actually creating one job at the expense of two others, as bricks-and-mortar retailers continue to melt down and companies like Sears—is the latest example—go bankrupt, getting paid to do what they want. We said, publicly, to public officials, Amazon should pay to arrive, not vice versa. And I would say the same thing about HQ2. If Amazon is going to come and price a bunch of people out of a city and create a bunch of new expenses by inducing so much growth, they should pay to arrive rather than get paid to.

AMY GOODMAN: We didn’t even get to labor conditions. But in September, we spoketo James Bloodworth, the U.K.-based journalist, author of Hired: Six Months Undercover in Low-Wage Britain. While undercover at an Amazon fulfillment warehouse, he found workers toiling amidst abusive conditions, no bathroom breaks. This is Bloodworth describing working in an Amazon warehouse.

JAMES BLOODWORTH: If you took a day off sick, you were given a disciplinary for that. And if you received six of these disciplinaries, you would effectively lose your job. And this was taking a day off sick even if you had a letter from the doctor, even if you phoned in beforehand to say that you were going to be sick. So, if you took six days off sick, you would effectively lose your job. And this was the biggest employer in this town.

Other things, I mean, the people were afraid—people were receiving disciplinaries for taking toilet breaks. The productivity targets were so high that workers were afraid to go to the bathroom. I mean, a survey came out at the Amazon warehouse I worked in, recently, which found that 74 percent of workers there, order pickers, were afraid to use the bathrooms because of the productivity targets.

AMY GOODMAN: So, again, that was a British journalist, James Bloodworth, who went undercover in an Amazon warehouse. And I want to end with Assemblymember Kim. Again, Time magazine’s headline, “The Median Amazon Employee’s Salary Is $28,000. Jeff Bezos Makes [More Than] That in 10 Seconds.”

ASSEMBLYMEMBER RON KIM: Yeah, I mean, I think that’s absolutely ridiculous. But I want to end by also saying the EU has already—is already considering an open anti-trust case against Amazon. Imagine, for the last two years, instead of competing and embracing, every city and every state united, calling Amazon accountable, having open investigations by the attorney general’s office in every single state investigating into their anti-trust practices. That’s leverage. That’s real leverage. Instead of doing that, we give them billions of dollars to come to our cities and states. Now, it’s still not too late. And I think we should move forward and hold Amazon accountable.

AMY GOODMAN: We want to thank you all for being with us, just the beginning of the discussion, New York State Assemblymember Ron Kim; Stacy Mitchell, joining us from Portland, Maine, at the Institute for Local Self-Reliance; and Greg LeRoy of Good Jobs First in Washington, D.C.

This is Democracy Now! When we come back, we go to the border. Stay with us.