The Washington PostDemocracy Dies in Darkness

Amazon’s political mugging in New York is a warning for American business

Perspective by
February 15, 2019 at 3:01 p.m. EST

Amazon’s decision to abandon plans for a headquarters complex in New York reveals much about what has gone wrong with American capitalism and democracy.

The most obvious, of course, is the cynicism and lack of trust that people have in government officials. Only days before the Amazon deal was announced last fall, New York Gov. Andrew M. Cuomo and Mayor Bill DeBlasio coasted to reelection. Both are smart, seasoned and expertly advised politicians who have a proven track record of helping the poor and working class. Yet many of the elected and self-appointed champions of those constituents refused to trust their leaders to negotiate a favorable final deal on behalf of them and their city.

There is little doubt that poor and working-class New Yorkers would have benefited from Amazon’s presence. Although very few would have gained jobs directly, the arrival of more than 25,000 highly paid executives and tech workers would have indirectly created thousands of additional service jobs, put upward pressure on wages and generated more than $1 billion in additional tax revenue each year.

Washington won its piece of Amazon’s HQ2. Now comes the hard part.

That money would have allowed New York to quickly recoup the $3 billion in tax breaks it gave to Amazon, with plenty left over to expand infrastructure, help the needy or build more affordable housing. But today’s polarized politics do not tolerate trade-offs or compromise. When no deal is always better than an imperfect one, democracy becomes dysfunctional.

Democracy also becomes dysfunctional when symbols are allowed to become more important than substance. Just think about recent weeks, in which the big news items were the fight over funding a border wall that is likely to have little impact on illegal immigration or on the budget, and what a governor most Americans don’t care about may or may not have put in his school yearbook page 30 years ago, or whether a freshman member of Congress is a dangerous anti-Semite because she had the temerity to tweet the obvious truth that the Israel lobby uses campaign contributions to elect friendly politicians (“Senator, sorry to interrupt, but Sheldon Adelson is on line two.”).

Because of its size and visibility and antipathy toward unions, Amazon (and its helipad) became the perfect symbolic target for anti-capitalist activism. Driving it from New York, however, will not do much to mitigate the effects of gentrification, raise wages or improve working conditions.

Wealth tax. 70 percent rates. Medicare-for-all. Let’s take a breath.

Big losers in all this were union leaders, who figured they could use their leverage to force Amazon not to oppose campaigns to organize workers at their distribution plants in New York and everywhere else. In the end, all they accomplished was ensuring that there will be no new workers to organize, at Amazon or any other companies that might have considered expanding in New York.

The irony is that New York City has long been ground zero for the union busting movement. I refer to Wall Street, which for decades, under the banner of maximizing shareholder value, has tried to force every company to cut pay and benefits for its workers and ship jobs overseas, or face certain takeover by private-equity firms and activist investors who will.

Amazon’s New York critics were always quick to point out that the world’s most valuable company did not need or deserve tax subsidies to build a new headquarters. But in an environment where cities and states compete to throw money at companies, it is naive to expect any company to turn them down.

The way to end this unproductive arms race is not to vilify Amazon for acting in its rational self-interest. It is to pressure the National Governors Association and National League of Cities to agree to collectively disarm and stop offering these subsidies — or, at minimum, limit them to providing job training and infrastructure investments that benefit everyone.

CVS bought your local drugstore, mail-order pharmacy and health insurer. What’s next, your hospital?

Business leaders are already pointing to Amazon’s retreat from New York as a warning about the economic harm that will befall the rest of the country if the Democratic Party continues its leftward drift and gains control of Congress and the White House. But they have only themselves to blame. The antipathy and distrust people have for business is the direct result of three decades of winner-take-all capitalism in which the benefits of economic growth were captured by those at the top and too many people were left behind.

Now the business community is discovering that what goes around comes around — that the anger, distrust and resentment that it has spawned does not distinguish between good companies and bad, between productive self-interest and greed, between good deals and bad ones.

While Amazon reflects many of the best attributes of American capitalism — its efficiency, its creativity, its risk-taking, the choice and value it offers consumers, and the wealth it creates for shareholders — it also exhibits some of its worst traits. (Usual disclaimer: The Washington Post is owned by Jeffrey P. Bezos, Amazon founder and chief executive.) The ruthlessness. The instinct to dismiss critics and criticism. The arrogance and insularity of top executives. The fixation on secrecy and control. The disdain for government and the disregard for the public interest. The too-easy acceptance of extreme inequality. Many of these traits were on display in the HQ2 process.

The political mugging that Amazon received in New York is a preview of what is in store for American business if it fails to repair the social contract and replenish the social capital it has depleted. The choice for the business community is either to embrace rules and practices that strike a better balance between shareholders, workers, customers and the public, or have rules and practices much less to its liking imposed by an angry and sometimes irrational public.

The $786 million question: Does Steve Schwarzman — or anyone — deserve to make that much?

Is Amazon getting too big?

Yes, it could happen again. The flaws of American capitalism invite cycles of booms and busts.