What does Amazon owe New York City?

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amazon - nyc

The tech giant has a chance to “shape what 21st century philanthropy looks like.” Will it rise to the challenge?

 

Amazon’s imminent arrival in New York City, bringing a promise of 25,000 jobs and $2.5 billion in investment, is polarizing, to say the least. Opinions about the deal between city, state, and corporate leaders to bring the tech headquarters to Long Island City are divided, between viewing the arrangement as a fleecing of public money by a massive corporation, or a catalyst for jobs and employment, and an East Coast answer to Silicon Valley. What everyone agrees on is that the situation is unprecedented.

But beyond the deal—which includes nearly $3 billion in state and city subsidies and tax breaks, and promises from the company to invest in infrastructure, green space, workforce training, and schools—there’s a question of being a good neighbor. In a city filled with legendary corporate benefactors, how will Amazon weave itself into the city’s corporate, civic, and community fabric?

Amazon will instantly become a sizable corporate citizen of New York City, a role that traditionally, in the case of companies such as Bloomberg or Citibank, has come with civic responsibility, including funding for social, art, and cultural programs. How Jeff Bezos and the e-commerce giant decide to fill this role may ultimately determine its impact, and how voters treat the politicians who brought the company to Queens.

Julie Samuels, executive director of Tech:NYC, a non-profit representing the city’s tech industry and a supporter of HQ2, believes that Amazon’s entry into New York City offers nothing less than a chance to redefine the relationship between big companies and cities.

“We can shape what 21st-century philanthropy looks like,” says Samuels. “There’s no prescription.”

Queensbridge Homes, a large public housing complex
 Shutterstock

“Amazon has to become part of New York City”

Amazon has already shown promise by working within the existing community, says Samuels. The company reached out to her organization for advice about coming to New York.

Many of the community benefits Samuels points to, which are promised in the agreement, build upon existing efforts by Queens institutions. Partnerships with nearby Queensbridge Homes, the nation’s largest public housing complex, and LaGuardia Community College on job fairs and workforce development, as well as plans to build a school and startup hub on or near the company’s Long Island City campus show Amazon “being part of the civic fabric that exists.”

What excites Samuels the most is that the sheer size of Amazon, and its preemptive engagement strategy, means the company can make difference from the start. Where historically, corporations may have focused on funding for cultural institutions, Amazon has a chance to use its technical expertise and platform to have a different kind of impact on the city’s workforce.

HQ2 also arrives at a critical time for the city’s tech industry, which now counts 7,000 startups spread across all five boroughs. As employment in the sector grows, from 53,000 to 134,700 between 2010 and 2017, according to the city, venture capital investments mushroom ($5.9 billion last quarter), and new hubs such as Cornell’s Roosevelt Island tech campus open, the arrival of Amazon is seen as a catalyst and a vote of confidence.

“Amazon’s experience in New York will be a New York experience,” she says. “Amazon has to become part of New York City. New York isn’t becoming part of Amazon. Just do the math.”

Samuels also argues that Amazon’s impact won’t be as dire as many fear. Adding 25,000 workers to a city of 8.6 million won’t overwhelm the city, and an analysis of transit patterns by Aaron Gordon of the popular Signal Problems newsletter suggests it won’t be as catastrophic for the subway as some have suggested.

Queens City Council member Jimmy van Bramer and other elected officials at an anti-Amazon rally in Queens. 
Dave Colon

“We need to make it unprofitable to get too big”

State Assembly Member Ron Kim, who represents the Queens district that will bear the brunt of the Amazon HQ2 “prosperity bomb,” agrees that the new headquarters offers a new opportunity, saying at a protest yesterday that, “this is a gut-check moment for our city and our state and for our democracy.”

For Kim, it’s a chance to lay down principles, protect local businesses, and change how cities and corporations interact.

“Amazon should be paying [New York] an extraction fee to do business here,” he told Curbed via email. “Every time they extract a dollar out of our local economy, they should pay a penalty fee of ten cents on that dollar. They should also agree to work with us to redesign our tax codes to tax any machine, AI, or automated tools that replace human labor.”

Kim, who strongly opposed the deal, made headlines when he proposed that, instead of spending $1.7 billion in city and state funds on a company valued at more than a trillion dollars, it should use that money for student debt relief.

Like Samuels, Kim feels that the definition of good corporate citizens is all about local engagement. His model, or models, are the small business in Queens, which re-circulate money back into the local ecosystem. He’d like to see the state follow North Dakota’s lead, and place caps on chain store growth, and stop funding expensive economic development programs. In 2015, the state gave away $8.25 billion, as much as the next three states combined.

“We need to make it unprofitable for companies to get too big,” he says.

The changing nature of cities and large companies has a lot to do with the faceless nature of tech, according to Mark Muro, a senior fellow and director of the Brookings Institution’s Metropolitan Policy Program. “Manufacturing and consumers goods companies needed local supply chains and talent, but today’s tech giant is much more itinerant,” he explains.

“Companies in the past depended on fixed infrastructure, and had to play nice with local leaders,” he says. “The tech companies have one imperative; clusters of people and talent. It’s about technological and high-end managerial talent, and Amazon just went to two of the world’s biggest, densest pools.”

Kim isn’t swayed by arguments that Amazon will try to fit in. “Blindsided” by the announcement of HQ2, he suggests that both the city and state administrations and Amazon should be sued to break the NDA and allow local leaders to fully digest and understand the terms of the agreement.

“Amazon will do everything in their power to undermine our unions and labor organization,” he said. “By design, this super-monopoly will extract as much money and value from every deal, agreement, community, and neighborhood. Unless we finally wake up and exercise our right to bust them up for anti-trust violations, they will continue to exploit us.”

Declining corporate political engagement

In many ways, large corporations have become less engaged in local politics, focusing instead on profits and the regulations that stand in the way of those profits. While many regional firms have engaged in public/private partnerships to help increase local competitiveness, part of a recent wave of localism in smaller U.S. cities, larger multinationals have become withdrawn and focused on profit and short-term gains, argues Professor Mark Mizruchi, due to a number of structural factors.

In his book The Fracturing of the American Corporate Elite, he argues that waves of foreign competition and acquisitions have created a leadership class that has abandoned centrist politics and focused on profits and extracting incentives, as opposed to long-term local investments.

“In one sense you see a lot more companies today making significant efforts to do good in local communities, and corporate social responsibility has become a big deal,” he told Curbed. “But on the other hand, the aggregate data says the funds companies have spent on philanthropy in recent years has dropped. There’s more noise relative to action than there was 40-50 years ago.”

Amazon, and the HQ2 search, may just be an extreme example of the race-to-the-bottom for corporate subsidies.

Protesters gather in Long Island City to say “No” to the Amazon “HQ2” decision on November 14, 2018 in Long Island City, New York.
 AFP/Getty Images

Raiding or restocking the talent pool?

Amazon’s arrival in New York City comes at a time when corporations and cities are radically redefining their relationships. Talent, as the company said in its HQ2 announcement, was the main driver in its decision to co-locate in New York City and Arlington, Virginia.

Recent research supports the idea that developing local business and talent is the best way to grow a city’s economy. Footloose of Stuck in Place?, a recent report by the Tax Policy Center, found that “efforts to win over businesses with tax exemptions and subsidies may not be fiscally fruitful for overall job generation for regional economies.” Others have found that focusing on the tech economy can lead to increased inequality: Dr. Neil Lee, an assistant professor at the London School of Economics who studies the tech world, has shown in his paper, “Is There Trickle-Down from Tech? Poverty, Employment, and the High-Technology Multiplier in U.S. Cities,” that as a city’s tech economy grows, income inequality increases.

What’s the solution? The closest thing to a surefire investment in local economic growth is education, according to Enrico Moretti, an economist at the University of California, Berkeley, who studies technology and the economy.

“Public investment in education offers the highest return in the long run,” Moretti told Curbed. “The return for infrastructure investment is much less. It’s human capital, at all levels, that generates economic growth.”

The true test of Amazon’s corporate citizenship, then, may be how it views the city’s talent pool: it is an asset to utilize, or a renewable resource it can help replenish and support?

by ny.curbed.com