Recently, Amazon announced that they would no longer be building ‘HQ2’ in Long Island City, NY. The general consensus seems to be that the deal fell apart over the money Amazon, a trillion dollar company, would receive from the city (boldface mine):
On some level, I understand Amazon’s approach to urban dealmaking. I covered economic development at the state and city level for the first eight years of my career, where I saw my share of lucrative corporate incentives offered up in the name of jobs. Until very recently — possibly until this deal — it has been possible for corporations get handouts simply for dangling the promise of new hires to politicians eager to burnish their reputations as job creators. (Ask the nice folks over in Racine, WI.)
Economic issues often dominate state and local campaigns, of course, and everyone wants to stand in front of the new headquarters when the ribbon is cut and the flashbulbs go off. But Amazon’s aborted effort to build in NYC shows that a simple promise of jobs is no longer sufficient to win public support — and in some ways, it may be counter-productive.
One big reason is that the economy is fracturing into two: with a small group of well educated professionals, who enjoy good jobs with rising wages; and a much lower-paid group of service-industry workers who take care of them….
For an anxious public, then, a promise of 25,000 new jobs sounds much different in 2019 than it would have in 2009. If you’re among the sea of hotel and restaurant workers that Porter describes, you know you’re likely never going to be qualified for one of the jobs that Amazon is creating in your backyard. Even if the company belatedly promised a job retraining programs for workers with fewer skills.
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.
It’s only natural that Amazon saw its promise to create 25,000 jobs as a blessing, for creating jobs is most of what we have ever asked of American companies. But given the realities of our economy — an economy that Amazon is relentlessly and ruthlessly transforming according to its narrow self-interest — it’s also only natural that many New Yorkers wanted nothing to do with it.
Last week, I was talking with someone who has lived in New York City for decades, and we both described how much cities like New York or D.C. have changed. For much of the leadership in these cities (and many others), the defining crisis was massive depopulation–and its consequences. In the sixties and seventies, NYC lost 500,000 manufacturing jobs. Not 500,000 people, but jobs. In one sector. In D.C., the city’s population plunged from over 800,000 to 525,000 (the low point was in the early 1990s). Neighborhoods like D.C.’s Shaw and Logan Circle lost nearly half of their residents.
Many cities experienced massive decapitalization. Not only did they lose people and businesses (and the associated tax revenues), but this coincided with a massive defunding of public programs that targeted cities. In short, cities were desperate. Bringing back jobs, any jobs, was critical. At the same time, cities also needed residents–and they were so empty in many places, real estate was cheap (if not always safe). Essentially, cities ‘recapitalized’ through private money, which led, among other things, to gentrification:
But in places like Shaw or Logan Circle, there’s room. What I think happened is that the massive emigration from these neighborhoods made these neighborhoods–which still had ‘good bones’, such as mass transit and nice-looking houses–amenable to developers. They bought up and renovated these properties, and that renovation increased prices, and property taxes, in the entire neighborhood. At some point, lower-income people can’t afford rents or property taxes–even though these neighborhood are still not crowded. That, combined with the change in racial composition, makes this a very explosive issue in D.C.–there are cultural and political ramifications to the demise of ‘Chocolate City.’
(Aside: gentrification is not the same as bidding up in dense neighborhoods)
But the problem with private investment is that it is only interested in high returns, and middle class and working class people don’t generate those returns, so cities, having been relatively affordable (housing was cheap in many places in the 1980s and 1990s), became increasingly expensive, if not prohibitive.
What the current crop of sclerotic political leaders fail to understand is that it’s not the 1990s anymore–or for that matter the 1970s. The Bronx is not burning. D.C. is growing rapidly. Many urban areas have a housing shortage: vacancies no longer constitute the housing crisis. We do not need to find a way to increase the wealth of our prosperous urban areas by any means necessary. What we need to do is to find ways to make that prosperity more accessible to all. While much of that effort will involve federal and state policy, cities also need to understand the challenges they face today, not years ago.
Giving money to rich corporations really isn’t going to solve these problems. Spending money to make life better for all, not just the gentry class, would.