Growing resistance to corporate incentives

By Don C. Brunell

The circumstances leading to Amazon’s decision to scrap its New York City project are trends corporate leaders need to examine closely. There are cultural and political shifts in America which are changing the way business is done.

Amazon walked away from its deal struck with New York Gov. Andrew Cuomo and New York City Mayor Bill de Blasio which would create 25,000 new jobs and added $27 billion in new city and state tax revenue. In return, Cuomo and de Blasio, who actively courted Amazon, promised $3 billion in government incentives — a lightning rod among opponents.

The selection came after an extended closely-guarded process in which more than 230 North American cities bid on Amazon’s HQ2. To the amazement of many business analysts, Amazon selected New York City and Crystal City, Virginia as the winners.

New York opposition came swiftly as details emerged particularly from union leaders (Amazon is non-union). Vocal politicians, such as newly elected Congresswoman Alexandria Ocasio-Cortez (D-Queens) and Democrats in the state Senate fought back by nominating an outspoken opponent to a state commission which could single-handily squash the agreement.

Even though opinion polls show New Yorkers favored the deal. “Support for the new headquarters was strongest in communities of color and among working people who too often haven’t gotten the economic opportunity they deserved,” de Blasio said in arguing for Amazon to stay the course. But Amazon pulled the plug.

While Amazon will find more friendly digs, what is happening in New York should not be ignored. There is a growing backlash to corporations among liberals.

Veteran Wall Street Columnist Peggy Noonan sees a larger trend developing which is bad for our private, market-based economic system.

Noonan believes the Democratic Party is going hard left for the foreseeable future. Pew Research shows Democrats began lurching to the left beginning in 2009. Gallup says the percentage of Democrats calling themselves liberal has jumped 23 points since 2000.

Noonan adds: “Millennials, the biggest voting-age bloc in America, are to the left of the generations before them. Moderates are aging out. It is a mistake to dismiss their leaders as goofballs who’ll soon fall off the stage. They may or may not, but those who support and surround them are serious ideologues who mean to own the future.”

Joe Parilla, a fellow at the Brookings Institution’s Metropolitan Policy Program, told the Associated Press that Amazon’s high-profile bidding process may have stoked the backlash. Companies usually search for new locations quietly, in part to avoid the kind of opposition Amazon received.

“There are two very energetic forms of populism in the U.S. right now, one on the left and one on the right, and neither likes Amazon that much,” said Brayden King, professor of management at Northwestern University’s Kellogg School of Management. “For both, Amazon is becoming a whipping boy,” King told the Wall Street Journal.

Hopefully, the lesson learned from Amazon’s misfire will resonate with corporate executives. It is not enough to roll into town and tell government leaders to give them their best offer of tax incentives in exchange for new jobs and an increase in tax revenues. A nine-fold increase in revenue is a pretty good return, but hard economic facts were overshadowed by the resentment of providing any government incentive.

Corporate leaders must engage community and political leaders regardless of their views and slug through the approval process. It is not easy and there will be bumps and bruised feelings. But just as roadbuilders carefully engineer, excavate and pave the highway before opening it to traffic, companies have to build the foundation for their projects. That’s reality today.

 

Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.