By David Leonhardt, New York Times
Imagine that a bunch of children are sitting around a table when a seemingly beneficent adult walks into the room carrying a plate of cupcakes. The kids burst out in excitement — until they notice a problem: There are fewer cupcakes than children.
At this point, the adult announces some ground rules. To receive a cupcake, the children will have to compete with one another. The adult will accept cash or other objects of value. Praise for the adult’s kindness would also be welcome.
The kids immediately start saying nice things and digging into their pockets. But then one child has second thoughts. She quiets the room and tells the adult he’s being a bully. He is bigger, stronger and richer than the kids, she says. He shouldn’t make them grovel for cupcakes. The adult replies: “Fine. No cupcake for you.”
If she were your child, how would you feel: proud that she took a stand, or disappointed that she didn’t act in her own best interests? Cupcakes, after all, are pretty tasty.
Last week, New York became that disobedient child. The city damaged its own interests, or at least its short-term interests, for the sake of principle. Enough New Yorkers raised enough of a ruckus about the nearly $3 billion in tax breaks that the city and state were bestowing on Amazon that Amazon finally had enough. On Thursday, it announced that it would no longer be bringing 25,000 jobs to Queens. No cupcake for New York.
Yes, I know: Jobs are not cupcakes. Jobs help people build middle-class lives, which are in too short supply these days. So pretend that the adult in my story offered a Kindle instead of a cupcake. Or a college scholarship. It shouldn’t change your view of the girl’s rebellion.
Regardless, it’s a version of what social scientists call “the tragedy of the commons” — in which people hurt their long-term interests by acting in their short-term interests. The only solution to the tragedy of the commons is to change the rules.
For years, companies have been getting the better of local governments — and taxpayers — by pitting them against one another. If a city or state won’t pony up cash or tax breaks, companies threaten to go elsewhere. Boeing, Nike, Intel, Ford, General Motors, Foxconn, Royal Dutch Shell and many others have all done it. Since 1990, the combined size of these handouts has surged.
In the moment, the deals are often popular. Polls showed that most New Yorkers favored Amazon’s plans for Queens. Last week, the editorial boards of both The Times and The Wall Street Journal criticized the politicians whose complaints scuttled the deal. The front page of The Daily News thundered, “AMAZON KILLERS: Shame on these so-called progressives for rejecting 25,000 high-paying jobs & billions in taxes tech biz would’ve brought to city.”
The deal’s supporters do make some good points. Amazon’s critics have used silly anti-capitalist rhetoric at times. And the deal would have modestly helped the Queens economy (and only modestly: New York is home to more than four million jobs, and Queens to more than one million). But there is a larger picture here: Corporate-relocation subsidies are terrible policy.
They do nothing to lift the country’s economic growth — to create more cupcakes, as it were. The subsidies mostly redistribute income upward, from taxpayers to corporate shareholders. If every city and state justifies big giveaways based on its own immediate interests, the tragedy of the commons will never end.
Somebody needs to make a principled stand. In New York, a coalition of activists and politicians did so. They called attention to the grubbiness and secrecy of these subsidies, which are, in their own way, anti-capitalist. The deal’s collapse, Greg LeRoy, a longtime advocate on the issue, told Emily Badger of The Times, is “absolutely a godsend to those of us who have been trying to reform economic development.”
For decades, local politicians have felt pressure on only one side of this issue: To do whatever it takes to attract companies. As a result, those politicians have contributed, often unwittingly, to the radical rise in economic inequality.
Amazon’s messy departure from New York is a victory for the other side. It should remind politicians elsewhere that their private blandishments may later turn into public controversy. It should also remind politicians that they can say no. Northern Virginia gave Amazon much less money than New York but still won tens of thousands of new jobs.
And the whole episode should energize legal efforts to fight corporate handouts. Missouri and Kansas, for example, are talking about a “cease-fire” to keep local companies from playing the two states off each other. Officials in Arizona, Illinois, New York and several other states have talked about a multistate compact known as the End Corporate Welfare Act. The federal government, for its part, could offer financial incentives to states that refuse to play the handout game.
Yes, New York’s economy will be slightly worse off because of Amazon’s departure. But the city deserves our gratitude. Refusing to play an unfair game is sometimes better than winning it.