Amazon’s HQ2 Decision Shows the Evil of Corporate Welfare

by Kai Weiss

Finally, it is over: for over one year, Amazon has been on the search for the best location for its second headquarters in the US. The search for HQ2 quickly developed into a bidding war between 238 cities, with each trying to lure the e-commerce giant to town with the best incentives, and to prove that it is the best place in North America to do business.

Earlier this week, Amazon announced its decision to set up its new headquarters in both New York City and Washington D.C. – with 25,000 jobs each, and another “Operations Center of Excellence” in Nashville with 5,000 employees.

Thus, a worrisome race, with one of the biggest corporations on the planet looking for the place best to exploit the government treasury, eventually has come to an end – despite likely hurting people in New York, Virginia, and Tennessee on the way.

After all, the bidding war between cities ended up being one not on the best business environment, but the cronyist deal for Amazon. New York has promised to provide Amazon with 1.525 billion dollars, Virginia and Arlington will pay a combined 800 million, while Nashville has offered 102 million.

To show the extent of these deals, Veronique de Rugy of the Mercatus Center at George Mason University looked into the consequences for New York and Virginia:

New York, with the money that’s now going to Amazon, could have paid for three years of road maintenance or have reduced the corporate income tax rates by 5.42 percent, which would benefit ordinary companies without political favor. Virginia could have reduced the corporate income tax by 45.16 percent and maintained the roads for four years with that money. Congrats Amazon and sorry everyone else!”

While the “winners” of the HQ2 decision will obviously profit from it with more jobs and opportunities in the region, Mercatus’ Michael Farren and Anne Philpot are quite correct when they write that this is “the only competition where the losers are winners.” Indeed, what the Amazon HQ2 story shows most is the evil of crony capitalism, of some companies with power and influence in the political arena being able to change the rules to their liking, or, as the case here, obtain corporate welfare en masse.

Of course, Amazon is no exception here. Countless companies get in bed with the state in some way or another – this is especially profound the bigger an enterprise gets (to the point when they are “too big to fail”). There are obvious examples like banks and financial institutions as well as the car industry – think of those bailouts in 2008.

But especially in the last few years, it has become ever more evident that another group – and one which has been hailed by classical liberals for long, is nowhere close to being innocent either: the tech industry. “Big tech” both drafts and supports regulations that suit them (the infamous GDPR, for example), decisively influencing political discourse, and, as in the case of Amazon, are on the look for deals that grant them the most taxpayers’ money.

One of the most profound examples for the latter has been Elon Musk and his electric car company Tesla. As Jordan Malter and Kate Sprague note,

“From subsidies at the national and state level, to federal tax credits for consumers buying electric cars and solar panels, to fuel efficiency standards that help bring millions in revenue for Tesla and vital government contracts for SpaceX (won in a competitive bidding process), his major companies have gotten significant government support in different forms.”

In total, Musk’s ventures have profited, as one estimate put it, a whopping 4.9 billion dollars of special government favors – as of 2015.

Yes, “big tech” has done much positive over the last decades. Their innovations have changed the world forever – and mostly for the better. Perhaps, however, it is time to rethink the unabashed apologetics against these corporations, regardless of how much they add to the path of Progress.

They have long stopped being truly private companies. Instead, it is ever more important to defend the institutions of free enterprise and the market economy, unhinged by the government, and take a principled stance for entrepreneurs and companies which add to prosperity and genuine progress, while at the same time not trying to hurt their fellow men.

This piece solely expresses the opinion of the author and not necessarily the organisation as a whole. Students For Liberty is committed to facilitating a broad dialogue for liberty, representing various opinions. If you’re a student interested in presenting your perspective on this blog, click here to submit a guest post!

Image: Pixabay

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