Governor Scott Walker standing in front of Mt. Pleasant village hall, where Shake the Ground! protestors voiced their discontent with the local government's actions in the Foxconn deal.
By dangling the prospect of thousands of new jobs before communities, giant corporations like Amazon in New York and Foxconn in Wisconsin have shown how easily they can manipulate local political leaders who fall over themselves to offer the best “incentive packages” to corporations already laden with profits.
But we may be witnessing a fundamental change in how the public views these corporate incentives and the craven submissiveness of elected officials who hand them out. A wave of grassroots organizing by citizen groups and progressive elected officials in Queens drove Amazon to announce on February 14 that it was dropping its planned development, which was supposed to deliver 25,000 jobs to the borough.
We may be witnessing a fundamental change in how the public views these corporate incentives and the craven submissiveness of elected officials who hand them out.
The community organizations and progressive officials expressed fury over the $3 billion in subsidies for profit-swollen Amazon. Protestors pointed out the company’s record of unfair labor practices (a company representative openly pledged to vigorously resist unionization efforts at a Staten Island warehouse), tax avoidance, low-wage jobs, and failure to invest in local communities that would have faced accelerating gentrification in a city already unaffordable to many.
“Rather than seriously engage with the community they proposed to profoundly change, Amazon continued its effort to shake down governments to get its way,” stated New York state Senator Michael N. Gianaris, who represents the area where Amazon planned to build.
Democratic presidential candidate Senator Elizabeth Warren, Democrat of Massachusetts, also spotlighted the company’s arrogance. “Amazon—one of the wealthiest companies on the planet—just walked away from billions in taxpayer bribes, all because some elected officials were sucking up to them enough.”
Newly elected Democratic Socialist Congresswoman Alexandria Ocasio-Cortez, representing a district adjoining the planned Amazon campus, hailed the breakup of the deal as the result of citizens insisting on a fair deal. “Anything is possible,” she wrote on Twitter on Thursday.
“Today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world.” The last point referred to the personal fortune of Amazon CEO Jeff Bezos, estimated at $137 billion. The Amazon corporation itself is worth a staggering $1 trillion.
Gianaris, City Council Speaker Corey Johnson, and Representative Ocasio-Cortez were among the elected officials who worked with community groups to fight the deal that Governor Andrew Cuomo and Mayor Bill De Blasio carved out with Amazon. The coalition included Queens Neighbors United, New York Communities United for Change, CAAAV Organizing Asian Communities, Make the Road New York, an immigrants’ rights group, and the local chapter of the Democratic Socialists of America.
On the very same day the corporation announced its deep-sixing of the plan, the Institute for Tax and Economic Policy released a report revealing that in 2018, Amazon paid no U.S. federal taxes on $11.2 billion in profits. Through tax credits and loopholes, Amazon actually received a federal tax rebate of $129 million last year, an effective federal tax rate of roughly minus 1 percent. It also paid no federal taxes in 2017.
Further, Amazon “will be getting a $789 million tax cut thanks to the Trump Administration's new law in 2018,” reported Seattle Business. Amazon has already hauled in subsidies of $1.6 billion and counting for its warehouses and data centers as of mid-2018.
Across the United States, major corporations reel in an estimated $110 billion annually in “incentives” to create jobs they often fail to deliver. Yet elected officials remain wedded to the strategy of subsidizing private corporations as the only possible road to long-term jobs creation.
Across the United States, major corporations reel in an estimated $110 billion annually in “incentives” to create jobs they often fail to deliver.
Between 1990 and 2015, the amount of incentives offered by states tripled, according to the W.W. Upjohn Institute. The inter-state war, launched with lavish incentives, started in 1936 in elite-dominated Mississippi when it began trying to lure northern-based industry to the low-wage region with subsidies.
Since then, this strategy of incentives-based development spread across the nation as corporations successfully played states against each other, although countless studies show the subsidies to be only a marginal factor in corporate decisions, as Greg LeRoy documents in The Great American Jobscam.
Wisconsin’s courting of Taiwan-based electronics giant Foxconn—with $4.5 billion in incentives, coupled with the weakening of environmental protections—is another bad deal. Foxconn initially promised to eventually create 13,000 jobs producing TV and other electronic screens, with 75 percent of the jobs in blue-collar categories and averaging about $23 to $27 per hour.
Earlier this year, Foxconn backed off entirely from its commitment to a giant manufacturing factory in favor of a smaller “technology hub,” radically downsizing its projected need for production workers. The sixty workers hired thus far are earning around $14 an hour, roughly half what was promised, with no benefits, according to Bloomberg News, which added that “Foxconn has dismissed a number of Wisconsin employees in the past several months.”
After receiving a phone call from Donald Trump—who had traveled Wisconsin to herald the project, proclaiming Foxconn was coming to the United States only because he was President—the company backtracked, saying its LCD factory plans were back on.
But Foxconn’s reassurances ring hollow, in light of what has happened so far.
The under-delivery of high-profile “mega-deals” like Amazon and Foxconn are no aberrations. Mississippi, the nation’s poorest state, shelled out $1.3 billion for a Nissan auto plant. Contrary to Nissan’s promise of an average wage of $19.70 an hour, an estimated 35 percent to 40 percent of the workforce consists of temporary workers earning $9.25 to $12 an hour.
In Ohio, General Motors is now closing its Lordstown plant, despite recieving over $60 million in state and local incentives in the last decade.
The under-delivery of high-profile “mega-deals” like Amazon and Foxconn are no aberrations.
But there are hopeful signs. Legislatures in Florida, Illinois, New York, and several other states have talked about creating a version of the End Corporate Welfare Act, which “would create an inter-state compact that eliminates the practice of giving taxpayer subsidies to individual companies,” explained New York legislator Ron Kim, sponsor of the proposal in his state.
It is, essentially, a national commitment to end the practice of robbing working people and small businesses to enrich the largest firms operating in the United States.
But it will take an ambitious, sustained, and deeply-rooted campaign in each state and nationwide to put a halt to corporate welfare and inter-state warfare. The “incentive package” competition has become a deeply entrenched feature of the “crony capitalist” system now prevailing in corporate-government relationships.
Let’s hope the collapse of the Amazon deal signals growing public awareness across the nation that corporate subsidies are a stunningly short-sighted strategy to create jobs.