Amazon protestors cut off their nose to spite their face

It is most unfortunate for everyone involved that Amazon has pulled out of their decision to open a second headquarters in New York in Long Island City. I totally understand why they did it.

After an extensive search and bidding war, Amazon chose the Virginia suburbs of Washington, D.C. and Queens in New York to open East Coast headquarters of the firm. This would mean 25,000-40,000 additional jobs in the high-tech industry for New York alone. 

ADVERTISEMENT

New York should have been celebrating, as other contenders, like my hometown of Philadelphia, a finalist, hung its head in defeat. Instead of a warm welcome and embrace by the victor, shortly thereafter, Amazon was greeted by protests and endless scathing criticism in city council hearings — not exactly the welcome mat Amazon was expecting. Amazon had every right to say “nevermind.”

I will confess I am not privy to all of the financial details. We know from public disclosure that the city and state had offered upward of $3 billion dollars in tax incentives to Amazon. Critics of the deal naively believe that the city will pay Amazon $3 billion dollars. This was at the heart of the criticism. 

They believed this money would be better spent for other necessities for the community and lower income residents. This is phantom money. It does not exist. This is money the city and state would forego collecting from Amazon when they moved in.

I must believe the government officials had sufficiently analyzed the economic impact of the additional 8 million square feet of office space and its construction costs, the huge incremental employment and the resulting income, real estate and sales tax, the incremental purchasing at retail, restaurants, etc., the reduction in unemployment and so on.  

Some estimates are that Amazon would have ended up paying as much as $27.5 billion in taxes to the city and state over the next 25 years. To see that, however, it took a long-run perspective. It required not just looking at the hefty tax rebate announced in all the papers, but also recognizing the resulting benefits. 

Now, it should be realized there is no $3 billion to be spent for the local residents. There is no additional employment, nor revenue for surrounding businesses. There is no tax boost for other needs for the city.

City and state officials that lobbied for the offer to Amazon did a great job — in part. What was also needed was to better communicate with the local constituents, politicians and union leaders about the advantages to their community. 

If there is indeed an advantage to landing the Amazon deal, that needed to be better understood. How will the community benefit? What is the likely return? Over what time period? All of that needed to go into their original assessment before they decided to make their generous offer. 

It is clear that civic authorities who put together the winning bid did not make the benefits apparent to those that are in opposition. They needed to do a better job of marketing the wisdom of this decision. They failed to do so.

One could question whether Amazon needed to partake in this communication. They were, however, in a difficult position, as any effort on their part would appear to be, and in reality would be, self-serving. As a result, their efforts would only be viewed skeptically.

What is the net result? Where are we today? Those protesting the Amazon move might feel good and declare victory, but are they really better off? Is New York better without Amazon there — without all the jobs, the resulting tax revenue and all the subsequent businesses that would have been surrounding the Amazon offices to capitalize on their presence? 

What should have been a win/win for both Amazon and New York has now turned into a loss/loss. There are no winners, only whiners.

David Reibstein is a professor of marketing at the Wharton School of the University of Pennsylvania and host of Wharton Business Radio’s “Measured Thoughts” SiriusXM show, Channel 132.