Amazon deal a warning about corporate welfare

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Any illusion that online retail giant Amazon would build a second headquarters (dubbed HQ2) in Toronto – or anywhere in Canada, for that matter – was surely shattered this week when it was revealed the chosen locations will fork out at least US$2 billion in direct subsidies to the company.

New York state will provided $1.525 billion in direct incentives to Amazon, one of the biggest and most profitable companies on the planet, to abet the gentrification of a New York City neighbourhood in exchange for 25,000 jobs. Likewise, Virginia offered up $573 million for the same promise of 25,000 jobs in the area of Washington, D.C.

Canadian locations have neither the cash nor the legal latitude for that kind wasteful corporate welfare. Still, that didn’t stop many from getting into the bidding war – essentially a race to the bottom – to entice Amazon to choose them as the Seattle-based company sought a spot for a second headquarters.

If pretty much every case of corporate welfare is any example, the benefits will be few and the “incidental” harm – critics in the two “winning” communities are already decrying the potential destruction of working-class neighbourhoods and potential housing shortages, for instance – will be much more than claimed.

But if political life is a perpetual election cycle, the one thing politicians relish is the doling out money – grants, loans, subsidies – and the photo ops that accompany such announcements.

The history of corporate welfare is replete with unpaid loans, bankruptcies, undelivered jobs and shuttered factories despite assurances to the contrary.

Given that all levels of government and a variety of ministries and departments are involved, it’s hard to get a handle on just how much money is doled out as corporate welfare. It’s made worse by the fact that officials try to hide what they’re doing: what we do know almost always comes through Access to Information requests. Documents redacted as a matter of course, with the transfer of your money to wealthy corporations treated in the same way as military secrets.

Still, some estimates put the national corporate welfare bill at some $16 billion a year, or almost double the cost of social welfare costs. And without any documentable benefits.

What would perhaps make the corporate welfare payments more palatable is a realistic cost-benefit analysis: if an investment makes sense – i.e. pays back every dollar to the taxpayers directly, and then some – then it should be considered. If not, then take a pass. That applies to everything from massive, decades-long support for the likes of Bombardier and Pratt and Whitney to ersatz economic development efforts in Woolwich and the region. In almost every case, the decisions are bad ones, which, as we know, is pretty much business as usual for politicians and bureaucrats

Political gain and an eagerness to channel public money into private hands aside – and that’s a big cultural change to reverse, as milking taxpayers is the norm – ending corporate welfare wouldn’t be that difficult.

Broader research tells us the any benefits of corporate welfare are, at best, fleeting and rarely successful in attracting high-skilled, high-paying jobs. The money disappears down a sinkhole, with little lasting effect. But as long as politicians are allowed to control the money, they’ll keep on wasting it to benefit only themselves and a few well-heeled friends.

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