#amazonhq2

Amazon and Ethiopia Face Tough Choices Ahead

Press Release 03/29/2019

Gainesville, Fl, Mar. 29th 2019 (Brookings Institute)

This week in economics has provided perfect examples of right and wrong ways to promote fiscal growth. Whitney Schneidman writes of Ethiopia’s fast growing economy and how its 42 year old leader Dr. Abiy Ahmed plans to make the country an African superpower. Ahmed’s main strategy is mass privatization of almost every sector except for finance. The continuation of state owned banking is expected to stunt the boom created by privatization. In the piece Schneidman writes; “continued poor services and an inability to transfer funds between banks will be a constraint on the government’s reform efforts” (Schneidman, source). Shifting the focus to a more (relatively) micro scale, Amazon has been receiving bids from counties around the US in hopes of becoming the host city for the massive firm’s second headquarters.

Nathan Jensen writes of the fiscal incentives cities are offering Amazon and how few of these deals are open to the public. Only 26 of the 238 bids are available for public view. The vast majority of these bids are being made by private entities behind closed doors with no local, state, or federal review. These entities are lobbying their city boards to create tax cuts and massive financial incentives for Amazon, which oftentimes cost more than the predicted growth in the area. New York City offered $3.5 billion dollars in subsidies to Amazon for a predicted 50,000 jobs created by the project. That would only employ 0.6% of New York’s active labor force for 4% of the city’s annual budget. These incentives are lopsided and cater to the interests of firms who stand to profit from the development instead of helping the local communities. Jensen ends the piece in saying; “The Amazon HQ2 process highlights what is both right and wrong with economic development in the United States” (Jensen, source). The “right” part he is referencing is the community involvement with the public bids. Cities like Boston and Richmond are listening to the voices of those who this project will affect. This tactic is effective as both cities have made it to the final round of consideration. These public bids offer comprehensive plans on neighborhood development instead of simply throwing Amazon billions of dollars.

Economic development cannot exist without the associated growing pains. The Ethiopian Prime Minister is doing his best for the African country. Despite his efforts the complicated web of state-run financial institutions might bottleneck any future development. Meanwhile the self-interest of large firms are turning the Amazon HQ2 decision into a ‘pissing contest’ between billionaires. Time will tell whether these plans end in a boom or a bust, at home and abroad.

Devin Downs