The development of a third Amazon development center in Connecticut could mean lost jobs.
The following article can be found on the June 18, 2017 edition of the Fairfield Citizen.
If I were a small-business owner, especially in retail, I might be a little irked by news that the state of Connecticut has struck a deal with Amazon to develop a third “fulfillment center” in North Haven.
If I were an entrepreneur trying to get started, I might be a little miffed that my state government set aside $25 million for a company that is, in terms of market valuation, among the four biggest in the world.
It’s one thing to help David. It’s another to help Goliath.
But there may not be a solution to this problem, because the problem is more about politics than it is about business. The more state and local officials scramble to create jobs for their constituents, the more they end up contributing to the growing economic power of monopolies. And the more they do that, the more they defeat their own purposes.
Gov. Dannel Malloy announced earlier this month that Amazon would expand operations in Connecticut, building a facility in North Haven, creating an additional 2,000 jobs. The online retailer runs facilities in Wallingford and Windsor, already employing about 2,000.
That was great news for an unpopular Democratic governor eager to see his name emblazoned in headlines along with the word “jobs.” That was great news for his chief Republican rival for the same reason. Jet engine maker Pratt & Whitney used to reside on that 168-acre lot, but it has sat empty for the 18 years. “I welcome the new jobs … and I look forward to continuing to work with Amazon as the new local partner to bring new development, growth and vitality to our entire region,” said state Senate President Pro Tempore Len Fasano of North Haven.
Growth and vitality? Maybe.
Consider the big picture. Economic growth is slowing. The president of the United States might believe that “there’s no reason we shouldn’t be able to get at some point into the future to 5 (percent) and above,” but no one who knows what they’re talking about believes that. The U.S. economy grew 1.6 percent in 2016, its worst rate since 2011. Only the most Pollyannish wonk expects more than 2 percent growth.
There’s a reason for that. We have not yet arrived as a consensus, but economists are seeing more evidence that concentration is the culprit. Specifically, the more the U.S. economy concentrates around a handful of multinational corporations, the less room there is for everyone else. This affects us in myriad ways. Wages stagnate. Productivity declines. Inequality worsens. And, importantly, dynamism flat-lines.
One survey of small businesses found more dying than being born across the country and across all sectors of the economy. Another study focusing on Connecticut found dynamism stalled. That’s important, because small firms tend to be net job creators while big firms tend to be net job killers. In enticing Amazon or any giant to create jobs, Connecticut officials could be, in reality, killing them off.
Amazon is a key player in this game. With Apple, Google and Facebook, it’s the most valuable company on the planet. Last year, it controlled 43 percent of internet revenues and 53 percent of online sales growth. Analysts don’t see an end in sight, as Amazon is moving into finance, manufacturing and cloud computing, while brick-and-mortar retailers like Sears and Macy’s are losing ground, fast.
Most companies hope to realize a profit before they grow. For the past two decades, Amazon did the opposite. It grew and grew, nearly always in the red, but with size has come the key to its global strength. “In platform markets, bleeding money to establish growth may be a guarantor of long-term dominance,” wrote Lina Khan, a Yale Law School scholar in an article for Pro-Market, a publication by the Stigler Center at the University of Chicago Booth School of Business. “The market reflects a truth that our current (anti-trust) laws fail to detect.”
Which brings us full circle: this problem is about politics more than business. Until national politics and legal thinking return to an anti-trust posture they had in the early part of the last century, the options for elected state and local officials would appear to be fairly limited.
But not entirely. Fact is, Malloy and Fasano are reaching for the low-hanging fruit when they should be making long-term investments, like giving entrepreneurs privileged status in the granting of state subsidies. Yes, there’s a good chance many would fail, but there’s also a good chance a few wouldn’t. If and when they do succeed, it would be money well spent.