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Memo to Amazon: Stay Away from D.C.

eye on the news

Memo to Amazon: Stay Away from D.C.

In choosing a site for its second headquarters, the Internet giant should avoid the nation’s capital. September 4, 2018
Economy, finance, and budgets

The Washington, D.C. metro area has a good chance to become home to Amazon’s second headquarters, and why not? There’s much to recommend it: a large talent pool; proximity to the nation’s policymakers; a large metropolitan area that’s better able to absorb the shock of 50,000 new jobs than smaller competitors; above-average public transportation; and, not least, the second home of Jeff Bezos, who purchased the district’s largest and most expensive mansion a few years after buying the Washington Post. The fact that three of the company’s 20 finalists for HQ2 are located in the D.C. area—the district proper, plus suburban jurisdictions in Maryland and Virginia—perhaps gives an early signal of the Seattle-based behemoth’s intentions.

Choosing D.C., if Amazon does, would be beneficial to Washington and its real estate industry but a poor choice for the rest of the country, based on the traditional role that Washington has played in American life. Washington was designed from scratch in 1790 to be an “every town” capital that the public could relate to, in keeping with the culture of a young democracy. Back then, New York and Philadelphia were the nation’s largest and most cosmopolitan cities, but America was a rural society, with a spirit defined by taming the wilderness. Thomas Jefferson actively campaigned for a non-elite capital that would be reflective of that country. When he entered the White House in 1801, D.C. had 5,000 residents. For the next 200 years, Washington served as an administrative backwater, never a glamorous or economically significant metropolis like New York, Los Angeles, Chicago, or San Francisco. The district was always a bit boring, but it served its purpose.

In recent decades, federal spending has exploded. Two wars, along with enormous pieces of legislation such as the Patriot Act (2001), Sarbanes-Oxley (2002), Dodd-Frank (2010), and the Affordable Care Act (2010) nearly doubled Washington’s outlays between 2000 and 2012. Thousands of well-paid consultants, contractors, lawyers, and bureaucrats descended upon the capital to feed at the expanding federal trough. With the long reach of Dodd-Frank, Washington started to draw the Wall Street elite and appear on lists of the world’s biggest financial centers. The arrival of so many outsiders sparked unprecedented gentrification throughout the D.C. area. Professional baseball returned to the city, entire neighborhoods were rebuilt, and the cost of real estate soared. At the same time, Barack Obama came to office as a cultural icon to millennials and urban elites. His presidency helped reshape the image of DC from stodgy to cool. The city took on the trendsetting qualities of top-tier urban centers that had traditionally left Washington behind.

The rest of the U.S. took little notice of this phenomenon until the 2008 financial crisis, which tanked the economy in most places—except inside the beltway. While much of America suffered, Washington grew fat on massive federal spending that insulated the government class. The country woke up to the startling realization that eight of the 20 wealthiest counties in America, including four of the top six, were in Washington’s suburbs. Resentment festered, and Washington became increasingly synonymous with the country’s economic and cultural chasms.

Enter Amazon, the standard-bearer of an industry that represents the forces of disruption and automation that have put millions out of work, a company whose CEO is now the world’s richest man. Big Tech holds such an outsize stake in American capital accumulation and cultural influence that critics are not far off in calling the industry’s leaders the “robber barons of our time.” Championing reliably left-wing causes, Silicon Valley also sits at the high church of green progressivism. The industry promotes sweeping environmental regulations that will spell doom for hardscrabble legacy industries like manufacturing, logistics, agriculture, and energy, and which have effectively priced out the middle and working classes from the Bay Area.

If that weren’t enough, Amazon is close to winning a $10 billion Pentagon contract for cloud computing that many insiders say is rife with insider dealing. As Vanity Fair reports, the contract was structured by a lobbyist with close ties to both Amazon and Defense Secretary James Mattis, and appears to be written in a way that would exclude other potential bidders. In short, Vanity Fair reports, it “bears all the hallmarks of the swamp that Trump has vowed to drain.” Overnight, Amazon could become one of the federal government’s largest contractors. A second headquarters in Washington would further entangle Amazon and the feds.

With the nation so politically divided, bringing Amazon to Washington would be a bad choice, especially when many better alternatives exist, such as rising tech-hubs like Raleigh and Pittsburgh, or a low-cost city like Newark, which has access to a world class talent pool, not to mention one of the country’s largest airports. Widening extremes in both political parties, growing distrust of the federal government, resentment of coastal elites by a landlocked working class, and even small breakouts of political violence have shaken America to its core. President Trump’s confrontational demeanor hasn’t helped. Siting Amazon in D.C. would only exacerbate the divisions that have opened up in recent years.

Photo: KenHoward/iStock

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