Browsing the blog archives for February, 2019.

Why Amazon Doesn’t Love NY

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On Thursday, Amazon abandoned its plan to build a large campus in Queens and allegedly create 25,000 jobs for New Yorkers. The original deal involving $3 billion in government “incentives” was considered an economic victory by Mayor Bill de Blasio and Governor Andrew Cuomo but was derailed by a huge backlash from progressive activists and union leaders. So how did a Democrat-negotiated deal unravel at the hands of other Democrats? The answer is not difficult to understand.

First of all, I’m neither a Democrat nor a New Yorker, but I opposed this deal from the beginning. It’s entirely rational for governments to provide infrastructure when a large company comes to town, but the “extra” payouts to lure Amazon are a slap in the face to taxpayers and other businesses. The government was picking winners and losers. The “incentive package” New York offered would have given Amazon an unfair advantage over its rivals in New York and across the country. I’ll all for Amazon’s success, as long as it is attained through the marketplace.

But my views are at odds with many politicians on both sides of the traditional political spectrum. They overlook the cronyism involved when governments collude with some businesses (but not others) to locate in their cities or states. They refer to the payouts as “incentives” and “investments,” claiming that the jobs created will fuel economic development and that the tax revenues they create will more than compensate. They even use competitive lingo to justify the collusion, arguing that they must “fend off competition” from other locates to “win over” new businesses. But this logic overlooks an important principle: It’s okay and even desirable for governments to promote business activity with competitive tax policies and other inducements available to all firms, but governments should not use taxpayer funds to pick individual winners and losers.

This issue creates complications for those on the left. While defenders of liberty promote free markets and despise government intervention, socialists despise free markets and promote government intervention. Leftists don’t trust business in general and rely on heavy-handed regulation to keep it in line. But most socialists understand that the government is unable to replicate the private sector in terms of production efficiency, so they don’t want to destroy it altogether. They want some type of arrangement with quasi-free markets and big government.

The Amazon deal gave government a “seat at the business table” and some sense of control over the online behemoth, but it required a multi-billion-dollar payout to a giant corporation. Modern leftists want to control business activity in order to extract taxes and other concessions, but they don’t want to support large corporations in any way. In the end, the Democrat Mayor and Governor were willing to hand over taxpayer dollars to Amazon to “create jobs.” In the end, socialists like AOC won the battle because they don’t see why Amazon is needed in the first place.

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Takeaways from Venezuela

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If you have been following my blog, the ongoing chaos in Venezuela was entirely predictable. It remains the most underreported story on legacy media.

Here’s an abbreviated storyline: Nicolás Maduro recently won reelection in a sham vote. Two weeks after he was sworn in for a second term, Juan Guiadó assumed the interim presidency, citing constitutional authority that permits the head of the National Assembly to create an interim government and plan for new elections. The Trump administration immediately recognized Guiadó’s authority and instituted economic sanctions targeting Maduro. Guiadó has received support from most other nations as well, but Maduro has the backing of the military and hasn’t budged. Guiadó’s politics are largely moderate to left-of-center by American standards, but he supports free speech, private property, and other basic constitutional rights. His claim to the presidency is legitimate.

Venezuela was prosperous prior to Hugo Chávez’s election in 1998. The Chávez and Maduro regimes have looted and destroyed the nation in just two decades. The current situation is chaotic and heart-wrenching. Poverty is rampant. Stores are empty while many citizens scour garbage for food. Inflation is well above 100,000%. Hospitals lack basic medicine. All of this is occurring in a nation with the world’s greatest oil reserves.

Going forward, there are 3 takeaways from the situation in Venezuela:

  1. Where leaders are elected, Marxism begins with class warfare and an attack on private property. It ends with control, corruption, widespread poverty and despotism. Venezuela is a textbook case of this reality.
  2. Some Americans actively supported Chávez until he “ran out of other people’s money” and things began to unravel. Whenever socialism fails, the left blames corrupt leaders, not corrupt ideas. The problem in Venezuela—like Cuba, North Korea and the former USSR—is bad ideas, not just bad people.
  3. If applied, the bad ideas applied in Venezuela would reap havoc in the US. I wouldn’t expect the same degree of destitution, but the impact on our society could be severe. Don’t be deceived into thinking a “middle ground” is a solution and what has happened elsewhere couldn’t happen here. Whatever you think of President Trump, keep this in mind as you evaluate the rhetoric from Democrats who seek to unseat him in 2020.

It’s unclear how the current standoff in Venezuela will end, but a civil war is not out of the question. Let’s hope and pray that Maduro exits without mass bloodshed.

The Acton Institute posted a compelling interview with an economist in Caracas earlier this week if you want to see what’s going on there firsthand (https://livestream.com/ActonInstitute/VenezuelaInterview/videos/186483002).

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