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Big cities courting big tech helped define 2018

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Amazon HQ2 brought out huge concessions from cities—and little effort to rein in tech’s power

NYC Economic Development Corporation

2018 was the year that big tech firms lost our trust—if they ever truly had it in the first place. From Google’s debate over building a search engine for China to Facebook’s cascading series of scandals, data breaches, and opposition research against critics, any notion that the giants of Silicon Valley were somehow different than past corporate titans has been obliterated.

So why won’t cities stop doing everything they can to gain their favor? In short: jobs. Despite important developments in transportation, climate change policy, and equity that potentially have far greater long-term consequences, this year’s biggest event in urbanism, by far, was Amazon’s beauty pageant of a corporate location search.

Alternately called an “urbanist Super Bowl” and a “contest of debasement,” the Amazon HQ2 contest found mayors across the country eager to play along in a campaign that extracted billions in subsidies for an already colossal company. The contest reached its apex in New York City, one of the two so-called winners. Gov. Andrew “Amazon” Cuomo, who promised to rename a body of water the Amazon River, courted the trillion-dollar company with a bid document that bastardized one of the city’s proudest graphic symbols.

If “I Amazon New York City” is the response that arguably the country’s most economically diverse city has when a tech titan comes looking for new office space, it suggests that the power dynamics may be slightly off.

The opening of the Amazon Spheres in Seattle
Alex Garland

Before the fantastic future comes a very practical present

Pressure to create economic growth has led cities to embrace tech with open arms—for better or for worse. Forget the techno-utopianism of automated vehicles, the wonder of smart cities, or a streetscape littered with Blade Runner-like virtual ads. Before technology companies radically transform our cities, they’re weighing resources, revenue, and what’s in it for them.

Today, tech giants want world-class talent, while cities want jobs and tax revenue. That’s the central argument in favor of bidding for Bezos: New York City stands to gain thousands of high-paid workers, earn much more in tax revenue than it spends on tax breaks, and gain a symbol in HQ2 that shows it can become an East Coast answer to Silicon Valley.

In the last decade, “technology” has become shorthand for economic development and jobs, as well as a prime cause for the clustering of economic opportunity in superstar cities. Every city and municipality wants to be seen as fostering innovation, catalyzing startup culture, and attracting entrepreneurs and job creators. It’s the reason behind multibillion-dollar deals for firms like Foxconn, and, perhaps, a driving force behind big developments across the country this year, like MIT’s continued expansion in Cambridge.

“Cities feel like there’s no alternative,” Greg LeRoy, executive director of Good Jobs First, a Washington, D.C., policy center that promotes accountability in economic development, told Curbed. “They’ve grown up in a corporate-dominated site-selection system, where public officials are playing poker with a weak hand.”

From city managers talking about the potential upsides in figuring out dockless scooter pilots (“We don’t want to be the city that squelched a promising mobility innovation”) to the 200-plus cities that lined up to submit detailed bids to Amazon, landing big tech has become the currency for job creation. Mayors would gladly take the downsides that, say, Seattle experienced from Amazon’s expansion, as long as the pitfalls come with the upsides.

”Everything is bigger in Texas,” said Texas Gov. Greg Abbott at a press conference discussing Apple’s recent announcement of new $1 billion campus in Austin. “Today we can say Apple is bigger in Texas.”

While Amazon may be criticized for flexing its muscle in a monopolistic manner when it comes to commerce and sales, the real monopoly power may be how the industry is associated with job creation. As the concept of winner-take-all urbanism continues to solidify, tech firms looking to expand or relocate will certainly take lessons from Amazon’s spectacle.

Google office in New York City in 2013. The company recently announced plans for a massive expansion in New York.
Shutterstock

A breakout year for tech expansion and cities

Amazon and Apple aren’t the only tech companies with a growing physical footprint. Google has rapidly expanded in cities across the country, and just announced plans to grow its New York City footprint to 7 million square feet, enough to house 46,000 employees. Between commercial and office space, logistics warehouses and last-mile delivery centers, and even the occasional storefront, tech companies continue to impact employment and real estate markets, putting considerable pressure on prices and affordability.

“This just reiterates that big-tech siting decisions are continuing to concentrate on a very short list of sizable, well-established digital centers that are not losing share but are gaining share of the industry,” Mark Muro, a senior fellow at the Brookings Institution’s Metropolitan Policy Program, told CityLab.

And the question remains: If tech is as focused on talent as cities are on jobs, don’t cities have bargaining power? There isn’t a second New York City, and the city’s tech scene has been on the rise for years. According to recent economic data, the city boasts 7,000 startups spread across all five boroughs, 134,700 tech jobs as of 2017, and $5.9 billion in venture capital investment, as well as the opening of the new Cornell Roosevelt Island tech campus. It’s still no Silicon Valley—no other region is—but it’s growing rapidly.

Once cities land these jobs, what prevents them from seeing the kind of growing inequality that has burdened the Bay Area? Tech leaders there, working in offices that benefited from public subsidies, are mostly pushing back against measures to levy taxes on companies to combat the city’s significant homeless crisis.

Neil Lee, an assistant professor at the London School of Economics who studies the tech world, has shown in his paper, “Is There Trickle-Down from Tech? Poverty, Employment, and the High-Technology Multiplier in U.S. Cities,” that as a city’s tech economy grows, income inequality increases.

The wisdom of Bezos

Amazon built an empire on convenience, and has excelled at selling city leaders on a similarly simplistic story: Landing Amazon, no matter what it takes, means direct employment and a growing tech sector. It’s a convenient narrative.

But does it represent the best way forward—and the best use of resources? Other cities without New York City’s economic dynamism and magnetism have found other ways to grow. Madison, Wisconsin, and Indianapolis, Indiana, part of a large swath of America’s middle section many consider to be the apotheosis of tech innovation, have each seen sizable tech scenes take root. In St. Louis, Cortex, a self-styled innovation hub and 200-acre technology district in St. Louis, has focused on building homegrown talent and companies.

“Every major region is trying to recruit tech companies,” says Dennis Lower, longtime president and CEO of Cortex. “That’s not how we’re going to get where [we] need to be. We need to grow our own companies, which is one of the main goals of Cortex.”

Indianapolis, especially, has focused on building tech without focusing on tech itself. Initiatives such as an expanding bus rapid transit network, a new Cultural Trail, and a 2020 plan for the city’s bicentennial focused on reviving key neighborhoods, suggest a city focused on equity and quality-of-life issues.

In the pursuit of growth, development, and dynamism, what’s holding cities back from building it themselves? The closest thing to a surefire investment in local economic growth is education, according to Enrico Moretti, an economist at the University of California, Berkeley, who studies technology and the economy.

“Public investment in education offers the highest return in the long run,” Moretti told Curbed. “The return for infrastructure investment is much less. It’s human capital, at all levels, that generates economic growth.”

Maybe that’s the true measure of tech’s impact on our cities. Beyond the transformative technologies they develop, are they building a talent pool, creating the conditions for new startups and employers, or just utilizing another asset? As Amazon faces more backlash over the HQ2 deal in New York, perhaps the year’s biggest spectacle may serve as a turning point, a moment when cities and their leaders take a step back and consider that there may be better ways to invest in their economic future.