business news in context, analysis with attitude

There continue to be a number of stories about Amazon’s announced search for a second headquarters city, where it is prepared to spend $5 billion and create 50,000 new jobs:

• The Seattle Times has an editorial in which it suggests that Amazon’s decision to look for a second headquarters city - and apparently not even inform Seattle city officials of the decision before it was announced - reflects a lack of engagement by lawmakers and bureaucrats there with the success of their biggest employer.

“Seattle’s current political leaders must recognize that poor planning and anti-business posturing come with a heavy price,” the editorial says. “Their politicking creates uncertainty for job creators and was a factor in Amazon’s decision to look elsewhere to expand.

“Amazon’s growth, while a source of pride to most, has not been easy for the region. City leaders’ failure to adequately plan for the residential, commercial and traffic growth it permitted created an environment where Amazon was blamed for Seattle’s growing pains.

“Other cities crave the diversity, prosperity and clean, good-paying jobs that Amazon brings. Seattle City Hall used tension over Amazon’s growth and wealth creation as leverage, to fulfill developer wish lists and advance labor’s political agenda, including an income tax that’s illegal under state law.”

Now, the editorial says, “State and local government and business leaders must respond by assuring Amazon, other large employers and entrepreneurs that Greater Seattle still has the capacity, talent and desire to enable their companies’ growth … Amazon should help by explaining what its hometown can do to better support fast-growing, large-scale companies.”

Whatever city wins the HQ2 sweepstakes, the editorial goes on to say, “may pay a steep price to attract Amazon, it will benefit from the talented people the company hires from across the country and globe. They will bring a cultural and intellectual richness, as well as economic growth that Seattle has at times taken for granted. Tens of thousands of non-tech jobs will follow, along with all manner of hotels, restaurants and microbreweries.”

• The Wall Street Journal reports that “Amazon accounted for more than half of the Seattle office space created over the past year and a half, and the city’s commercial real-estate vacancy rate is already lower than the national average, according to commercial real-estate firm Colliers International. The unemployment rate for the county is below the national average, according to the latest available data. Meanwhile, home prices in Seattle have risen 47% to an average of $667,488 since 2007, according to the Cost of Living Index by the Council for Community and Economic Research.

“The online retail giant said its next headquarters should be located in a walkable transportation hub with good access to an educated workforce and universities. A second headquarters would also give Amazon a chance to spread its economic clout and political constituency. Proposals are due next month, Amazon said.”

• Meanwhile, Washington Post columnist Steven Pearlstein has a piece suggesting that what Amazon seems to be doing is bringing jobs to where the workers are, as opposed to bringing workers to the jobs.

“Rather than wait for Seattle to solve its housing and congestion problems, Jeffrey P. Bezos, Amazon’s chief executive (and the owner of The Washington Post) decided to help create another Seattle someplace where his company’s spectacular growth can be more easily and inexpensively accommodated.

“The economic argument for moving the workers to the jobs is that workers are more productive and innovative in companies located in cities dense with people and other companies. Some of the benefits from ‘agglomeration’ have to do with the ease with which companies can find a wider range of competing suppliers. Also the ease with which companies and skilled workers can find each other. In a high-tech economy, in particular, the biggest effect may come from the ease with which workers and firms learn from each other and come up with new ideas and disseminate that know-how.”

But, Pearlstein writes, while this can create highly productive and innovative “super cities,” simply piling on more people and companies can stress out their infrastructures to the point where it becomes problematic and incredibly expensive - in a sense, there are diminishing returns.

“One reason that such cities became such economic engines is that they were viewed as desirable places to live by the well-educated, ambitious professionals who start and populate innovative companies — the ‘creative class’ … These cosmopolitans have a strong preference for urban centers that offer ethnic diversity, cultural sophistication and walkable neighborhoods with vintage housing stock, good restaurants and an undercurrent of hip and cool. The last place this elite would want to live is in an urban jungle of cement canyons and high-rise towers.

“There is an alternative, of course, to making highly productive dense cities even denser: Create more of them.”
KC's View:
I’m intrigued by Pearlstein’s thesis, especially because it tends to fit in with broader conventional wisdom about the growing urbanization of America. It strikes me as good public policy if this urbanization can be spread out, with more cities reaping the benefits.