Stephen Boyd provides a thoughtful and sincere critique of my last post on Amazon and the Scottish Government. Even though I disagree with him I urge readers to read his post. The Easter break has prevented me from responding sooner.
Stephen's main point is that
the Scottish Government should not subsidise Amazon because it is a bad corporate citizen and one that has demonstrated little sign of changing its ways. Its business model undermines the kind of economy/society the Scottish Government tells us (explicitly through its target regime and National Performance Framework) it wishes to create. Amazon's business model (brazen avoidance of taxation, poor quality insecure employment, predatory pricing and squeezing of suppliers ..... undermines stable long-term growth. Far from an unmitigated boost to productive activity, the growth of Amazon may well exert a long-term extractive impact on the economy.
My point is that the attraction of inward investment is important to a small open economy such as Scotland. If the Scottish government sought to pick and choose according to whether the company has a business model that it likes or not, then it will make the attraction of inward investment that much more difficult. Once one company is rejected that will very likely lead to spillover effects on the willingness of other companies to come here. Companies whose business model and practice the government views more favourably may now not be willing to come here and the decision to reject the less favoured company will not have led to a change in its business model.
Providing the company observes existing Scottish and British laws on inter alia health and safety and employment practices, I don't think economic development policy can seek to apply further ethical standards if it wishes to compete for investments on the global stage. If it did so then the Scottish government would be applying a different standard to an inward investor such as Amazon than it would to any Scottish company investing in Scotland. By all means ensure that there are better employment practices, which might mean less inward investment than would otherwise be the case. But don't pick and choose between investments on some arbitrary notion of a good or bad employer because that will promote uncertainty and damage inward investment much more.
As I said in the original post from the standpoint of economic development policy,
whether Amazon should have invested in Scottish activities with Scottish Government support depends on the estimate of the net contribution of activities to the Scottish economy.
Stephen suggests that "Amazon may well exert a long-term extractive impact on the economy." I take it he is using the term "extractive" as applied in the research of Acemoglu, Johnson and Robinson (2001 AER) and as popularised in Acemoglu and Robinson's latest book Why Nations Fail. Here extractive institutions are those whose main purpose is to facilitate the extraction of resources and their transfer to (in the case of colonial governments) the imperial power. In other words he sees the long-run contribution to the Scottish economy of Amazon as negative as destroying actual and/or potential output. I don't think there is any evidence for that.
Finally, Stephen dismisses the jobs created by Amazon in Scotland too readily. In one of his tweets he states that that any reduction of unemployment from the job creation is "trivial". But people who seek to work for Amazon do so voluntarily. There must be a net financial benefit to them even if they were on state benefits so there will be secondary spending or multiplier effects, which Stephen seeks to deny. If Amazon is such a bad employer then when more jobs are created in the economy they will move to those jobs. But in the meantime if Amazon is, as Stephen says, one of "the world's worst employers" it would appear that working at Amazon is preferable to unemployment.
As Chris Dillow recently noted, research shows that unemployment is more conducive to long-term unhappiness than either divorce or bereavement. Moreover, this is not simply a result of idleness since well-being rises when the unemployed move into retirement, suggesting that it is the felt stigma of unemployment that is a key issue. Against that background, I for one am prepared to put up with the Amazon's of this world if they help mitigate the scourge of unemployment.