In New York City, politicians pushed back on incentives to Amazon and Amazon decided to leave New York. One could understand that New York City is one of the largest economic forces in the world and they have the ability to say no to incentives. Although the incentives was $3 billion in an effort to have $25 billion over 10 years come into the city. For many that was an easy trade off, whether the company is profitable or not.
If you went back in time to the railway age, most people focus on the task of building the railways across the country through all kinds of terrain and it is a very good story. Many civil engineering feats to cross rivers and non flat land are still worthy of hearing about. The other side which we typically do not focus on what was the government’s role and what did they give to the railway companies. The railways were built on a promise of more to come – when they were built the west was unsettled and not the “bread basket of the world growing grains” In reality there was little economic activity although there was plenty of potential. In the book, The Railway Game by J. Lukasiewicz published by McClelland and Stewart, Toronto, 1976; the economics of the railways are examined.
Railway companies have been traditionally been promoted by government leaders who wanted railways in their communities, remember in the 1880’s the alternative was water or ships. A railway could and did bring goods to markets faster which meant if the town or city had railway yards it would grow or how to grow. Many politicians at this time owned land which they could sell at higher prices. The conflict of interest idea was not a large consideration to be in politics, likely if you did not have a conflict, you were seen as less than honorable. While Mr. Lukasiewicz focuses on Canadian railway history, the same thing was seen in the United States. Having politic connections meant the government of the day either in Washington or at the state level essentially guaranteed the repayment of the bonds to construct the railways. The early railway owners – the Vanderbilt, Hill, Morgan, Harriman, Huntington, Stanford and others were known as railway kings. Some of the names now grace universities.
In addition to the guarantees of the force of government, railways were offered subsidies to build track. In many instances the companies were given land. The federal government gave over 187 million acres and grants from states added another 50 million acres. Northern Pacific was the leader in railways with 49 million acres. Texas is a big state and gave away land that is similar to the size of the state of New York. Note the land was given to bring the rails into town in order to ship freight, not passengers. (Further information about land given away is available Southerland and McCleery, 1973)
Linking to dividend paying stocks, for generations public subsidies have helped businesses, whether they acknowledge them or not. Private capital likes monopolies or near monopolies which provide stability of profits. If there is stability they can be dividends flowing every year which is a good thing.
There are more questions than answers, till the next time – to raising questions.