On August 24, Apple CEO Tim Cook made a joint announcement with the governor of Iowa and the mayor of Waukee that the small town had been chosen as the site for a new $1.3 billion data center. At a time when struggling Midwestern towns and cities are trying to present themselves as emerging innovation hubs in an attempt to attract a sliver of Silicon Valley’s wealth, the photo op gave the politicians fodder for their inevitable reelection campaigns. But what made Waukee attractive to Apple?
Putting aside the huge subsidies aka tax breaks, Waukee and Iowa taxpayers are going to be paying a huge portion of the construction cost. Apple isn’t going to pay to get the electricity or water to their data center! And who’s paying for the roads?
AAPL knows the art of the deal ;)
Apple received $213 billion in tax breaks for 50 permanent jobs — that’s $4.3 million per worker — and even bigger subsidies are on offer for factories. Tesla received $1.25 billion in assistance to build its gigafactory in Nevada, and Foxconn is poised to get a $3 billion incentive for its proposed Wisconsin factory, despite a legislative analysis showing the state won’t break even for at least 25 years.
Selling the myth
Those pushing the Silicon Valley model would at least say there’s an upside to these structural changes: More people are becoming entrepreneurs and the technologies they create are inspiring greater innovation. Too bad the data shows the opposite. Not only has the number of new businesses plunged since the 1970s, but millennials are the least entrepreneurial generation so far.
When towns, small cities and struggling states give uneconomical incentives to large tech companies in the desperate hope that a data center will revive the local economy, they’re perpetuating a trend toward increasing consolidation that’s hurting workers, devastating communities and making it harder for mom-and-pop shops to survive against multinational behemoths that can use the profits from one division to allow another to operate at a loss to eliminate competition.
There’s a growing recognition among academics, politicians and regular people that the convenience offered by these large companies is not worth the many downsides that come with allowing them to have so much control over the economy.