Extractives

Rights and Wrongs - Amazon and New York: Lessons for the Extractive Sector

Commentary, 25 February 2019

By Salil Tripathi, Senior Advisor, Global Issues, IHRB

The unraveling of Amazon’s plans to set up its second headquarters at Long Island City in New York is a unique moment in the annals of corporate interface with communities opposed to their presence. 

In most instances, companies have won the argument, either by offering better concessions (such as investing in local projects), providing more local jobs, winning the core support of local politicians, and sometimes, by relying on the state to use force, as has happened when extractive industries operate in areas where local communities oppose the projects. 

The history of business and human rights is replete with examples of things going spectacularly wrong in this context, with companies operating in territories that turned hostile towards them, raising further risks of conflict, which inevitably leads to more human rights abuses. 

 

Background

The lessons that the Amazon experience offers are important, because they show the importance of community consent before major projects are undertaken. 

The lessons that the Amazon experience offers are important, because they show the importance of community consent before major projects are undertaken. At the same time, the experience is also limited, because other companies do not have the choice Amazon has (of shifting elsewhere), and other communities do not have the option of turning down a major investment. That one of the largest corporations in the world, owned by the man who is at the moment the wealthiest in the world, decided to walk away from a project because of sizeable opposition in the world's most important financial centre, and in a country that believes in free markets (albeit, regulated by democratic means), is remarkable.

Comparisons are imperfect, but examples from the extractive industries have shown that communities are not always effective in stopping projects they oppose. 

Think of the struggles around the world – farmers near Letpadaung mine in Monywa, Myanmar who are challenging a Chinese-owned copper mine; the Ogoni people against Shell in the Niger Delta; the inhabitants near Lake Boeung Kak in Phnom Penh; or the ongoing saga of indigenous communities facing off a bauxite mine in Orissa.

In each of those instances, powerful corporations have the support of the state, which sees those projects to be of strategic importance, and together, the collective will of state and corporation has usually prevailed. Sometimes there are setbacks – oil companies do not operate in Ogoniland, for example, which has more to do with the significant backlash Shell faced after the execution of Ken Saro-Wiwa and other Ogoni leaders by the Nigerian dictatorship in 1995. But setbacks in some countries have not stopped projects in other countries going ahead regardless of risks of human rights abuses.

Mining and other extractive companies have usually had their way. Amazon didn’t. 

There is one crucial difference between Amazon and an extractive industry, and that is factor endowment.

There is one crucial difference between Amazon and an extractive industry, and that is factor endowment. Amazon had the choice to shift its operations elsewhere. Extractive industries do not have this luxury; they must operate where the resources are. And that is why they should consider it to be an even greater responsibility to be good neighbours with the community around them, and not exacerbate their weaknesses and vulnerability. They must enable them to prosper, rather than live in a cocoon protected by barbed wire and armed guards. 

That crucial difference is visible most in another epic struggle in the United States – between native American communities opposing the North Dakota Pipeline and large corporations. The contrast is glaring. Those who opposed Amazon succeeded; those opposing the pipeline have not.

It also shows the sad reality of different rules for different folks. A company has little choice but to respond to concerns when articulated by urban middle class in a teeming metropolis – if it is consumer-facing, it has reputational issues to consider, too. But if they are operating “out there,” away from the cities, and doesn’t have a brand name to be challenged, and if those fighting for their rights are relatively powerless, then companies find it easier to get their way. That doesn’t say much about equality and human rights, but says much about the way the world is.

 

Many Questions

...if they are operating “out there,” away from the cities, then companies find it easier to get their way.

And yet, the Amazon case raises many questions - many reports suggest that the majority of local residents and key local politicians in fact supported Amazon’s plans, yet it withdrew.

Why did such a powerful corporation backtrack even though it seemed as if the majority of local residents either didn’t mind the project or supported it? Was the opposition really widespread? Was it truly a great project for the city or were there major valid concerns? What would be the impact of the withdrawl on the local economy? Did the company walk away too early without offering a compromise that would have made everyone happy? Where did the company's approach go wrong? Or did Amazon withdraw as a warning to other communities, that it would simply take its business elsewhere, if the communities protested too much? 

The answers include aspects of everything mentioned above.

It is true that Amazon saw itself as doing a big favour to New York – it wanted cities to bid for its business and sought concessions from local governments by seeking tax rebates. There is nothing fundamentally wrong with companies seeking favours, provided those favours do not come at the cost of the city’s obligations. In the past, however, companies that have sought favours and set up businesses (even after invoking eminent domain), have not always fulfilled promises, and sometimes even closed shop when market conditions have changed (as seen in the landmark caseKelo v City of New London - I wrote about it here in 2009). 

While Amazon did talk about the high-paying jobs that would be created, it didn’t appear to sufficiently address local concerns about impacts on property pricesreal estatetrafficjobs for local people who may not be skilled software engineers, and so on. It also read the local political mood badly – Queens is the region of New York that had just elected Alexandria Ocasio-Cortez, a lively and popular young politician who has political and economic views that are considered radical in the American context. Union leaders were preparing for a long fight.

Amazon also thought its popularity with consumers would be sufficient to override the vetos of local politicians, but it miscalculated. (Whether the local politicians outwardly critical of Amazon would have wanted it to withdraw is an open question).

There is a Faustian bargain involved here – in spite of stories outlinging how the company treats its workers and the conditions at Amazon's warehouses, consumers vote for the instant gratification of videos-on-demand and books delivered on their hand-held devices. And yet, Amazon retreated.

 

Lessons from the experience

Community consent matters: 

Even if they have secured support of prominent local politicians and even if the majority of the people living in the area support their operations, companies must pay heed to local concerns and address doubts and perceptions, even if those perceptions are alarmist or, in their view, wrong.

Several analysts have argued that Amazon would have eventually succeeded, but it wanted to make a political point. It could afford to do so, as many cities had vied for Amazon’s business. While Amazon has said, for now, that it won’t be establishing another headquarters, such words are never final; it still may, and it may even be in New York, in a different form, but possibly with changes in the proposal that acknowledge and meaningfully address community concerns.

Seeking community consent requires good listening and empathy-based consultations and willingness to make changes to the original plans, respecting local views.  

That requires time. Companies say they are in a hurry – if the project is to be successful in the long run, it is better to retreat than to attempt to force a company’s presence on a reluctant community, even if the naysayers are in a minority. Seeking community consent requires good listening and empathy-based consultations and willingness to make changes to the original plans, respecting local views.  

Strong institutions matter: 

Local government too must listen to the community. 

If a significant or vocal section of a community remains opposed to the project the local leaders – mayors, councilors, politicians, should either spend more time listening to the concerns and amending plans including exploring alternatives that can be offered and considered, or represent the people’s interests, and not those of the corporation. For that, strong institutions, including the judiciary, matter. If the judiciary is pliant or weak, politicians can take advantage of it and impose the will of the strong on the more numerous. 

Free, Prior, and Informed Consent has wider ramifications: 

The discourse on free prior informed consent, or FPIC, has been viewed largely from the prism of indigenous communities and their rights. That is an important right, and a well-earned victory for a particularly vulnerable group. But the principle has wider implications, going beyond the Amazon case, and should be used in contexts where the vulnerable community need not be indigenous.

While not specific to the Amazon case, there are many instances where economically weak, politically unprotected groups – which include the poor, ethnic minorities, marginalised, and refugees – are affected by location decisions that large corporations make. Their human rights should be safeguarded, and that requires companies willing to listen to everyone.

Recognising the power imbalance is crucial.

In the Amazon case, the constituencies opposing the project were not as vulnerable as indigenous communities that challenge extractive industries, but the fear of gentrification was real, and escalating prices would have crowded out those who weren’t well off, skewing the real estate market towards well-paid employees and contractors working for Amazon.

There are limits of eminent domain: 

In recent years, some companies have used the idea of  ‘eminent domain’ to prevail upon the views of local communities, and establish their presence with the support of the state, by arguing that the project serves a public purpose. That idea was tested in the Kelo case described earlier. Eminent domain was of course not considered in the Amazon case, and that is an important moment, since the US Supreme Court had permitted the redevelopment of New London in the Kelo case.

Eminent domain is a blunt weapon and should be used only sparingly, and where the need of public purpose is sufficiently critical to override individual or community property rights. 

 

These are important lessons that other companies need to study further. Extractive industries should pay particular attention, as their interactions with communities are often more acute. They often face extremely poor communities, who can be isolated, and frequently lacking basic infrastructure. People from these communities often lack skills to become machine operators or engineers – the kind of jobs the companies have to offer. Companies should be exceptionally careful in assessing impacts so that they do not make the situation worse for the local community, and so they share benefits fairly. 

Companies should be exceptionally careful in assessing impacts so that they do not make the situation worse for the local community, and so they share benefits fairly. 

Wherever Amazon (or for that matter any other corporation) decides to set up shop next – it should learn from this experience. It means conducting meaningful human rights due diligence by identifying impacts of the planned activities and taking steps to mitigate harm; listening to the concerns of affected parties; responding to the issues raised in a way that offers effective remedy; maintaining an open and transparent relationship with all constituencies in the area; and not using force – through doctrines like eminent domain, or indeed, physical force through extensive security operations – to ensure that the company’s activities are consistent with human rights standards.

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