E-Wars: A New Hope (Episode IV)

Congratulations. You made it. Once you read this post (assuming you have already read the other three parts), you will have learned all that I (currently) have to say about Amazon. You also have my word that I will do my utmost to make sure this is the last installment in this Amazon series (no surprise sequels or prequels that turn out to be trilogies in their own right). Those of you who did not catch that allusion may want to set aside around 13 hours to power through the Star Wars saga.

The remainder of this post will be dedicated to what should be done with Amazon. Before any actual solutions are proposed, a quick rundown of the general problems that Amazon poses should help for clarification. First, both Amazon’s growth and its practices to achieve it have revealed the impotence of American antitrust law (under its modern interpretation), particularly in addressing varying business models and the value of consumer data.  Second, Amazon and other big companies have used the (often empty) promise of new jobs and revenue to secure tax cuts from local and state governments, and federal taxes have proven themselves easily reducible regardless of sticker price. Finally, Amazon has cultivated a cutthroat white-collar work environment that is only more dangerous, competitive, and unrewarding in blue-collar positions.

By now, it should be clear that the title of the first post in this series, “Stop Using Amazon,” is a gross oversimplification of the issue (I confess to only the most innocuous “click-bait”). It is unreasonable to expect the American consumer (or even the body of American consumers) to take a stand against Amazon without any help. Fortunately, Americans live under a government that exists to help them do the things they cannot do alone. American citizens should demand their government–the champion of the people and the steward of the American economy–takes action in their (collective if not individual) interest. Thus, the solutions that follow are (for the most part) not ones that the average 17-year-old Nick Jacobson could undertake all by his lonesome.

In regards to the first problem (antitrust law), I will defer to greater expertise and (briefly) explain the proposals Lina Khan outlines in her essay, “Amazon’s Antitrust Paradox.” Khan offers two solutions. First, she suggests the free market approach. This strategy revives older interpretations of antitrust law with modern additions. It operates under the premise that Amazon, as it currently exists, gains unfair advantages due to the size and breadth of its operations, and thus should be broken up. Primarily, it targets the businesses in Amazon which crosslist Amazon competitors as Amazon customers. The primary example of this is the relationship between Amazon Marketplace and Amazon manufacturing. Small businesses that use Amazon’s platform to sell their goods are then prey to Amazon’s own manufacturing arm which is always on the lookout for vulnerable, profitable markets to enter. Another example is Amazon Web Services and Amazon Video. By providing data storage to its competitors (like Netflix), Amazon gains unfair influence into competitors’ businesses, like when Amazon Web Services crashes and temporarily shuts down Netflix (Khan). Breaking up Amazon would prevent these anticompetitive practices.

As a student at Yale Law School, Lina Khan wrote a paper for the Yale Law Journal called “Amazon’s Antitrust Paradox,” which argues that the current antitrust enforcement framework is ill-equipped to tackle Amazon’s dominance and the potential harm it poses to competition.  (An Rong Xu/The Washington Post)
Lina Khan, the 29-year-old face of antitrust reform (Photo Credit: An Rong Xu, The Washington Post)

Even beyond specific practices, Khan notes that the existence of such a large company is dangerous. Simply the massive amount of data that Amazon has consolidated is threatening. If Amazon were hacked and its consumer data exposed, 92 percent of online shoppers (those that have used Amazon) would be at risk of having their information compromised (Selyukh). That figure translates to around two thirds of American adults, over 160 million people.

The second prescription Khan considers is accepting that online platforms naturally monopolize and thus accepting the monopoly while taking steps to limit its ability to exploit its power. The general philosophy for this approach also dates back to the early 1900s. Khan quotes Chief Justine Waite’s defense of this practice: “when private property is devoted to a public use, it is subject to public regulation” (Khan). Realizing this approach would chiefly involve prohibiting price and service discrimination. That is, Amazon could not favor its own goods over those of its competitors.  It would also have to make sure its platform (e.g. Marketplace) had “open and fair access to other businesses” (Khan). The trade-off in this approach is that it does not pursue competition but rather concedes that monopolies have advantages and can be tolerated within limits.

Image result for chief justice waite
Chief Justice Morrison Waite (served 1874-1888)

In summation, the issue of Amazon’s massive market influence and the dangers that poses can be addressed either by breaking up the company or by regulating the company but permitting it to continue to exist (an interesting parallel might be drawn between the competing visions of Wilson’s New Freedom and T. Roosevelt’s New Nationalism).

In regards to the second issue (taxation and incentives), the solution is once again beyond the abilities of consumers to enact. As far as incentives go, the remedy is simple: stop giving them. State and local municipalities need to recognize that any money that could go to encouraging a corporation to settle in a town is better spent on education and infrastructure. As mentioned in Part III, the incentives often fail to pay for themselves and may not even be a deciding factor for corporations looking to open a new branch (Casselman).

As far as federal taxes extend, the issue gets more complicated. While this post will not attempt to explore the intricacies of the American corporate tax system, suffice it to say that when the federal corporate tax rate is (or, rather, was) 35 percent, but the average total tax rate (including state, local, federal, and foreign taxes) that the companies in the S&P 500 pay is 26.9 percent, the original intent is muddied (Qiu). Many companies are able to legally shift their profits to tax havens like Bermuda, sheltering billions of dollars from taxes. According to Gabriel Zucman, a economics professor at Berkeley, the US loses “close to $70 billion a year in tax revenue due to the shifting of corporate profits to tax havens.” This figure, Zucman notes, would just about cover the entire cost of food stamps if collected. (The tax legislation passed last year does not address this issue except that it lowers the corporate tax rate to 21 percent.)

chartoftheday_3877_offshore_holdings_of_tech_companies_n.jpg
Credit: Felix Richter, Statista

As for the final problem–the way Amazon treats its employees–two things are necessary. First, America needs to implement greater protections for workers and enforce those that already exist. One of the best ways of indirectly pursuing this goal is strengthening unions. Amazon has been careful to keep unions and its employees separated, once firing 400 customer service employees (allegedly due to cuts after the dot com bubble burst) after the Communications Workers of America reached out to them (Kopytoff). Other examples of beneficial legislation are paid maternity and paternity leave, better health care, a higher minimum wage (although most Amazon employees are not making minimum wage), and greater supervision to ensure safety and health standards are being met in facilities.

More broadly, however, Amazon has cultivated the idea that the people who succeed are those who put off families, never stop working, shout at their colleagues, and spy on their bosses. The company mentality is if people cannot keep up, they had best move out. Here is a place where people can (and should) get involved, not necessarily in Amazon, but in their own workplaces and social groups. Working oneself without regard for physical, mental, or emotional health is neither healthy nor productive. Multiple studies have suggested that happy employees make productive employees (in one study, an average of 12 percent more productive employees) (Addady). Amazon, in fact, announced plans to test a 30-hour workweek in a small group of employees (with 75 percent pay) in 2016, but the practice hasn’t spread to a significant number of employees. In fairness, there are limits. One study in Gothenburg, Sweden concluded that, while reducing the eight hour workday to a six hour workday (without a drop in pay) made employees “happier, healthier and more productive,” it still cost the company a little less than $750,000 a year.

As noted in the London paper, The Financial Times, by Simon Kuper, countries around the world are taking steps to make their workers happier, less stressed, and left with more time on their hands. Kuper asserts that, “[o]nly the US has found a lasting way to make well-off employees work all hours into old age: take away their healthcare insurance if they stop.” That is a whole other ball game.

Thank you all for sticking through to the bitter end of this series. Come back next week for something refreshingly new and exciting (I’m considering a 17-part series on the effect seltzer has on atmospheric carbon dioxide levels). Hopefully you all know far more about Amazon then you ever suspected you might find out. Even more hopefully, now that you know all of this, perhaps you could mention it to a legislator or two? After all, the conclusion of this post is that the government has to act to protect us. The government, however, is only made up of people, and most of the time, the only requirements for election are age, citizenship, and residency. In all likelihood, altogether too many elected officials know altogether too little about Amazon.

Now is the Prime time to act. Be Relentless (if you are curious how that relates, type http://www.relentless.com into your search bar).

May the force be with you (if you order now with your Prime membership, you can expect it by Monday).

 

Works Cited

Addady, Michal. “Study: Being happy at work really makes you more productive.” Fortune, 29 Oct. 2015, http://fortune.com/2015/10/29/happy-productivity-work/.

Alderman, Liz. “In Sweden, Happiness in a Shorter Workday Can’t Overcome the Cost.” The New York Times, 6 Jan. 2017, https://www.nytimes.com/2017/01/06/business/sweden-work-employment-productivity-happiness.html?login=smartlock&auth=login-smartlock.

Casselman, Ben. “Promising Billions to Amazon: Is It a Good Deal for Cities?” The New York Times, 26 Jan. 2018, https://www.nytimes.com/2018/01/26/business/economy/amazon-finalists-incentives.html.

Khan, Lina M. “Amazon’s Antitrust Paradox.” Yale Law Journal, January 2017, vol 126 no 3, https://www.yalelawjournal.org/note/amazons-antitrust-paradox#_ftnref454.

Kopytoff, Verne. “How Amazon Crushed the Union Movement.” Time, 16 Jan. 2014, http://time.com/956/how-amazon-crushed-the-union-movement/.

Kuper, Simon. “Why the 30-hour work week is almost here.” Financial Times, 14 Feb. 2018, https://www.ft.com/content/78c5cebe-111b-11e8-940e-08320fc2a277.

Qiu, Linda. “Does Amazon Pay Taxes? Contrary to Trump Tweet, Yes.” The New York Times, 16 Aug. 2017, https://www.nytimes.com/2017/08/16/us/politics/trump-amazon-taxes.html.

Zucman, Gabriel. “How Corporations and the Wealthy Avoid Taxes (and How to Stop Them).” The New York Times, 10 Nov. 2017, https://www.nytimes.com/interactive/2017/11/10/opinion/gabriel-zucman-paradise-papers-tax-evasion.html?mtrref=www.google.com&assetType=opinion.

 

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