It’s Time to Break Up Amazon

It’s Time to Break Up Amazon
by Alec MacGillis
Farrar, Straus and Giroux
400 pp., $28.00
 
Amazon.com, the online bookseller founded by Jeff Bezos in 1994, is a technology behemoth whose operations affect nearly every aspect of modern human life, radically changing social interaction in America for the worse. Although founded ostensibly on a libertarian ideology, Amazon has now integrated itself fully with American government at the federal, state, and local levels. Even the U.S. intelligence and security services are involved.
 
This is the case that reporter Alec MacGillis meticulously constructs in this book, which is to Amazon and Bezos what Ida Tarbell’s The History of the Standard Oil Company (1904) was to John D. Rockefeller. MacGillis’s target is far richer than Tarbell’s, however. MacGillis shows Amazon’s massive scale, its monopolistic control of American retail and data services, its aggressive subversion of American government, its abuse of its own workers, and its destructive effect on American cities to be far worse than anything the Rockefeller cabal orchestrated.
 
If Amazon had not so skillfully grown like cancer into the bones of American government, its sheer size and monopolistic power would have brought down the hammer of anti-trust regulators long ago. The company brings in almost half a trillion dollars in revenue every year and employs 1.6 million people worldwide, nearly a million of whom live in the United States, and the great majority of whom work in more than 200 massive delivery centers and warehouses, known as “fulfillment centers” in Amazon jargon. More than 40 percent of all e-commerce in the United States, as well as 17 percent of all retail sales (excluding gasoline and vehicle purchases), are transacted through Amazon.
 
But focusing on the e-commerce business is to miss Amazon’s insidious dominance of internet data services, the so-called Amazon Cloud, which can reportedly handle the majority of the world’s internet traffic through more than a hundred data centers. MacGillis reports that these massive concrete blocks are typically each about 200,000 square feet and house $400 million in tech equipment. The biggest cluster of these centers in Northern Virginia covers more than 9 million square feet. Loudoun County alone had more than 40 data centers in 2013—with plans to double that amount this decade—and boasted that as much as 70 percent of the entire world’s internet traffic flows through its centers. 
 
Loudoun County is also conveniently located near the D.C. corridor as well as the American security apparatus in the Pentagon, Central Intelligence Agency, and the National Security Agency—all of which are Amazon Cloud customers. Amazon won a $600 million contract to handle the CIA’s data in 2013, and a $10 billion Pentagon contract that it shared with Microsoft.
 
Despite getting incentives, including tax credits, to build these centers that service the world wide web, this branch of Amazon does very little for the local communities in which the centers operate. MacGillis reports that each one employs only about 20 engineers, and each sucks up a massive amount of electricity and water, which is used to cool the servers. Each data center consumes about as much energy as it does to fuel 5,000 homes.
 
At a D.C. banquet Bezos attended in 2019, a presenter boasted about the benefits to the energy industry, saying that every $1 billion Amazon and other companies spent on data centers would lead to $7 billion in electricity consumption over two decades. A few weeks after the banquet, Bezos commented that space exploration would soon be necessary. “We will run out of energy on Earth,” he said. “This is just arithmetic, it’s going to happen.”
 
Bezos routinely drifts between the world’s richest to second-richest person, depending on Amazon’s stock price. As of press time, he was in the second slot with a net worth of $171 billion, behind Tesla CEO Elon Musk. Unlike others on the wealthiest person list, such as Warren Buffett and Bill Gates, Bezos is remarkably parsimonious. The few charitable contributions MacGillis notes include $2.5 million to support same-sex marriage legislation in 2012, and $350,000 to the campaign of Seattle Mayor Jenny Durkan, who would go on to support the city’s lawless “CHOP” protest zone in 2020. (Just a few months ago, Bezos did break this trend by donating $100 million to the Obama Foundation, however).
 
“Jeff Bezos is a straight-up libertarian,” an early investor in Amazon told MacGillis. “Jeff’s perspective is the canonical neoliberal perspective: that the only purpose of corporations, the only purpose of shareholders, is to enrich themselves to the exclusion of everything else.”
 
Though he was born in New Mexico and cultivated a persona as a laissez-faire Seattle entrepreneur, Bezos is a product of the East Coast’s Acela Corridor. Before he founded Amazon, he was an investment banker at D. E. Shaw in Manhattan. When moving out to Seattle to take advantage of the state’s low tax rate and the technology talent pool created by Microsoft, Bezos was careful to buy a house with a garage and to start the company there for a few months before buying downtown office space so that he “could later adopt the customary ‘garage start-up’ mythology,” MacGillis writes.
 
His pretense as an independent free-marketer now dropped, Bezos spends a significant amount of his time wining and dining with D.C.’s political elite, who have the power, if they were so inclined, to put Amazon into regulatory check. Bezos does this from his Washington D.C. mansion, fittingly enough in the Embassy Row neighborhood, where his neighbors are the embassies of Croatia, the Netherlands, and the United Arab Emirates, not to mention Michelle and Barack Obama, who rented a house nearby after leaving office, and Donald Trump’s daughter, Ivanka, and her husband, Jared Kushner.
 
While in D.C. in 2013, Bezos snatched one of the nation’s leading newspapers, The Washington Post, for a pittance: $250 million, less than 1 percent of his net worth. In 2015, he also nabbed Obama’s high-profile press secretary, Jay Carney, to lead the company’s global corporate affairs, including public relations and public policy. The Democratic Party scored a coup in its friendly association with Amazon and Silicon Valley, as MacGillis explains: 
 
The [tech] industry had leaned liberal since at least the early 1990s, after all, when Democrats such as Bill Clinton and the technophile Al Gore had recognized where the future lay and helped draw Silicon Valley away from its libertarian, pro-business moorings in the Republican Party.
 
By 2018, Amazon had the largest dedicated corporate lobbying office in D.C. The company’s more than $4 million per quarter spent on federal lobbying was second only to Facebook among the tech giants.
 
Amazon has also assembled an impressive state and local lobbying team to negotiate sweetheart tax-credit deals with municipalities that bend over backward to entice the company to build its warehouses and offices in their communities. MacGillis details a typical case, repeated many times across the country, in which Amazon convinced State of Ohio officials and the city of Monroe (near Dayton) to give the behemoth a 10-year state tax credit, worth about $3.8 million, plus a total exemption from local property taxes for 15 years. Amazon insisted on complete secrecy during the negotiations, prohibiting citizen groups and watchdogs from critiquing the deal until after it was already done.
 
Perhaps the most impressive subsidy feat was the company’s “second headquarters” contest in 2018, in which it succeeded in getting 20 finalist cities to humiliate themselves with incentives, both financial and symbolic. MacGillis reports: 
 
Tucson hauled a twenty-one-foot saguaro cactus to Seattle by truck. The mayor of Kansas City gave five-star online reviews to a thousand Amazon products. Dallas, appealing to Amazon’s dog fetish, offered to waive local pet adoption fees for company employees. Atlanta proposed adding an Amazon-only train car to the city’s subway system, to help “distribute products around the city.” Close by, the Atlanta suburb of Stonecrest offered to rename itself Amazon.
 
In the end, Amazon naturally chose Arlington, Virginia, right across the river from Washington D.C.
 
How “lucky” a chosen city might be  depends largely on which of three tiers Amazon had planned for it. MacGillis explains: 
 
The company had, in a sense, segmented its work force into classes and spread them across the map: there were its engineering and software-development towns, there were the data-center towns, and there were the warehouse towns.
 
In describing the lives of warehouse workers, who largely lived in depressed provincial or rust belt regions, MacGillis channels Studs Terkel’s 1972 classic, Working, to conduct interviews with the grunts of modern-day technological sweatshops.
 
These are the workers of the so-called fulfillment centers, which are sprawling warehouses crawling with forklifts, robots called “Kivas,” and “water spiders,” people whose job is to keep work stations fully stocked. MacGillis describes one warehouse in Sparrows Point, Maryland—which had replaced the old Bethlehem Steelworks—as containing 14 million items and 14 miles of conveyor belts that could run at 600 feet per minute, where workers assemble one hundred packages per minute, or 6,000 per hour. Kiva robots, which look like giant orange Roombas, bring stacks of pallets filled with products to be packaged by workers who are only allowed 20 minutes of time “off-task” over their 10-hour shifts. Any dawdling risks docked pay, or even termination.
 
Before the Kivas, fulfillment pickers were expected to reach speeds of about 100 items per hour. With the Kivas bringing stacks of the products that people buy online to them, the pickers were expected to reach speeds of packaging 300 to 400 items per hour. They were spared the endless walking of aisles, which had left “Ama-zombies” soaking their feet at night and popping the Advils that Amazon provided in vending machines, but now they had to confront the monotony of their stationary post. The addition of robots wasn’t so much replacing workers yet as it was making the workers’ existence more robotic.
 
Then there are the tragic stories of Jody Rhoads, a forklift operator whose neck was crushed in a collision with a supply rack, and Devin Shoemaker, crushed under a delivery trailer. Each case that MacGillis documents was conveniently swept under the rug by Amazon, which put pressure on OSHA to find no violation of work safety rules. The Center for Investigative Reporting found that serious injuries at Amazon’s warehouses were reported at a rate more than double the national average for the warehousing industry.
 
Amazon is just as ruthless with its retail competition as it is with its workers and the cities it preys upon. The company gets retailers to join its Marketplace service, demanding a cut of roughly 15 percent of profits. It then uses the data it collects from the retailers who use its services, for the purpose of competing against those same retailers. A pencil salesman, Mike Tucker, became a retail activist, blowing the whistle on Amazon’s predatory business practices. After signing up retail sellers, Tucker explained, Amazon then
 
draws on those sellers’ expertise and the stream of data their transactions generate to see which of their products sell well and then start selling near-copies of those goods under Amazon’s own brands: diapers, batteries, vitamin supplements, nicotine gum, mid-century modern chairs, trash bags, gel insoles…
 
The net result is that “Amazon has eliminated about twice as many jobs at independent retailers as it had created,” Tucker said. No other occupation has declined as much since 2012 as retail salesman. NYU Professor Scott Galloway estimated the number of job losses caused by Amazon at about 76,000 per year. By driving out local businesses, it has also devastated state and local property tax collection. Meanwhile the company has fought doggedly against paying local and state taxes, only giving way in a handful of jurisdictions in recent years. According to a report released by Fair Tax Mark in 2019, Amazon is best in Silicon Valley at tax avoidance, having paid a 12 percent effective tax rate between 2010 and 2018, as opposed to the 35 percent corporate tax rate in the U.S. during the same period.
 
What is to be done? For all the merits of his book, which draws on his many years as a reporter at Pro Publica and elsewhere, MacGillis falls short of good solutions. He strongly recommends unionization, for example, and says he drew inspiration for the book from Upton Sinclair’s propaganda novel, The Flivver King, published by the United Auto Workers Union in 1937, just as it had forced Ford Motor Company to accept unionization demands. This is a poor inspiration, because Henry Ford appears saintly in comparison with Jeff Bezos, certainly in how he paid his workers and in his principled avoidance of government lobbying. It also ignores the troubled history of corruption and failure that dogged the American labor movement in the 20th century.
 
Anti-trust presents a better solution, one that cuts to the core of Bezos’s false libertarianism. Amazon is a true monopoly in libertarian economist Murray Rothbard’s definition of the term: it benefits from exclusive privileges granted by the government. MacGillis’s reporting makes it clear that Amazon presents a greater danger to the United States and the world than Standard Oil or the Bell Telephone Company ever did. The breakup of Standard Oil in 1911 and the Bell Telephone System in 1982 into competing regional divisions is a good model for how a virtuous Congress, if America ever gets such a thing, could bring the Bezos behemoth to heel. The American Innovation and Choice Online Act, a proposed bill that makes it illegal for Amazon to provide advantages for its own products and services over those of businesses that rely on it as a retail platform, would be a good first step.

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