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Amazon and the 'New Economy' Letdown and What It Means to YOU

Ohanian Comment
I'm sure you've heard about the New York Times article detailing that Amazon treats its white collar workers just about as badly as it treats the blue collar laborers. As John Cassidy points out below, this is about a whole lot more than Amazon. For starters, it's not a stretch to see Amazon policy as where school deform policy is headed.

On a personal note, I'm glad I finally weaned myself away from the super convenience of Amazon Prime. Living some distance from stores and hating to drive and hating to shop, I've ordered everything from patio furniture to a toilet for our sailboat to dish towels. I've now trained myself to resist immediate gratification and order books from Vermont independent outlets. And with luck, we'll never need another toilet for the sailboat.

I disagree with Cassidy when he says one cancelled membership makes no difference. We must all behave as though our acts were universalized. If the moral/ethical consequences would be bad if 10,000,000 people did something, then I definitely cannot justify doing it just became I'm "only one" person.


Jeff Bezos scares me. The piece below has this pull-out quote: Behind all the product innovation, there is a good deal of old-fashioned labor discipline, wage repression, and exertion of management power. This could be describing school deform.

I agree with Dean Baker when he says although it's okay to feel sympathy for the "overachievers who are poorly treated at headquarters," his real pity if for the workers in the warehouse.

Baker concludes:

It is also important to note the big handout that Amazon has relied upon from taxpayers. Amazon has not had to collect sales tax in most states for most of its existence, giving the company an enormous subsidy in its competition with brick and mortar competitors. The cumulative size of this subsidy almost certainly exceeds its cumulative profits in the years that it has been in existence. Any discussion of Bezos success should mention this huge subsidy from the government.
So YOU are subsidizing Amazon--at the expense of local merchants.

by John Cassidy

First up, an admission: like tens of millions of Americans, I am a member of Prime, Amazon.com's program that charges ninety-nine dollars annually for unlimited shipping and other benefits. Originally, I used Barnes & Noble's Web site for purchases of books and other media products. But when we had a family, my wife and I couldn't resist the convenience of one-stop shopping and delivery for books and everything else. A couple of years ago, after reading about the harsh working conditions at some of Amazon's warehouses, I considered cancelling Prime. The fact that I didn't get around to it perhaps reflects laziness and lack of empathy on my part, but also a collective-action problem. What difference would one cancelled membership make?

The revelation, in a Times story published this weekend, that some of Amazon's white-collar workers were treated almost as harshly as its blue-collar employees has revived the debate about the Seattle-based retailer's culture and work practices. Jeff Bezos has claimed that he doesn't recognize the company portrayed in the article, which depicts, for example, recriminations for cancer sufferers and other employees dealing with major personal issues. But the Times story is consistent with other accounts, such as Brad Stone's 2013 book, The Everything Store: Jeff Bezos and the Age of Amazon. Under Bezos's direction, the firm has long adopted a Darwinian approach to business, encouraging its upper-echelon employees to work around the clock, and systematically culling under-performers.

As the Times pointed out in a follow-up story by Noam Scheiber, overwork and brutal competition among professional employees are hardly exclusive to Amazon. At elite investment banks and law firms, employees, particularly younger ones, have long worked sixteen-hour days and weekends in the knowledge that some of them still won't make the cut. But there was still something about the Amazon story that touched a nerve. In just three days, it has attracted more comments on the paper's Web site than any other article the Times has published.

Perhaps Times readers, who tend to be well educated and reasonably well off, like reading about bad things happening to people like themselves. But I think it goes deeper than that. As the "New Economy" celebrates its twentieth anniversary--on August 9, 1995, Netscape's initial public offering took place--it is becoming harder to ignore some of its negative aspects. Behind all the technological advances and product innovation, there is a good deal of old-fashioned labor discipline, wage repression, and exertion of management power.

In the telling of its original defenders, such as Alan Greenspan and George Gilder, the New Economy would be a wonderful place, marked by rising productivity, rising incomes, enhanced competition, and lower prices. For a while, in the late nineteen-nineties, some of this vision appeared to be coming to fruition: as investment in information technology soared, productivity and wages both rose steadily. But since about 2003, productivity and wages have stalled. Indeed, according to John Fernald and Bing Wang, two economists at the Federal Reserve Bank of San Francisco, the trend rate of growth in labor productivity has returned to the level we saw between 1973 and 1995 (about 1.5 per cent per year), which, in turn, was much lower than the trend growth rate from 1948 to 1973 (about 3.2 per cent per year).

To be sure, there is a lively debate about whether the official statistics are adequately capturing some of the innovation that is going on in the New Economy, such as the proliferation of new goods and services, including comparison-shopping sites and streaming media. But those debates have been going on since the original productivity slowdown in the seventies and eighties, and they are unlikely to be resolved. In any case, the acid test of productivity growth is whether it leads to higher wages and living standards for most of the population. On this score, so far, the New Economy has been a disappointment.

Amazon provides a good example of how the New Economy really works. To most of its customers, myself included, it is a wonderfully convenient Web site. But behind the New Economy front end lies a huge old-economy network of warehouses, trucks, and modestly paid workers. Amazon now employs about a hundred and fifty thousand people around the world, many of whom are temporary employees who don't receive medical benefits or paid leave, according to media reports and the A.F.L.-C.I.O. (Full-time employees do receive benefits.) Amazon's nickel-and-diming is hardly surprising. Its real competitor isn't Apple or Google, or any Silicon Valley company: it is Walmart and other retailers that compete on price, have small profit margins, and pay low wages.

Of course, Amazon isn't the only New Economy company that has old-economy features. Surely everybody knows by now that Apple's iPhones are manufactured and assembled in Chinese factories, where wages are low, hours are long, and independent monitors continue to uncover abuses. Uber and Lyft insist that their drivers are independent contractors rather than employees, which enables the firms to avoid doling out health insurance and other benefits. Many digital-media companies, forced to compete for the advertising crumbs that the monopolistic giants Google and Facebook don't suck up, pay lower wages and extend fewer benefits than the old-media companies that they are supplanting. Earlier this month, writers at Vice Media became the latest set of employees of a major digital-media company to vote to unionize, in an effort to get better wages and work conditions.

Amazon, for its part, has long resisted efforts to unionize its workforce, both in the U.S. and abroad. This battle is still ongoing. After the Times article came out, an official at a big British labor union, the G.M.B., which is seeking to recruit some of the roughly seven thousand people who work at Amazon's U.K. distribution centers, accused the company of treating its staff like "robots" and imposing work conditions that often lead to physical and mental illness. A petition authored by the G.M.B. cites a survey of Amazon staff, which found that seventy-one per cent of them reported walking more than ten miles a day at work, seventy per cent felt they were given disciplinary points unfairly, and eighty-nine per cent felt exploited.

I don't recall the word "exploited" being bandied about much in the dot-com era. Today, though, it crops up quite a lot. In a stinging response to the Times article, Larry Elliott, the Guardian's economics editor, reminded his readers that American private-sector unions "were originally formed as a response to exploitation by 19th century mill owners." He added that, by "keeping a cowed workforce under the lash with non-stop pressure, bullying and psychological warfare, Bezos is the 21st century equivalent."

Amazon's defenders, led by the former White House press secretary Jay Carney, who is now the company's senior vice-president for corporate global affairs, would strenuously contest that characterization. And it should be noted that the company pays high salaries to some of its white-collar employees, as well as giving them health insurance, stock options, and other benefits. Still, what a great irony it would be if one of the legacies of Amazon and other New Economy companies was to help revive something that helped to define the old economy: the labor movement.

— John Cassidy with Ohanian Comment
The New Yorker





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