Washington must confront the ‘Amazon economy’

A decade ago, progressives were lamenting the “Walmart-ization” of America. They were concerned by the growing trend of big-box retailers that paid low wages while selling cheap goods from China and other countries. This Walmart model pitted smaller domestic manufacturers and Main Street businesses against large multinationals for a share of the U.S. consumer market. As a result, domestic producers struggled to stay in business in the face of heavily subsidized imports.

Unfortunately, the Walmart model has since been replaced by an even greater problem: The Amazon economy. Brick-and-mortar retail stores have been swallowed up by the e-commerce juggernaut of Amazon, Target and other web-based retailers. This has led to even greater wealth disparity and a decline in labor rights. Now, as the nation cycles through the COVID-19 recession, Washington must come to grips with the resulting challenges facing America’s workforce.

In some ways, the COVID-19 pandemic was a tale of two very different economies. Even as millions of U.S. workers were laid-off – or struggled through diminished hours and wages – enormous wealth flowed to the very largest of America’s corporations and the richest families. In particular, the top 1 percent, 5 percent and 10 percent of Americans did very well while millions at the bottom were suffering. Just the top 1 percent of U.S. households saw their net worth increase by $2.6 trillion in 2020. The U.S. even added 110 new billionaires between 2020 and 2021, an increase of 17.9 percent. Overall in 2020, according to the Federal Reserve, America’s top 1 percent owned nearly one-third of all net U.S. assets and more than half of all U.S. stocks and mutual funds.

At the other end of things, the pandemic clobbered the U.S. economy. One in six U.S. small businesses closed their doors, and the nation’s unemployment rate reached 14.8 percent in April 2020 — the highest in more than 70 years. Workers at the bottom of the labor pool, especially in communities of color, were particularly hard hit. Even today, nearly 15 months after the pandemic began, 23.6 million U.S. workers face unemployment or reduced working hours, or have dropped out of the labor force entirely.

Meanwhile, e-commerce giants such as Amazon and Target have flourished. Amazon, in particular has cannibalized the market share of Main Street retailers, increasing its revenues by 44 percent in the past year alone based on quarterly, year-over-year data. 

Amazon and other online retailers have become very adept at capturing profits and market share from the rest of the economy. And now they are massively outperforming other stocks in the S&P 500. Since the start of 2020, the S&P index has risen by almost 30 percent. But Target shares have grown more than twice as fast, and Amazon shares have grown nearly three times as rapidly — at a staggering 84 percent. 

And so, Amazon keeps doing very well. However, the devastation wrought in the private sector – and especially for small businesses – means that, when the pandemic ends, there will be fewer jobs and businesses to rehire America’s workers. 

In response, the Biden administration has put forth both the American Jobs Plan and the American Families Plan. Their goal is to create new demand in the economy that can sustain the creation of good-paying jobs with benefits.

Significantly, the United States has just undergone a massive redistribution of wealth and power toward companies like Amazon. President Biden thus faces not only one of the largest wealth disparities in U.S. history but also the growing economic and political power of these monopoly-like firms. 

Legislation is needed to rein in the power of these corporate behemoths. The PRO Act, which passed the House in March, would strengthen labor rights, particularly for employees caught in Amazon’s pressure-cooker workplace. Similarly, the Raise the Wage Act would implement a national $15 minimum wage by 2025, boosting the wages of 32 million workers, 21 percent of the labor force. And both HR1 and the John Lewis Voting Rights Act could bring greater transparency and fairness to fundraising and redistricting, and eliminate partisan gerrymandering.

Amazon is emblematic of increasing corporate power in U.S. labor and product markets. It’s especially corrosive that Amazon derives a particularly large share of its revenues by importing an endless stream of China’s mass-production goods. That works against American manufacturers and destroys good jobs. But Amazon is also the face of a multinational agenda seeking to thwart labor rights. And so, America’s workforce continues to be pinched by special interest groups focused on short-term profit rather than the nation’s long-term economic stability.

If Amazon has a legacy, it is the growing monopoly of power in the marketplace — all fueled by ever-increasing campaign contributions aiding both e-commerce giants and multinational entities. To balance the equation, Washington must stand up for labor rights, voting equity, government investment, job creation and the importance of small businesses. Otherwise, America’s workers will become increasingly impoverished and disenfranchised.

Robert E. Scott is a senior economist with the Economic Policy Institute (EPI). Follow him on Twitter @RobScott_epi.