— Printed at request of David Turnoy. Originally from NationOfChange.org —
Capitalism is failing in America, and Amazon is both the cause and beneficiary of much of the breakdown. Jeff Bezos said, “We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient.” He might have added three capitalist practices familiar to his company: (1) Pay no taxes; (2) Drive competitors out of business; and (3) Exploit workers.
Anarcho-capitalism: The sordid details of Amazon’s tax avoidance
In 2018, according to its own SEC filings, Amazon claimed a refund on its $11 billion in U.S. profits. It did the same on nearly $6 billion in profits in 2017. The company has reportedly positioned itself to avoid even more future taxes with unspecified tax credits.
In the most extreme form of capitalism taxes do not exist. This is called “anarcho-capitalism.” Among all corporations, Amazon may be the leading advocate of this philosophy. They haven’t paid federal income tax for the past two years. They set up headquarters in Luxembourg for tax breaks that are now being challenged. They claim minimal profits on hundreds of billions in revenue, resulting in one of the lowest profit margins among major corporations, and thus much less tax. Of course, Amazon claims to be using tax credits from past losses that stemmed from investment in research and development (R&D). But the company appears to overstate and obfuscate the R&D numbers. Its only ‘explanation’ of R&D in its annual report comes in an ambiguously all-encompassing section called “Technology and Content.” Plus, that’s no excuse to dodge taxes. Walmart and Google each spent nearly $12 billion on technology in 2018, almost as much as Amazon, but Walmart paid 28 percent in federal taxes, and Google 14 percent.
We learn much more at the state level. Amazon has played one state against another for tax breaks over the years, most recently negotiating an estimated $3 billion tax credit from the state of New York before residents rebelled – as well they should have. The Economic Policy Institute found that employment levels don’t significantly change in communities with new Amazon warehouses, and a recent study by The Economist concluded that the opening of a fulfillment center in a given community actually depresses warehouse wages. Furthermore, as an indication of the folly of wooing corporations with state subsidies, Upjohn research found that in the great majority of cases incentives are not even a part of a company’s decision to locate in a given area.
Most insidiously, Amazon’s seemingly fair-minded acceptance of state sales taxes likely has a dark side. For years the company fought the state tax as it built a competitive advantage over smaller firms. Now that it’s firmly established, online variety and convenience have replaced price as the primary incentives for most consumers, and so Amazon now supports a sales tax, very likely to discourage competition. Evidence comes from one study that found Walmart 34 percent cheaper than Amazon in four of five product categories.
Monopoly: Amazon and the killing of competition
Kiplinger compiled a remarkable list of 49 companies, many of them familiar to almost all Americans, that are in danger of being driven out of business by Amazon. One of them, Toys ‘r’ Us, has already succumbed. Sears is nearly gone. Others include Barnes & Noble, Kroger, Rite Aid, Best Buy, Etsy, Yelp, Pandora, and even stalwarts like Target and Trader Joe’s and UPS and Fedex and Office Depot and Staples. Investopedia agrees, adding Macy’s and even Walgreen’s and CVS and Costco.
In a summary of “The Myth of Capitalism,” by Jonathan Tepper and Denise Hearn, it is argued that “an increase in market concentration across the United States has resulted in a system that is not true capitalism, since freedom is being restricted…Amazon is crushing retailers…It can determine what products can and cannot sell on its platform, and it competes with any customer that encounters success.” Columbia University and UN economist Howard Steven Friedman adds, “Monopolies are one example of capitalism failing. Monopolies have virtually no competition and can dictate prices to their customers unless they are restricted by regulators.”
READ FULL ARTICLE: www.nationofchange.org/2019/02/18/how-a-failing-capitalist-system-is-allowing-amazon-to-cripple-america/
[EDITOR’S NOTE: This article has been updated to reflect the requesting source.]
Google “Nation of Change.org”. I would hate to see Orcas Issues reprinting information from organizations rated as either “far left” or “far right ” by independent news rating services ever again “at the request of a subscriber”. No local advocate or verifiable author? Let’s not go there.
Thank you, Martha, for pointing that out. It is now corrected/updated.
“Capitalism is failing in America, and Amazon is … the cause” because it Pays no taxes, Drives competitors out of business, and Exploits workers. Heavy stuff.
There is a legal standard developed since the Sherman Act in 1890, a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” It includes also The Clayton Act and The Federal Trade Commission Act.
The essential question not addressed in this piece is whether Amazon’s business practices actually violate any of these, Whether it is operating “in restraint of trade.” You have not made your point! but made many assertions and insinuations aimed at arousing our sentiments while failing to address the issue constructively.
Amazon is the first mover in a new type of internet-based business. As such it has beaten out the competition because it provides a superior service. What is necessary is either show they are operating in violation of the law, or whether the effects of their success violates our ethical principles and require a new take on established law. It took many years to depose Rockefeller and the Standard Oil monopoly. But we still have Exxon, Mobil, ConocoPhillips, & Chevron because we have decided certain sectors require large players to provide us with the commodities and services we want.
FaceBook likewise is facing a reckoning as a first mover in another kind of internet based service, now that we have sussed the implications of their kind of business. We are now attempting to apply, and modify, law formulated for the printing press.
So this piece supplies us with much attitude and some interesting factoids and sets up a straw man “Anarcho-capitalism.” But it fails to address the core problems at the heart of progress in a “Complex Economy” such as ours where privately owned businesses and government both play important roles. Living on an island, one appreciates the prompt boxes with a smiley on them. Amazon is not the evil empire, so give it a rest!
Just Speculation:
Perhaps Amazon pays/paid no tax because it made no taxable profit.
Person or business, tax is paid only on taxable income.
Amazon’s business model seems to be to establish ascendancy in the marketplace first, and make taxable profits later.
This is not a failure of capitalism. It’s a feature, not a bug. And if my speculation is correct, it’s perfectly legal and appropriate.
But there is a bug flying toward Amazon, in the guise of Ali Baba. This Chinese (“communist”) business is doing a better job of the postulated capitalist business plan than Amazon is. Watch out, Mr. Bezos!
Gosh, I went to the nation of change.org website and the most controversial articles I could find were headlined: “More Than 200 Democrats Introduce Bill to Expand Social Security,” and “Berinie Takes It To The Road.” What’s scary far left to some may be the way forward for others.
Follow up: NationofChange was founded by Donna Luca and launched in 2011. As an active philanthropist with 25 years’ experience in educational and environmental causes, Ms. Luca recognized that concerned people needed an easy way to get informed and involved to make changes on the issues that mattered most to them.
To address this need, Ms. Luca brought savvy technologists and intrepid independent journalists together to shape NationofChange. Today, funded entirely by mostly small reader donations, NationofChange provides a progressive platform that empowers individuals to create on-the-ground social, environmental, and economic change, one action at a time.
Oh, and by the way…
Having been both affiliated with a supplier to, and a customer of, Sears, Roebuck & Co., I can confidently state that the demise of Sears was in full swing long before Amazon ever appeared on the business stage.
Sears died because of managerial arrogance and the attendant inability to modernize its business model, not because some outside force did it in.
Bezos actually seems to have adopted the best features of Sears’s business plan, and then successfully modernized the system to keep it viable.
Thanks for posting David. I shared, and also added this very interesting, (and progressive) reader supported news site to my daily feed.
Thanks to Lin for being brave enough to print this article at my request. I thought it was important to remind us islanders, many of whom make lots of purchases online, that your purchasing decisions have real-world consequences. You can choose to support companies that share your own beliefs through your purchases. And while I know many islanders use Amazon because you want to get a low price, you actually can get better deals by shopping from other sources, as the article makes clear.
Thanks also to Thom for revealing the background of “Nation of Change”. Yes, it is a site that has the radical notion of working for social justice. The author of the article, if you read to the bottom at the link that was given, is Paul Bucheit. Here is his description: As an advocate for social and economic justice, Paul Buchheit has authored numerous papers on economic inequality and cognitive science. He was recently named one of 300 Living Peace and Justice Leaders and Models. Does advocating for social and economic justice make a news source far left? Or is it the fact that the author dares to question an impact of US capitalism?
I agree with Martha. We support Orcas Issues financially to allow it to publish its own stories and islanders’ articles. If I wanted an aggregator, I would go elsewhere. (Just one note about the Amazon-bashing: the author complains that Amazon once didn’t collect state taxes, then immediately complains that Amazon now collects state taxes.)