How Big is Big Tech?

September 24, 2018

In April of 2018, Jeff Bezos was interviewed by German business executive Mathias Döpfner for Business Insider. When Döpfner asked Bezos how he felt about calls to reign in Amazon and the other big tech companies, Bezos responded, "I think we humans, especially in the Western world, and especially inside democracies, are wired to be skeptical and mindful of large institutions of any kind…It's just that they have a lot of power and control, and so you want to inspect them. Maybe that's a better word. You kind of want to always be inspecting them." This is about as straightforward a response as you’re going to get out of the chief executive officer of what is now a trillion-dollar company, let alone the richest person on the planet, regarding the problem of corporate concentration. But the truth is that some people want to do more than merely inspect Amazon and the other tech giants. Some are calling for these companies to be tightly regulated and, in some cases, broken up.

Is the ever-growing concentration of economic power in the tech sector really a problem? Policymaker Matt Stoller gave a talk at the Harvard Law Forum in October of 2017. The topic was monopoly power and its distortive effects on our democratic institutions. Stoller relayed an anecdote about a father who attempted to block his young son from having access to YouTube, a feat that proved to be more difficult than one might expect. The Chrome browser didn't allow for YouTube to be blocked-- after all, YouTube is owned by Google. So, eventually, the father decided to block all Google products. Stoller said, “But then he realizes that his son can’t do his homework without Google, not because he can’t use a different search engine, but because the school has a deal with Google, and they use Google products...” Here’s where we get to crux of the issue. These products are increasingly becoming an essential part of everyday life for any person living in modern conditions, children included.

When Amazon announced that the company was in the process of searching for the location of their second headquarters, every major city in the United States threw their hat in the ring. And that's no surprise. As many as 50,000 jobs could be created for the city that’s eventually chosen. But the lengths some cities were willing to go to in order to attract the tech behemoth is jarring. Chicago's bid included a $2.25 billion incentive package. The city’s official bid states that the company would be able to keep a total of $1.32 billion a year of the income taxes paid by its workers. That means every Amazon employee working at this hypothetical Chicago location would be paying Amazon a tax for the privilege of working at Amazon. City officials view it as a potential investment. They’re banking on the possibility that the deal will bring more money into Chicago than it loses in tax revenue due to incentives. But the fact that one single company has such leverage over entire cities is a bad sign. Increasingly, technocrats are seen as messiah-like figures, people who will swoop in and, by virtue of their unparalleled genius, make things better for working class people. But there are certain metrics that would seem to indicate that things aren’t getting better.

It’s true that, by most indications, the economy appears to be doing well. Unemployment is at the lowest it has been since before the dot-com bubble burst in the early 2000s. The economy has added around 150,000 to 200,000 jobs a month for the past few years. But the average worker is not seeing the full benefits of what would otherwise appear to be a time of prosperity. Despite our relatively tight labor market, a strange phenomenon is occurring. We're not seeing a commensurate rise in wages. So, what’s the hold up? Some economists argue that economic conditions have created a dynamic by which wealth is so increasingly concentrated that certain employers hold a disproportionate share of market influence on the labor market. This is especially true with respect to large companies like Amazon, which relies on workers in distribution centers and package warehouses. The median annual compensation of Amazon employees is a measly $28,446 a year. For the sake of context, Jeff Bezos makes more than that in about 10 seconds. These companies have so much leverage over the average worker that, in practical terms, they have what economists refer to as monopsony buying power. In the long term, this dynamic is untenable. It’s a major economic crisis waiting to happen.

Current economic conditions in the United States and across the world are, in many ways, shockingly similar to those of the early 1900s, which directly precipitated a world war. In the decades leading up to the 20th century, globalization was spurred in part by technological advances such as the steamboat and the telephone, which enabled faster trade and communication, respectively. Likewise, unrest occurred due to uneven economic development around the world. But the rapid pace technological changes of the 21st century might well make the early 20th look like the Stone Age. And, in due time, the likes of Jeff Bezos and Mark Zuckerberg might be inviting comparisons to the robber barons of the previous century and earlier.

 A handful of extremely large companies are dominating the tech industry. Apple is the first American company to surpass $1 trillion in value. Recently, Amazon hit this benchmark as well. To give you some perspective, that is more than half the GDP of Canada. And analysts estimate that Amazon could be worth $2.5 trillion by the end of 2024. If trends continue, the company is on track to garner approximately 49% of the e-commerce market in the US by the end of 2018. The consequences of this market domination are wide-reaching. Some argue that tech giants are stifling innovation in Silicon Valley. And since the tech giants are increasingly becoming merchants of users’ data, and since some are wont to abuse that dynamic, it seems all the more pertinent to take action now, before they grow too powerful to be stopped.

There is no shortage of ideas to remedy the situation, and it's beginning to look like Europe is leading the way. In July of 2018, European authorities fined Google $5.1 billion for abusing its power in the mobile phone market, and ordered Google to change its practices. This was a clear attempt to loosen Google's control of Android software. Moreover, the European Commission is launching an investigation into Apple's agreement to purchase Shazam, an application that allows users to identify music, movies, and TV shows based on short sound clips. And, in the UK, Jeremy Corbyn has proposed a tax on big tech firms in order to fund journalism. But legal action in Europe can only accomplish so much. The tech giants are all based in the US, and transformative change will require action in the States.

At the heart of the problem of corporate concentration is the matter of vertical integration, the common ownership of various stages of production by a single company. Vertical integration is when a company owns their whole supply chain, or a vast portion of their supply chain. For example, Amazon has been testing out drones to deliver packages directly, as opposed to using services like FedEx or UPS. An argument can be made that there are sectors of the economy where it makes sense to have a centralized arrangement with common ownership of the supply chain. Perhaps the most interesting economic debates of the near future will revolve around this matter of centralization, whether or not it is an ideal arrangement, and whether it is private or public entities that are really fit to undertake such massive efforts. On the left end of the political spectrum, some have proposed that we nationalize Amazon, Google, and Facebook, as opposed to splitting them up. Others like economist Richard D. Wolff propose that the government incentivize worker cooperatives, which he argues is paramount to “socialism of the 21st century.”

Unfortunately, the political will to take real, consequential action now is currently nonexistent in the US. With Republican control of both the executive and legislative branches, the prospect of the federal government taking action against trusts or monopolistic endeavors is a nonstarter. It is sadly the case that, historically speaking, the state has more often than not taken a reactive approach to dealing with dire economic problems. This is not some aberrant problem that can be rectified with a single piece of legislation. It’s intrinsic to economies in which the capitalist mode of production is the dominant mode. When economic conditions allow for a mere handful of wealthy people to have this amount of influence over the lives of average people, it’s necessary to critically reassess the system that has given rise to such conditions. A view of politics that emphasizes the ability of the state to act as a bulwark against corporate power is certainly a good place to start, but it will take a mass movement of people carrying out political actions, such as boycotts, and applying a significant amount of pressure on their representatives to effect real, positive change.

David Stockdale is a freelance writer from the Chicagoland area. His political columns and book reviews have been featured in AND Magazine. His fictional work has appeared in Electric Rather, The Commonline Journal, Midwest Literary Magazine and Go Read Your Lunch.  Two of his essays are featured in A Practical Guide to Digital Journalism Ethics. David can be reached at dstock3@gmail.com or via his website.