This week Jeff Bezos was named the world’s richest man by Bloomberg’s Billionaire’s Index, with a staggering $152bn (£117bn) in net worth following a jump in the Amazon share price on Amazon Prime day. Looking further into how he came to be there reveals a story of the global economy in 2018. While a gilded class sees huge returns, it comes at the expense of workers and society not receiving their fair share.
Bezos did not make his fortune alone; the company’s customers, suppliers, workforce, and the public sector through investment in infrastructure, roads and services all played a part. In particular, Amazon’s employees, of which there are over half a million, are essential to Amazon’s business model of being reliably quick and convenient. Yet Bezos makes more wealth every 9 seconds than the median Amazon employee in the US makes in a year. In the UK, undercover investigations have shown work in Amazon’s fulfilment centres to be insecure, demeaning, excessively monitored and low-paid. Toilet breaks can cost a job and workers’ movements are tracked to check they are optimal for maximising Amazon’s profit. Amazon has consistently suppressed efforts amongst its workforce to unionise, and has created some of the most atomised labour markets imaginable through its Amazon Turk bank of online workers from around the world, reducing the ability of colleagues to organise. Amazon’s fulfilment centres are often in places where it’s close to the only gig in town for low-skill workers; evidence from America suggests this has enabled the tech giant to reduce wages for those jobs over time. Despite its poor record as an employer, mayors in the US have offered Amazon billions in tax breaks to attract the giant to create employment in their cities.
Unlike his workers who receive a wage, Bezos’ net worth rises as shares increase in value; his wealth comes from his ownership of shares – or capital – rather than a salary for his work. Those shares rise in value not only because workers aren’t receiving their fair share of growth produced, but also because Amazon – like many other tech companies – has a huge wealth of data at its disposal from which it can generate profit. That data is contributed by customers as they shop on Amazon, and use products such as Alexa. It can be used for advertising, product development and to support artificial intelligence to increasingly take on tasks once the preserve of humans.
This model of wealth production and distribution is not limited to Amazon. There is mounting evidence that workers are not receiving their share of profit across the economy, including here in the UK. Despite economic growth, real average wages are still 2-3 per cent below their pre-recession peak. This is partly a story of poor productivity growth – but it is also one of bargaining power between workers and executives and capital owners. Technology and increased economic and financial integration have enabled capital owners and multinationals to position their operations and investment anywhere in the world, increasing their power over workers and governments. The power of companies to pay very low wages and offer appalling working conditions is also strengthened by what employers call ‘monopsony power’: where a relatively small number of employers account for many job opportunities in an area.
Decreased labour bargaining power can be seen in the decline of union membership in the UK over the past 40 years: from one in 2 to less than one in 4 today. Partly as a result, the share of national income accruing to workers in advanced economies is falling. The Bank of England estimates that whereas 70 per cent of national income was paid in wages in the late 1970s, it is now as low as 55%.
Neither is Amazon alone in its use of data to take a large share of income. The last decade has seen the rise of highly profitable digital platform monopolies – from Google to Uber, with workforces which are relatively small proportional to value added, and which take an intermediary share of profit as they connect suppliers with consumers. The growth of ‘superstar firms’ which are able to use aggregation and analysis of data to make supernormal profits, and to dominate not just current digital markets but future ones in artificial intelligence and machine learning, is set to increase the share of national income going to capital owners. These companies, global in reach and in operation, are able to avoid paying taxes, while less mobile ordinary workers face a growing public finances crisis. Even when taxes are paid, the rate paid is lower; in the UK, capital gains and dividend income face lower taxes than income from work. While an ethic of hard work applies to ordinary people, those who live off wealth pay lower taxes on their income. The executive and owners of these companies are the gilded class of twenty-first century capitalism.
These are seismic changes in the global economy, though they follow an old pattern of capital finding new ways to enclose collectively produced goods (in this case, data), to maximise its own returns, and to keep one step ahead of the slow hand of the state. Policy has been slow to adapt, but it must – across countries, including the UK. Doing that will require overcoming the huge political power of the big tech companies, and insidious ideological justifications for policy that favours capital owners over workers.
There are three priority areas. The first is strengthening the hand of workers, through strong enforcement of employment rights and support for unions to match the expansive ambition of the tech economy. The second is to look to new models of ownership to ensure that everyone – workers, but also the unwaged – can benefit from growth in the economy that we collectively generate but which are being captured in the hands of a few. A Citizens’ Wealth Fund would help do this at a global scale, and new models of data ownership would curtail the power of the tech giants. The third is reforming our tax system so that those who make money from wealth pay their share. In an age of increasing returns to capital alongside a growing public service bill, that looks increasingly non-optional.
The richest man in the world did not get there alone; his wealth is created by Amazon’s millions of workers, suppliers and consumers. Rather than focussing on one man, we should look at how he got there to study the nature of the economy and how politics and policy should respond. Technology has the power to generate a future of plenty; but it is only through building a democratic economy of shared power and ownership that we can reach a future in which that plenty is shared.
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