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Amazon Doesn’t Know How to Innovate. It Knows How to Exploit

Amazon’s very business model is based on ruthless exploitation of workers and methodical plunder of public goods — fueling massive inequality between the places it enriches and those it leaves behind.

For Alec MacGillis, author of Fulfillment: Winning and Losing in One-Click America, Amazon offers an ideal frame for understanding the United States and what it's becoming. (PATRICK T. FALLON/AFP via Getty Images)

The pandemic has been good for Amazon. In the first ten months of 2020, the company hired 425,000 new employees (more than doubling its US workforce) and added another 500,000 independently contracted drivers. Net sales last year (almost $400 billion) were up 40 percent from 2019 and net income ($21.3 billion) nearly doubled. The already grotesque wealth of Amazon CEO Jeff Bezos ballooned another 60 percent to $177 billion. And, adding insult to opulence, the company beat back a high-profile unionization drive at its warehouse in Bessemer, Alabama — ensuring that Amazon’s workers would continue to shoulder the burden of the company’s dramatic growth while sharing little of the reward.

Alec MacGillis touches on Amazon’s banner year in the last chapter of Fulfillment: Winning and Losing in One-Click America, but his field of vision is much wider. Fulfillment is less about Amazon than it is about what Amazon represents and what it has wrought. For MacGillis, a reporter at ProPublica, Amazon embodies a business model based on ruthless exploitation of workers, predatory elimination of competitors, and methodical plunder of public goods. In this account, Amazon is both a symptom and a cause, offering “an ideal frame for understanding the country and what the country [is] becoming, given how many contemporary forces it represent[s] and help[s] explain.”

Fulfillment is a reporter’s book, told largely through personal stories that underscore the stark contrasts between those people and places that “one-click America” enriches and those it leaves behind. Early chapters give us Amazon’s booming Seattle headquarters and hollowed out Dayton, Ohio, where remnants of the Rust Belt working class stencil smiles on Amazon boxes for $12 an hour. Another takes us to Washington DC, following Bezos as he purchases political influence, the Washington Post, and a 191-room mansion. Another offers an additional parable of deindustrialization, told through the history of Baltimore’s Sparrows Point steelworks; shuttered in 2012, Sparrows Point is now an Amazon fulfillment center where former steelworkers drive forklifts for barely a third of their former paychecks.

For the most part, MacGillis is careful to describe these chasms not as accidents or ironies of our postindustrial age but as purposeful choices or strategies. Factory employment did not build a stable working class in Baltimore or Dayton — unionized workers did. Seattle’s housing insecure are victims not just of the city’s stratospheric private rents but of wage stagnation and the collapse of public housing. Warehouse accidents are less a result of hyper-speed consumerism than the evisceration of occupational health and safety regulation.

At its core, Fulfillment is about inequality — its causes and its consequences, its depth and its dimensions.

It is first about distributional inequality. This is nicely captured within the company itself, where Bezos made more in an hour last year than one of his warehouse workers would earn in a millennium. And it is captured in the places transformed by tech capitalism like Seattle, where housing prices and homelessness have exploded with the valuation of Amazon stock.

Fulfillment is also about relational inequality — the patterns of exclusion, exploitation, and subordination that make such maldistribution possible. Consider the high-tech Taylorism, surveillance, and intimidation that mark Amazon’s labor relations. Here, on stark display, is the “minute, exacting, and sweeping regulation” of workers’ lives that observers like Elizabeth Anderson have rightly described as authoritarian rule. Meanwhile, the arms-length neglect of drivers — classified as independent contractors — allows Amazon to shirk even the minimal responsibilities or standards that accompany conventional employment. In its relationship with vendors and third-party sellers on its platform, Amazon is an unalloyed bully. The company snaps up government procurement contracts with the promise of including local vendors on its “marketplace,” and then uses its control of that marketplace (and the information it collects) to crush the competition.

Amazon’s success is not, as MacGillis shows, the triumph of innovation and market savvy. Near-monopoly power in online sales and data storage allow Bezos’s company to collect lucrative rents in a market of its own creation. Dominating local labor markets lets it set a low prevailing wage, all while peddling the pretense that it is creating “good jobs.” The important point here is not that Amazon and the forces it represents are trading jobs for bad, but that the company is driving down job quality and compensation across sectors and occupations.

Consider the trajectory of warehousing and storage, the economic sector where we find Amazon’s fulfillment centers. Employment of production employees (Figure 1) has more than tripled since 1990 and more than doubled just since 2008. But union density has collapsed, going from more than 25 percent of workers in the early 1980s, to 15 percent in the early 1990s, to barely 5 percent today. And with that loss of worker voice, real wages have slowly fallen.

Figure 1: Employment, Real Earnings, and Union Membership in Warehousing and Storage, 1990–2020 (production and nonsupervisory employees)

Source: Current Employment Statistics series CEU4349300008 and CEU4349300006 (wages adjusted for inflation with CPI-U-RS); Barry T. Hirsch and David A. Macpherson, www.unionstats.com.

Fulfillment is also about political inequality — or the myriad ways that Amazon translates its economic power into political influence. MacGillis traces not just the predictably cozy relationship between Amazon and the jurisdictions (federal, state, local) where it does business but also the company’s blunt exploitation of those ties. Perhaps more than any other episode, the bidding war for Amazon’s HQ2 location (an ongoing “Bachelor for cities to compete for the affections of a company”) dramatized the company’s ability not just to win political favor but to plunder public budgets in the bargain. Amazon, according to a recent tally by Good Jobs First, has soaked up almost $4 billion in state and local subsidies — an immense public investment to underwrite union-busting and metastasizing monopoly power.

Finally, Fulfillment is about spatial inequality — about the growing gap between regions and between cities. MacGillis draws this out by looping back to the yawning gulf between Dayton and Seattle circa 1960 and the state of the two cities today.

On the eve of Ronald Reagan’s election in 1980, one in eight Americans lived in a city where the average family income was more than 20 percent higher or lower than the national average. Today, that share is closer to a third. And most of that increase is due to the rapid ascension of the top one percent in winner-takes-all cities like Seattle and San Francisco.

These regional disparities are evident at various scales. We see it in the growing economic segregation, neighborhood to neighborhood, within cities. We see it in the deepening divide, in every state or region, between urban and rural communities. One measure of this is the range of median family incomes across counties. On the box and whisker chart (Figure 2) below, the three-thousand-odd US counties are plotted, for each year, by median family income.

Figure 2: Real Median Family Income, US Counties, 1970–2020

Source: Census and American Community Survey (2010 and 2020 are five-year ACS averages)

For each year, the box surrounds those counties falling between the 25th and the 75th percentiles; the whiskers mark the points 1.5 times higher or lower than that range; and those beyond the whiskers are outliers. The universe of counties falling below the 25th percentile does not change much after 1970, but the high-earning outliers increasingly pull away. In 1970, just five counties claimed median family incomes more than twice that of the median county; by 2020, nineteen counties — almost all of them tony suburbs or booming tech cities — had pulled that far ahead.

Across much of the last century, pockets of robust economic growth yielded some degree of shared prosperity. Regional disparities dissipated because people could (and did) leave those cities and regions where jobs had dried up to seek better options elsewhere. This was the logic of the Great Migration (coupled with the promise of escaping Jim Crow terror), the dramatic regional and demographic shifts following World War II, and the postwar emergence of the Sunbelt.

But because prosperity is increasingly hoarded by the top ten or one percent of earners, the employment benefit of relocating — say from Dayton to Seattle — is wiped out by housing costs. Many US workers are faced with the choice between struggling to find work where they can afford to live and struggling to pay the rent where there might be a better job. Amazon exploits this dilemma relentlessly — hoovering up generous public incentives while offering lousy jobs to struggling people and struggling places.

These intertwined inequalities, for MacGillis, are the defining feature of the modern US economy. For the ordinary women and men whose stories weave through his account, security is elusive and opportunity scarce. And Amazon, as Fulfillment effectively details, is both a key driving force in this story and a malevolent exemplar of its consequences.