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May 27th, 2018

Insight

Trump is wrong about Amazon on all counts

Rich Lowry

By Rich Lowry

Published April 3,2018

Trump is wrong about Amazon on all counts
President Trump gets results. His attacks on Amazon have tanked the company's stock.

It's hard to think of a more pointlessly destructive act of presidential jawboning in our history. The online retailer is a jewel of our market economy that has delivered more choice and convenience at a lower cost.

The backdrop for Trump's animosity is that Amazon CEO Jeff Bezos owns The Washington Post, which, like much of the major media, is unrelentingly hostile to the president. WaPo's bias is nothing new, nor should it be taken out on the underlying business of its owner.

Trump's anti-Amazon jag can be put in the same bucket as his tariffs against China — Trump being Trump, unleashing in accord with his gut instincts and animosities.

The similarities end there. The difference is between targeting the Chinese regime and a great American company, between lashing out against mercantilism and against a capitalist success story, between berating an adversary of the United States and an adversary of his own.

If there wasn't an Amazon someone would have invented it, or at least the basic model of leveraging new technologies to transform retail. Beginning in the late 1980s, the advent of big-box retailers brought a productivity revolution to the industry. Now, e-commerce is challenging the big-box retailers in their turn.

This is how the US economy works. Eventually, it grinds the high and mighty into dust. In the 1910s, the US government desperately wanted to break up US Steel; 100 years later, the company accounted for less than 10 percent of US steel production. In the 1990s, the government wanted to keep Microsoft from dominating computing; 20 years later, it doesn't even make the list of Big Tech bogeymen anymore.

Trump has two specific complaints about Amazon. One is that it's ripping off the US Postal Service, costing the government billions. Perhaps a better deal can be extracted — a recent study by Citigroup concluded as much — but the postal service says its arrangement with Amazon is profitable.

The second is that Amazon doesn't pay sales taxes. This once was true, but Amazon now collects sales taxes in all states that levy them.

The larger case against Amazon is that it's killing off traditional retailing, while accruing too much power for itself. There's no doubt bricks-and-mortar retail is in decline, although we shouldn't exaggerate its scale. E-commerce currently accounts for less than 9 percent of retail sales, while Amazon, for its part, accounts for roughly 44 percent of all e-commerce.

If Amazon is sharp-elbowed and aggressive with its competitors, no one is forced to buy from it. Customers go there because they find it easy to use and cheaper than the alternatives. Amazon isn't pocketing huge profits. Instead, it's doing what companies should do: innovating, then plowing the proceeds into more investments (Amazon is much more than an e-commerce company).

Its fulfillment centers are wonders of productivity and hold the promise of as-yet-unforeseen transformations in other businesses.

Michael Mandel of the Progressive Policy Institute points out that online shopping saves consumers the time involved in driving to a store and looking for a product — and shifts all that (unpaid) labor to (paid) workers in its fulfillment centers and drivers.

This is a good deal all around, especially if Mandel is correct that jobs in fulfillment centers pay 30 percent more than jobs in traditional retail. These jobs provide, he writes, "decent pay for a high-school graduate, in a fast-growing tech-related industry, which requires a mixture of physical and cognitive skills. Many of them are full-time jobs with full benefits. They aren't easy jobs, for sure — but neither are manufacturing jobs."

In short, there are many scourges in American life. Amazon isn't one of them.

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