Jeff Bezos, founder of Amazon.com and owner of The Washington Post, is becoming the favorite whipping boy of self-proclaimed progressives around the country.
Although Bezos’s critics — ranging from the populist Texas politician Jim Hightower to Franklin Foer, the former editor of The New Republic — sometimes acknowledge that since his entrepreneurial retail model has benefited consumers with low prices and access to products that often aren’t available locally, Bezos has committed the sin of creating a retailing behemoth. And in some minds, big is bad.
In a revealing column on his web page this summer, Hightower argued that Amazon’s success is not related to its technological prowess, its efficiency or its “cheap-cheap-cheap prices.” Rather, it’s successful, he said, because it bullied its way into the market “by squeezing the life out of its workers and suppliers, by crushing its competitors (from small shops on Main Street to big chain-store rivals) with monopolistic muscle, and by manipulating our national and state tax laws.”
Not so fast. The truth is that nobody is required to buy anything from Amazon. It has no monopoly. If large numbers of Amazon customers decide to shop elsewhere, Bezos’s retail empire would be in trouble.
It is true, in one respect, that Amazon enjoys a pricing advantage over some brick-and-mortar retailers, thanks to a 1992 U.S. Supreme Court decision holding that sellers are not required to collect state sales taxes on products sold and delivered to customers in other states — unless the purchaser lives in a state where the seller has a “physical presence,” such as a distribution terminal, a warehouse or a retail outlet. The ruling, however, came two years before Amazon was even founded and applies equally to traditional retailers that ship purchases to out-of-state customers.
By the same token, traditional retailers also enjoy certain advantages. Amazon shoppers can’t flip through a book that interests them or try on shoes and clothing for color and proper fit before purchase. And, at least not yet, Bezos can’t provide a cup of cappuccino with your order.
Where Amazon does have an advantage is in competition with retailers in states with high sales-tax rates. And without Amazon’s lurking presence, the rates might even be higher.
Amazon is not the monster-like creature that Hightower and other such critics describe. It faces lots of competition. And its competitors are equally inventive in their efforts to gain market share. Uber and other new entrants into the so-called sharing economy already allow customers in big cities to order electric drills, groceries and other items from local retailers, delivering them on the same day (for a modest fee, of course), rather than having to wait 24 hours or more for Amazon to fulfill an order.
Individuals, government regulators and antitrust-law enforcers are almost always one step behind in their assessments of new market structures. By the time they figure out online retail, something even newer may be eating into online profits or nudging it aside.
In a competitive marketplace, nothing is fixed in stone forever. The “monopolist” of today is tomorrow’s victim of a process that the Austrian-American economist Joseph Schumpeter aptly described as “creative destruction,” which arises when existing companies fail to recognize or exploit new ideas and technologies.
Jeff Bezos should be a hero to progressives, not a bête noir, unless all they really want is to protect existing firms from competitive market pressures at consumers’ expense.
William F. Shughart II, research director and senior fellow at the Independent Institute in Oakland, Calif., is the J. Fish Smith Professor in Public Choice at Utah State University’s Huntsman School of Business.