I always enjoy observing irony in current events. One of the great ironies, among so many, of the Trump presidency was that his greatest real achievement (in my opinion), the rapid development and successful deployment of vaccines against Covid, was completely undermined by his own supporters. Putin seems to have achieved very little from his reckless invasion of Ukraine, beyond the irony of uniting his adversaries and accelerating Europe’s transition to sustainable energy, thereby undermining the core basis of Russia’s own economy. Beware of unintended consequences!
Now there is a sweet irony that can be attributed to the hip progressive movement, people who love to complain about others getting rich even when that can benefit everyone, especially the people they claim to represent. The irony concerns the bête noir of that movement, Amazon.
I love almost everything about Amazon. Perhaps I am a bit biased, since the firm has done more than any other to sustain my own wealth since I had the good fortune to buy a few shares in the firm several years ago. We love to attack people like Bezos, and perhaps even people like me who cling on to his coattails like parasites. But I think Amazon has been of benefit to humanity and has the potential to support our development even further.
I will certainly be holding onto my precious shares, in the belief that there is a lot more upside than downside, despite the squalls of 2022 caused by the return of sensible interest rates. One test I often apply is to imagine what would happen if a company increased its prices by 50%. Discounters and people like Walmart could not pull off such a trick because of competition and price sensitivity among their consumers, and others are limited by regulation. But I believe that Amazon could double its annual Prime subscription, and also impose fees on excessive returns, without losing many customers at all. They have kept prices low while following the sound retail philosophy of using a cost advantage to grow the business, but one day they will start looking for margin. And the value and quality of their service compared with any competition means they could do it and retain most of their base. For me, that shows a share with further upside.
We all have access to a wider range of goods at affordable prices thanks to Amazon and can lay our hands on them ludicrously quickly. Many small and start-up businesses rely on Amazon for marketing and distributing, benefiting them and their consumers. The cloud computing business reduces prices for all, and the streaming supports our abundant entertainment options.
But it is something else about Amazon that has tickled my sense of irony. They have revolutionised employment markets around the world, to the benefit of those seeking. Fair wage and fair treatment. Amazon have succeeded in restoring some balance between capital and labour where trade unions and countless left-wing politicians have manifestly failed.
It started a few years ago when Amazon decided to go big on fulfilment. I always found this decision rather strange, since it involved considerable capital and human operating costs, things which the tech giants generally avoid. But Amazon decided it could do this well, outcompete the established players such as Fedex, and create a lasting point of difference against other suppliers. It seems to be working.
The upshot is that Amazon has quickly become the second largest employer in the US, behind only Walmart. And these jobs are not for highly paid coders, but hourly paid work for people picking goods in warehouses and people driving trucks.
Progressives love to hate Amazon for providing these jobs, blinded by the profits Amazon makes and tales of how the jobs are demanding and demeaning. It is true that the jobs are far from glamorous. But progressives seem to assume that the alternatives for these people are as self-employed craft beer brewers and experimental artists. In reality, the alternatives are far worse, even when alternatives exist. Think of all the people sweating in semi-legal car workshops, or in the kitchens of small restaurants, or cleaning buildings. Compared with these employers, Amazon is a dream. They pay on time, are clear of expectations, do not tolerate abuse, and provide hygenic working conditions. A few truck drivers may struggle to find somewhere to pee while still meeting their quota, but generally hardships are few and conditions are fair. Progressives should be thrilled.
And Amazon seems to have moved the needle. When I write about the job vacancies I observed on my trip to Europe earlier in the summer, I quoted demographics, fewer immigrants, Covid and a few other factors as partial causes. But I missed one: many of the people who might be working in airports or restaurants are now at Amazon.
The same Amazon factor is noticeable in the US in similar markets. It is also affecting the public sector. Last week a report on the PBS Newshour showed how many local authorities were struggling to recruit people as garbage collectors or in other service capacities, and one hard-pressed manager bemoaned the fact that he could only offer $15 while Amazon was giving $18. Before, the excellent benefits and strong unionisation have meant that public sector leaders could usually find recruits to replace retirees. This appears to be no longer the case.
So now central banks are facing an unusual dilemma. Cooling down the economy has in recent decades been rather easy: tweak interest rates upwards, and soon unemployment will trend upwards to cool demand. Most of the cost would be paid by the marginal workers with fewer skills or in the wrong locations, but hey, rather than people holding wealth.
Now the central banks are raising rates rather quickly, yet the labour markets remain buoyant, at least in the US and some other developed markets. There have been some announcements of layoffs, but the ones I have noticed have been from over-hyped technology companies and some old economy companies like Ford, and it is notable that Ford are firing their office staff rather than anybody on a factory floor.
Sadly, it is all likely to be somewhat temporary. For decades we have heard predictions of how many unskilled jobs would be permanently lost to automation. It feels strange to be observing precisely the opposite. We can thank Amazon. But we should note that those same jobs driving delivery vans and picking goods off shelves are ripe for replacement by robots, especially once driverless vehicles start to gain serious traction. Amazon is no doubt aware of the possibility, and banking on it to maintain their cost advantage in the coming decades.
But meanwhile we have an economy that progressives have dreamed of, one where labour has as much leverage as capital, even at its less skilled end. What an irony that two of the causes have been the feverish recruitment of the bête noire of progressives, and blowback from the anti-immigration policy of the racist capitalists. One group lauds the reason by suffers the outcome, while the other loves the outcome but hates the cause.
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