Amazon Is Great for the Economy Because It's Great for Us
Is Amazon bad for us? Many argue that it is, because it draws customers and revenue away from bricks and mortar institutions, eliminating jobs and diminishing once-thriving shopping districts. But those mournful of the rise of internet shopping are actually mourning the proliferation of consumer choice and convenience. They are lamenting the very purpose of a market economy – to satisfy consumer needs and desires. In trying to protect certain kinds of businesses and certain kinds of jobs, they are actually trying to impede the creation of new ones that empower consumers and serve them in the way they wish to be served.
President Trump once again voiced the anti-internet view, when he tweeted last week: “Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt — many jobs being lost!” In truth, Amazon pays enormous taxes. Unlike those paid by individuals and privately-held corporations like the Trump Organization, the taxes paid by publicly-traded companies are a matter of public record, contained in SEC filings. Last year, Amazon paid over $400 million in corporate income tax. Over the past three years it has paid over $850 million. In the past, Trump has specifically accused the company of not paying “internet taxes.” Since there are no internet taxes, one can only assume he is actually accusing Amazon of not paying sales tax. In fact, Amazon now collects and pays sales tax for all of the 45 states that have them. By the end of last year, the company was already collecting and paying sales tax on sales in 29 states. Amazon pays the same tax rate as their bricks and mortar counterparts, and there is no reason other internet-based companies cannot do the same.
What about the other aspect of the argument, that companies such as Amazon eliminate jobs, by undermining businesses that provide them? Actually, Amazon has more than 50,000 job openings across the United States to help fulfill customer orders. Many economists argue that e-commerce has created more jobs than it has eliminated, largely in customer fulfillment centers, which pay about 25 percent more than retail jobs.
But comparing jobs created vs. jobs lost is actually circling away from the heart of the issue: The impact of internet retail on consumers. Consumers are not a resource to be hoarded by existing businesses, and fenced off from new and improved ways of meeting their needs. Producers and retailers are meant to serve their customers, not the other way around. The reason Amazon and other internet-based retailers do well is because they are providing consumers with something they want. By definition, improving the way we engage in commerce is going to change the way we do it – disrupting established markets and allowing entrepreneurs to build new ones. Saying things shouldn’t change is the same as saying they shouldn’t get better.
The internet is not the first vehicle of commerce to transform the relationship between sellers and buyers. When Sears, Roebuck introduced its first catalogue – known as the “farmer’s friend” because of the convenience it offered rural consumers – it aroused at least as much retailer ire as internet companies do today. Many rural newspapers refused to run Sears’ ads, and children were given a dime or a movie admission pass for every catalog they turned in, which were sometimes publicly burned. But the catalogue became more popular than ever, because it offered rural consumers a wider range of goods at a lower price. It no doubt drove many country stores out of business and eliminated many jobs. Supermarkets and department stores had a similar impact in urban areas. But other businesses and jobs were spawned. Most importantly, people benefited from increased choice, greater convenience and lower prices.
Shopping is certainly not the only activity that has changed to meet people’s needs and desires, making many jobs obsolete. Decades ago, when we took an elevator we needed a human being to operate it. At one time when we wanted to place a phone call, we needed the assistance of a telephone operator. The push-button elevator and direct dialing eliminated tens of thousands of jobs. Are we better or worse off? A little over a century ago, the political economist Diedre McCloskey has calculated, about 5 percent of Americans in the workforce worked for the railroads. That would be the equivalent of 8.5 million jobs today. But has air travel and the wide availability of cars made us worse off, or has it provided us with greater mobility, efficiency and opportunity to learn more about each other? Just a few years ago, when we wanted to see a movie at home, we made the trek to the video store and chose from among the DVDs they had to offer. Today, we use pay-per-view and streaming services like Netflix and Amazon Studios to see what we want to see when we want to see it. That eliminated tens of thousands of jobs over just the past few years. But would we go backwards, and sacrifice the increased choice and convenience, and reduced price?
We do not live in order to work, we work in order to live. When we improve the way we live, shop and travel, we also change the nature of the businesses and the jobs that make it possible to do those things.
