9   luglio

Kathleen Thelen: Consumers and citizens, the origins of the Amazon economy

Ciampi Visiting Scholars

Amazon and other Big Tech have revolutionized markets and consumption in just a few years, but, Kathleen Thelen argues, professor of political science at MIT in Boston, they use some practices similar to those of large mail order or supermarket chains. Tactics already used in the early 1900s. Of course, there are a number of innovations, in terms of technology, the ability to manage consumers’ data and those who work for them and also the global scale. Thelen has been visiting professor at the Ciampi Institute of the Scuola Normale Superiore where she also has coordinated an important conference on the regulation of artificial intelligence and platforms. We asked her to tell us about what she calls the ‘Amazon economy’ starting with its 900-year-old origins. Her forthcoming book is called Attention Shoppers! American Retail Capitalism and the Origins of the Amazon Economy.

“Many studies make the comparison between Amazon and Big Tech and the monopolies of the past, one of the things I tried to highlight in my book is that these are monopolies that we rely on as if they were public utilities. We cannot imagine doing a search without Google or finding a street without a map application. What is new about monopolies such as steel, is that they are not only indispensable nodes of economic activity. With Big Tech we have a personal relationship, we rely on them in ways we are not even fully aware of. These companies combine the power of being a central hub of the economy and the power of generating a dependent relationship with consumers. In the same way they have achieved to make their brand popular, like companies such as Lego or Disney. In short, we have an intense and personal relationship with these companies that harness us in many ways. This direct and unmediated relationship managed through apps. devices that we constantly have in our pockets is also a way to enroll consumers in political battles against institutions that try to impose rules on them. To give one example among many: Uber entered the US transport market by taking advantage of a legislative vacuum and when the authorities tried to regulate it, the app sent each user a message that read more or less “If they ban Uber, you will have to pay and wait longer for a taxi but if you press this button, you will send a letter to your elected officials telling them how much we serve you.”


Consumers or citizens? In your book you point out how, some campaigns to regulate or contain the role of apps and platforms have worked

I have studied these companies in different countries to observe the ways in which big platforms are received. In some cases, organized interests manage to highlight what is lost and not just what is gained by the omnipresence of these companies. When Uber landed in Denmark, the unions did not point out the precariousness of an employment relationship without rights, but pointed out that most of the revenue would go outside Denmark. In a country that relies heavily on taxes to maintain an effective welfare state, the idea of a company making money and using the country’s infrastructure but not paying its share of taxes made citizens look at Uber in a new light. It activated their identity not as consumers who want to save money and don’t want to know too much about the bad part of the business model, but as citizens with interests in their common good.

In the US, then, many rules are at the level of individual states, which makes it easier for companies to blackmail local authorities: they can say ‘if your jurisdiction is too hard on me, I will move out of here’. This is their modus operandi. Austin, Texas, tried to regulate Uber more strictly in terms of background checks on drivers and the response was ‘we’re leaving’. So the jurisdiction can compete with each other or get into trouble. Here you go back to popularity with consumers who are used to using Uber or not paying for an Amazon delivery.



You point out a biased way of applying anti-trust rules

Antitrust legislation in the early 20th century was meant to tame monopolies. Since the 1970s, the Supreme Court and lower courts have arrived at a view of anti-trust in which large retail chains have been immune because the only thing that is considered problematic is what compromises consumer welfare – an interpretation born of the influence of the Chicago school of economics. And consumer welfare is defined by the price of goods. Of course, large chains, whether physical like Wal-Mart or online like Amazon, have a business model built around reducing the cost of goods.


Let us go back to history, to the origins of the Amazon economy…

The story is long, but the crucial point is that in the US, from the very beginning, a large retail model based on very low costs for consumers and a large inventory took hold. It started with Sears at the beginning of the last century, with catalogues that arrived everywhere, on which you could buy anything, even a house to assemble (there are still some around the US). The low cost was based on two factors yesterday, as it is today for Amazon: cheap labor and a power dynamic vis-à-vis suppliers. Many companies rely on these retailers to bring their products to market and this is a huge source of power for these groups, who can use it to demand lower prices. The same groups also exploited the public infrastructure: Sears used the postal service not only to deliver catalogues and goods to homes across the country, but also as an intermediary in money transactions with people who lived in remote parts of the country and often without bank accounts. Amazon has greatly reduced its dependence on the postal service, but in the past it was a huge customer and was able to secure very low prices for its shipments. Today it has its own infrastructure, but still relies heavily on the Post Office for the last mile in remote areas, where it would not make sense for Amazon to build its own. These are the similarities that led me to study the US retail evolution. What distinguishes Amazon is the platform dimension, which allows for inventory ranging from luxury to second-hand items, but it is also an intermediary between seller and consumer. In the book I play with some of the similarities linking Sears to Amazon, there are differences and similarities in terms of the political strategies put in place to grow: labor law violations and avoidance, massive use of temporary labor, billing large fines by violating rules to occupy market segments, circumventing tax laws by shipping from states where they are lower. The differences lie in the ability to extract and exploit immense amounts of data in ways that allow them to act as intermediaries and market makers, and finance, Amazon and others have been loss-making for years but have taken advantage of markets that gave them confidence while waiting for them to grow to the size where they became indispensable monopolies.


Then there is the issue of labor…

The price level that Amazon can offer (as does Wal Mart) is based on two factors, which drive down labor costs. The employment they offer is not good, they don’t offer great benefits, and the companies are known to be virulently anti-union – there is only one unionized Amazon warehouse in New York, in Alabama the workers rejected union presence after a long battle and disputable practices by Amazon. The other element on which the low prices are based is the use of their monopsony power: many suppliers depend on the platform to get their products to consumers, which gives them enormous purchasing power that is used to obtain concessions. In turn, manufacturers transfer this pressure onto labor costs, as an MIT colleague, Nathan Wilmers, has shown in his research. This strategy, in an industry where unions are almost absent, contributes to the millions of low-income workers who need low prices to make ends meet. So, what I describe in the book is the emergence of what I call a ‘bitter balance’ in which low-income families depend on chains and platforms to shop cheaply and these contribute to the precariousness of the labor market.  We are therefore in a paradoxically difficult situation which is one of the aspects that makes the whole platform economy a great regulatory challenge.


This interview was published on Domani (in italian)