Amazon is a Monopoly

[amadeus]

Lower and lower prices drive down wages.

Even if this were true, why would it matter? If your wage is lower, and the price is lower, would you notice the difference?

Further, selling below cost is a means of destroying competitors.

You're accusing Amazon of dumping? Do you have any evidence of this, given that Amazon's average profit margin over the last 5 years was 1.25%? I'm no math genius, but if you sell products at below cost, you lose money.

If Amazon was guilty of dumping, the only thing they'd be guilty of is giving an even bigger bargain to its customers. Who would complain about this?

This is why some products have legal minimum prices.

I'm sure it had nothing to do with producers lobbying the government for that privilege, right?

A monopoly may lower prices today, but this puts them in a position to raise them unilaterally tomorrow.

Amazon sells stuff online. Am I really supposed to believe that Amazon is going to put other online retailers out of business and then raise its prices?

 

[Tahuti]

Even if this were true, why would it matter? If your wage is lower, and the price is lower, would you notice the difference?

It could. If you work in a particular industry where wages are considerably dropping and prices of products within that industry are dropping as well, you still may find your purchasing power dropping as the particular industry's deflation may not be happening in the economy as a whole.

Do you have any evidence of this, given that Amazon's average profit margin over the last 5 years was 1.25%?

Could be creative accounting to avoid taxes.

 

[luiz]

They are using their size to suppress competition and innovation.

But they are keeping prices low and are very innovative. That's the opposite of what you'd expect from a monopoly, which would keep prices high and not innovate that much.

Fact is Amazon has no "natural power". If they increase prices or offer worse service, it's very easy to take away their market share. There's no entry barrier to starting a competing firm. It's not like someone who bought all oil fields and then can charge whatever he wants and impose the conditions he wants. Amazon can't impose anything, because they're not offering anything that can't be easily replicated.

 

[warpus]

They are using their size to suppress competition and innovation.

Even if that were true, which it very well might be.. that doesn't mean that Amazon is a monopoly. which it isn't.

 

[Paul in Saudi]

(I suspect you may be convincing me. When I have difficulty putting my ideas into words, I have suspect I am not thinking clearly. Keep going, you are helping me see more clearly.)

 

[aelf]

Yeah but you want us all to be yeomen

I want us all to be free and dirty capitalists with robots doing all the work.

I don't think robots doing all the work makes us more free.

I was just struck by a vision of Kaiserguard's ideal society

Spoiler :

 

[Farm Boy]

Wait, Amazon has to be broken up because they keep prices down? That's defying the conventional problem of a monopoly.


edit: I agree what you're saying is a problem, but you have to treat the source, not the symptom. If you treat this symptom you will only be hurting people in other ways.

If you want to fix the problem, cut taxes a lot on the bottom 95%, raise taxes, not even by much, on the top 0.5%, and then increase spending on the bottom until we get bit of inflation, and then keep raising interest rates to hold the inflation steady while you keep spending on useful stuff. This will give you room to cut interest rates rather than change spending to deal with shocks in the economy, like we could in the 90s.

People will have so much more money in their pockets they won't need to worry about saving every damn penny that they'll actually go into a bookstore.

The entire problem is 35 years of an austerity economy. Monetary/fiscal tightness has caused a deep consumer need for cheaper prices, obtained only by Wal-Marting the country. We could have had a big-box system running the show years ago but people just didn't need it. Relative to the amount of stuff to buy, once upon a time money was plentiful. Now money is scarce.

Wait, I'm probably missing something. Aren't you the same Hygro that's argued the economy that ships manufacturing jobs to China in return for cheap consumer goods is really just great because it means we get cheap stuff? Forgive me if I've gotten that wrong. I was sitting around a couple days ago mulling over how fantastic a policy that actually is for the upper middle class that maintains high wages and gets significantly increased purchasing power both from the cheap goods and also double benefits from the lower middle class getting crunched into providing them low-paid services in the new economy.

 

[luiz]

Wait, I'm probably missing something. Aren't you the same Hygro that's argued the economy that ships manufacturing jobs to China in return for cheap consumer goods is really just great because it means we get cheap stuff? Forgive me if I've gotten that wrong. I was sitting around a couple days ago mulling over how fantastic a policy that actually is for the upper middle class that maintains high wages and gets significantly increased purchasing power both from the cheap goods and also double benefits from the lower middle class getting crunched into providing them low-paid services in the new economy.

So in your conception of an ideal economy every nation should manufacture all goods it consumes? Some sort of autarky? The logic of fighting free-trade is always mind boggling. What exactly should people be able to import? Why? And how much? Why? And who determines that? And why? Why exactly shouldn't people be able to buy from their supplier of choice, regardless of the country?

Also, where is your solidarity? Those Chinese workers need a paycheck as much as their American counterparts, or rather they need it even more as they're poorer.

 

[Farm Boy]

My solidarity is in the same place as it is when people argue that American agriculture is destroying developing economies. If you hadn't caught on at this point that I'm pretty sympathetic to legislated wage support and protectionism through subsidization, I don't think we've been talking on this topic much.

I mean, I'm fine with free trade in principle, but if its principle effect is to create a super-rich global elite by trending down everybody else's wealth relative to the level of the most desperate, and I think there is some evidence that it does, then I think the system needs to be not quite that free.

 

[Gucumatz]

Wait, Amazon has to be broken up because they keep prices down? That's defying the conventional problem of a monopoly.

Thats kind of what monopolies do though. Although its not a blatant price war, Amazon drives its prices down at times [on certain products] below even their own cost of production in order to gain a larger share of the market - and that [the attempt of trying to marginalize competition] is a monopolistic practice.

 

[luiz]

My solidarity is in the same place as it is when people argue that American agriculture is destroying developing economies. If you hadn't caught on at this point that I'm pretty sympathetic to legislated wage support and protectionism through subsidization, I don't think we've been talking on this topic much.

I mean, I'm fine with free trade in principle, but if it's principle effect is to create a super-rich global elite by trending down everybody else's wealth to the level of the most desperate, and there is some evidence that it does, then I think the system needs to be not quite that free.

So you have no solidarity whatsoever for people outside of the US? I don't see why rich Americans should have any solidarity towards non-rich Americans, following your logic.

And no, you got it all wrong. There is no evidence of what you say. All evidence points to the fact since trade became more liberalized the poor countries got much richer. Hundreds of millions of people were lifted out of abject poverty. Starvation decreased dramatically in relative terms. Global wealth inequality is falling at a very fast pace.

And why wouldn't it? Outsourcing to cheaper locations means poorer people are now making more than they used to. Income in the poor places receiving those manufacturing jobs rise, and rise fast.

And what would you do? Force people to manufacture on more expensive places? Force people to grow food on less efficient places? Keep the billions of Indians and Chinese locked in poverty for eternity?

Free trade is one of the economic concepts that can be demonstrated to work as intended.

 

[Gucumatz]

Implying that business can't emerge organically in China or India?

 

[luiz]

Implying that business can't emerge organically in China or India?

Much harder if they can only sell to a very poor country. The Chinese and Indians prior to liberalization didn't have money to buy the products they were making, so if they could only sell for themselves they simply wouldn't. The fact that the world markets were open to them is a gigantic reason why they got so much richer in so little time. Those who argue against free trade are literally arguing for poverty and starvation.

And what sort of bizarre logic is that that only business that grow in one place to serve that same place are "good"? Again, exactly why shouldn't people be able to buy from whatever supplier they choose?

Do you know that the US got rich also by exporting stuff to the whole world?

Should all countries be autarkies? My God, what a bizarre argument! There is no rational argument against free trade. It's always raw (and misguided!!) selfishness.

 

[Gucumatz]

Over time they would have money to buy products they were making. Its the Ford-Tata motors paradigm [Tata motors being the Indian car manufacturer who in pretty much every comparison reflects organic growth mirroring worker effects in the US].

Yes the US got rich by exporting to the whole world. There is rational argument against free-trade, it protects the producers in already established nations. Now that may sound selfish, but the fact is just looking from a Ricardian economics standpoint where capital moves - so does demand. Demand falls in more developed states, but organically that same demand would have emerged anyways over time without the direct mvoement of capital.

Factories that emerge organically are displaced by multinational corporations who are able to leverage their production process accordingly and is proven to reduce the level of unemployment in emerging nations.
-----

If exports flood a country [and particularly in smaller countries this is an issue], there is little opportunity for organic development. Look at Guatemala for instance, throughout the last century its been heavily bombarded through its imports and lacks any real internal development. Economic growth, not development is present in Guatemala. For a larger nation like Brazil, India, or China - exports can more easily mobilize workforce to development from the overall increase in velocity in the economy, not so for smaller nations.

 

[Farm Boy]

Oh there's rational arguments against it Luiz. If US agriculture would indeed crush local food production entirely in a region there should be protectionism to maintain some of the infrastructure. It's too slow to redevelop if you happen to need it quick. There's probably a balance to be struck between raw efficiency of production and maintenance of a local base outside of cities in the desert, localities with massive population per square mile and no countryside, and the like. And a proponent of capitalism is going to attack an argument by claiming looking out of number #1 is immoral? If a strong purchasing market is what's been required to fuel this growth it seems like eating the seed corn to not take care to tend it.

 

[Gucumatz]

Look at southern Mexico/Guatemala for instance. It is cheaper to buy corn from Iowa than it is to produce corn by farmers themselves and sell it to the community. Ironic considering its the home of corn, but ignoring the irony - it also forces farmers into the cities - where because of increasing exports not enough domestic industry is arising to provide jobs for all the now unemployed farmers.

 

[luiz]

Over time they would have money to buy products they were making. Its the Ford-Tata motors paradigm [Tata motors being the Indian car manufacturer who in pretty much every comparison reflects organic growth mirroring worker effects in the US].

Yes the US got rich by exporting to the whole world. There is rational argument against free-trade, it protects the producers in already established nations. Now that may sound selfish, but the fact is just looking from a Ricardian economics standpoint where capital moves - so does demand.

Factories that emerge organically are displaced by multinational corporations who are able to leverage their production process accordingly and is proven to reduce the level of unemployment in emerging nations.
-----

If exports flood a country [and particularly in smaller countries this is an issue], there is little opportunity for organic development. Look at Guatemala for instance, throughout the last century its been heavily bombarded through its imports and lacks any real internal development. Economic growth, not development is present in Guatemala. For a larger nation like Brazil, India, or China - exports can more easily mobilize workforce to development from the overall increase in velocity in the economy, not so for smaller nations.

That's a lot of bad economics there, man.

First, autarkies are marked by stagnation. If you can only sell to the local market, development is much slower. Also, prices remain high as there is little competition. Inefficiencies abound. People are kept in poverty. China and India were only able to grow as fast they did because they could sell stuff to the whole world, stuff for which there was no demand (yet) in their countries. Now they have plenty of local demand, and plenty of local companies cater to those needs. Hundreds of millions were lifted out of abject poverty. If the world followed "your" rules, they would still be extremely poor.

That rational argument against free-trade is anything but. It's only rational from the standpoint of the losers, who are always less numerous than the winners. Comparative advantages mean that the world as a whole is richer when trade is free - and in our case the biggest winners are in poor countries. So it's pretty selfish and mean spirited to oppose it (and pathetic to have no sympathy for Chinese workers while demanding that rich Americans show solidarity to poor Americans - why should they?).

And what is this with "organic development"? If lots of people are employed by export-oriented multinational and make more than they were previously making, overall demand will rise and plenty of local business will emerge to cater to their new needs. This happened not only in behemoths like China or India but also in countries smaller than Guatemala, such as Singapore. Why is Guatemala any different?

Finally, David Ricardo was the first person who formalized comparative advantages, and as such was all for free trade. I don't see how you can possibly claim to make an argument against free trade based on Ricardian economics. Let me be clear: you can't.

 

[Borachio]

It is cheaper to buy corn from Iowa than it is to produce corn by farmers themselves

Isn't that because Iowan farmers are heavily subsidized?

(I don't know whether they are or not, tbh. But it's the sort of thing that happens a lot.)

 

[luiz]

Oh there's rational arguments against it Luiz. If US agriculture would indeed crush local food production entirely in a region there should be protectionism to maintain some of the infrastructure. It's too slow to redevelop if you happen to need it quick. There's probably a balance to be struck between raw efficiency of production and maintenance of a local base outside of cities in the desert, localities with massive population per square mile and no countryside, and the like. And a proponent of capitalism is going to attack an argument by claiming looking out of number #1 is immoral? If a strong purchasing market is what's been required to fuel this growth it seems like eating the seed corn to not take care to tend it.

If US agriculture would indeed crush local production somewhere that would mean the poor and starving of that place would have access to cheaper food and maybe not starve anymore. You would impose protectionist barriers to artificially raise the price of food and keep them starving or spending all their money just to eat?

And maybe with the cheaper food those subsistence farmers would leave that back breaking condition and go work in manufacturing, where their lower salaries mean they are pretty competitive vis-a-vis the US. So they could buy cheap food from the US and sell cheap T-Shirts or shoes or whatever. What exactly is the problem here? Must everybody grow their own food? Is this a Bible commandment or something?

 

[Farm Boy]

Isn't that because Iowan farmers are heavily subsidized?

(I don't know whether they are or not, tbh. But it's the sort of thing that happens a lot.)

There's a significant amount of subsidization that occurs both directly through risk protection in insurance and through development of roads and infrastructure. There's no real getting around the infrastructure argument.

If US agriculture would indeed crush local production somewhere that would mean the poor and starving of that place would have access to cheaper food and maybe not starve anymore. You would impose protectionist barriers to artificially raise the price of food and keep them starving or spending all their money just to eat?

And maybe with the cheaper food those subsistence farmers would leave that back breaking condition and go work in manufacturing, where their lower salaries mean they are pretty competitive vis-a-vis the US. So they could buy cheap food from the US and sell cheap T-Shirts or shoes or whatever. What exactly is the problem here? Must everybody grow their own food? Is this a Bible commandment or something?

I would aim for deliberate error in making sure pricing isn't at all reliant on shortages in that particular market. If that creates some monetary waste in ensuring both the current supply is priced accessibly and future production is maintained, so be it. Protecting your food should be at least as important as armed defense and policing. US Ag can't just price out subsistence farmers. It can also price out farmers that would otherwise be doing o.k. in a developing economy. To an extent, that's ok. But only to an extent. It's sort of like the US Gilded Age's argument. If your economic policies are wrong for the population you have now, the population you have now just needs to change? Heck, I don't even get annoyed at Europe for leaning on quasi-science to impose protectionist barriers, I just get annoyed about the reliance on quasi-science rather than calling it what it is.