Monday, February 24, 2014

Amazon, the consumer and industrial policy

I am current reading (better say, listening to) The Everything Store, the award winning book on Amazon and Jeff Bezos' story.  It is a very interesting book, with a lot of useful information and quite measured and balanced opinions.  Several issues are important from a political economy / development perspective:

a. Large corporations "pick winners" all the time. Amazon purchased a lot of companies that looked promising and, more importantly, entered into new activities (some close to its own comparative advantages and some far away).  What is important is that some activities were failures (pharmaceuticals, for example) while others were big successes even if not everyone expected it (the Kindle).  One of the things that Amazon did well and that it may be harder for governments doing industrial policy is closing down (or at least stop investing) in activities that were clearly failing.  This just confirms that the debate should not be whether industrial policy is good or bad, but how do you build the right incentives to give up on sectors and companies that are not working.

b. My second observation is even better known but still very interesting: the dangers of placing the consumer at the heart of the political and economic agenda.  The justification for all kinds of abuses and questionable behavior (from pushing for not paying sales taxes to poor labor conditions to prices that undercut competition from small and medium companies) was that this would benefit the consumer.  It did not really matter who would suffer as a result.  But are we really consumer before anything else?  And will continue creating a society of consumers and borrowers instead of workers?

c. The negative impact of Amazon in working conditions is indisputable and the book is full of great and sad examples...

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