It destroyed the high street. It crushed smaller competitors. And it paid so little in tax that it undermined public services. We have heard a lot in the last few years about how terrible Amazon is for the economy.
Along with the rest of the “Big Tech” companies, we needed to tax them more, regulate them more and perhaps even break them up completely. But now it looks as if the problem has solved itself. Amazon is clearly slowing down. It is closing warehouses and shops and laying off staff. So are the rest of the tech giants. So we will all be better off …right?
Well, not quite. True, life will get a little easier for some of the traditional retailers, and they are already showing some signs of sparking back into life. But overall, it will do a lot more damage than good. For the last decade, Big Tech has been the only real source of innovation and growth. It led a wave of investment and it drove down prices for consumers while vastly increasing choice and competition. A slowing Amazon will mean a slowing economy – and we will miss the turbo-charged verve and ambition it brought to business.
All those anguished essays, discussion papers and speeches on the power of Amazon are starting to look well past their sell-by date. Far from taking over the world and destroying almost every other company on the planet, it is now in full-scale retreat. It is getting rid of warehouses in the UK, while there are reports that it is looking to offload 10 million square feet of space in the US. It is cutting 18,000 jobs from its global workforce. And it is scaling back its retail ambitions, first closing some of its bookshops in the US, and now closing convenience stores as well.
Sure, some of those moves may be tactical. Amazon could simply be scaling down some units that no longer look viable and working out a way to come back into the industries it wants to target with a different formula. Even so, it has stalled, and it is no longer expanding the way it once was.
The same is true for all the other tech giants: Apple; Meta, the owner of Facebook and WhatsApp; and Alphabet, the owner of Google and YouTube. With share prices falling, they are now focused on job cuts and restoring profits instead of conquering new markets.
The rise of Amazon, along with the rest of the Big Tech giants, did do some damage to the economy. They often manipulated data to their own advantage. Many of the jobs they created were relatively poorly paid while the hours were punishing. And plenty of smaller businesses were crushed along the way. As their power wanes, opportunities will open up for rivals.
We are already witnessing some signs of that with chains such M&S launching new stores for the first time in many years as traditional retailing revives. We may also see a slight uptick in tax revenues, especially for levies such as business rates. And yet, there will be a lot of negatives as well. Overall, a slowing Amazon, along with a slowing tech sector, will mean a slowing economy. Here’s why.
Big Tech has been the main engine of innovation and productivity growth over the last decade. If we take Amazon as an example, it came up with new ways of distributing goods around the country, making us less reliant on a hopelessly inefficient Post Office. With the Kindle, it upended the publishing industry. The Fire stick transformed the way we watch television. And Alexa changed the way we communicate and manage our homes (although even Amazon could never work out a way to make any money from its voice assistant).
Google offered us a vast new array of services such a maps, email, and documents, mostly for free. Meta devised new ways for us to communicate with one another. Apple made the slickest phones as well as an app store that developed into a global micro-economy all of its own (it generates revenues of $100bn a year, the equivalent of a small country). Big Tech was where the new products came from, and where productivity made the most advances, and without those the economy just stagnates.
It also led a wave of investment. All those huge boxed sheds you see on the side of every motorway junction cost a lot of money to build and so did the networks of couriers, depots and delivery drivers. Likewise, all the app developers, marketeers and managers running the whole process were on good salaries. In total, no one else was investing, especially in R&D, on the same scale at Big Tech. And investment is where all the future growth comes from.
Finally, and perhaps most importantly, it lowered prices and increased competition for consumers. Big Tech offered us lots of products for nothing at all, while its distribution systems meant we could comparison-shop with a couple of swipes on our phones. It was much harder for companies to rip us off because we would always know in an instant that we could get something cheaper somewhere else.
Yet we spent most of the last decade complaining about the rise of Big Tech. We demonised it for its ruthless competitiveness, its constant assaults on new markets and for bringing wave after wave of competition to industries that had not witnessed any for decades. There were some downsides to that, but overall, it made us richer, more productive and offered a lot more choice than we ever had before. Now that it has stopped expanding and has started to scale back its ambitions, we will miss it far more than we yet realise.