Press "Enter" to skip to content

Down on the Ground with Capitalism again

By George Sibley

A couple months ago I broached the idea in this column that one of the problems with “capitalism” in America is the American bias that equates it with “private-sector capitalism.” Meaning, a system for investment during the production and distribution of goods and services controlled by individuals and organizations who have money and are looking for ways to use it to make more money.

What made me think of this again was a story from the New York Times business section back in April about a difficulty that big online virtual mall is encountering today – what might be called an enviable difficulty, I suppose, from a business perspective. Amazon is making a lot of money these days. How they are doing that, we will look at more closely in a minute, but the fact is, in a time of “weak economic recovery,” as we’re euphemistically putting it, Amazon’s first-quarter revenues this year were up 38 percent over the same period last year.

But – for that same period, Amazon’s net income was down 33 percent, which means two things: one, Amazon is paying a fairly low return to its investors. This announcement caused a modest drop in Amazon’s share price on the stock exchange.

The second thing it means is with revenues up that much, and net income down that much, Amazon must be spending lots of money. Which it is: Amazon is building new warehouses and data centers as it continues to expand its online service into selling practically everything anyone might want except for fresh vegetables. Amazon is, in fact, doing what most of us believe America most needs at this point. The company is creating jobs, first in building their new capacity, then for those who will be employed operating it.

For so doing, Amazon has been criticized by stock market analysts. Corporate profits are high these days, and the resulting high dividends to shareholders have driven the stock markets back toward the highs they experienced before the 2008 crash-and-burn. But what those high dividends mean today, from down on the ground, is that corporate America generally is not doing what Amazon is doing; that is, investing in economic growth, jobs, et cetera. In a sense, those who control the economy are just cashing out for their investors.

At first blush, it sounds like American business as usual: the rich get richer while those who work for a living – or who want to work for a living – get left out. But as a former worker who is now one of those “retired seniors on a fixed income,” I have to try to figure out which side of this situation I am really on.

On the one hand, I want people to have work to do. After all, we’re a society that places a lot of our sense of personal value on the work we do, and 10-20 percent unemployment (depending on definitions) is basically un-American in the deepest sense of what we say we value.

But on the other hand, I bought into this relatively newfangled idea of retirement – the idea that workers should put some of their income in a fund so that they could eventually stop working and move over to give the young and fresh a shot at the jobs. Ideally, retirees could themselves “graduate” to a new stage of investing their time either in some new endeavor, or in community-oriented work on boards and committees that don’t pay, or just sitting back and trying to rethink the whole business – all of which I’m doing now with a modest but dependable (so far anyway) subsistence income.

I’m not so naïve as to believe that this retirement income is hatched out of golden eggs or something. It’s been invested by various private, public and quasi-public entities – three different ones, in my checkered case – and those entities depend on the return on investments they are making on my behalf. So I also depend on that, and where and how do I split the difference, between wanting to see companies make investments that create jobs, and wanting companies to pay enough dividends to keep those monthly checks coming in?

Then there’s another complication. What is it, again, that Amazon is doing with its revenues, rather than paying bigger dividends? It is creating jobs by building warehouses and data centers. But these are investments in its growing system for basically doing everything it can to undermine the local economies in Salida, Alamosa, Leadville, Gunnison. Originally it was just books, then music and videos, and they kept adding things. Now you can do their famous “one-click shopping” for appliances, jewelry, cellphones and apps, toys, car parts, gardening goods, clothing, hardware, even groceries – practically everything under the sun (or under a roof on your Main Street) except for quick perishables like fresh fruit and bakery goods.

So now I have the health of the national economy, the health of the local economy, and the health of my personal economy all bollixed up in a big competitive tangle where significant success for any one of the three probably unravels things for another of the three.

I am sufficiently brainwashed by the Ministry of American Capitalism to “know” that competition is supposed to be good in an economy. But what bothers me about a free market economy is its tendency to create unnecessary competition. In its expansion into everything, is not really providing a new and necessary service; it is just replacing local service with global service. Hard-ass capitalists tell me this is good because it forces local merchants to shape up their own service if they want to stay competitive, but there are factors on both supply and demand sides of the equation that are beyond their control. We customer-voters don’t always think beyond the “surface price” to look at deeper kinds of costs. And if we buy our stuff at a store downtown, rather than online, we have to pay tax – and everyone knows (according to the Ministry of American Capitalism) taxes are evil!

I am also bothered by the sense that Amazon’s brand of capitalism is not very good at accomplishing the work that really needs to be done. Other than the novelty of online shopping and the costly convenience of getting stuff delivered to your door rather than having to go downtown yourself for it, what is Amazon doing that we really need? Delivering stuff to a million doors a day (rather than just a few thousand local stores) is a burden on local transportation and communication systems, which Amazon not only doesn’t help pay for, but the local customer who doesn’t have to pay tax doesn’t pay for either. We are fascinated by Amazon’s thousand choices of models and colors in everything we want, and are letting everything we really need fall apart.

We may not understand “wealth.” We are considered by all, including ourselves, to be “the richest nation on earth,” but this may just be because we have a lot of money in America, which we confuse with “wealth.” Yet we have more people living on the edge of real poverty than almost any other developed nation, with at least half of that money concentrated in the hands of fewer than five percent of us. “Access to opportunity” for social and economic advancement in the United States is now lower than in most of those “old” societies in Europe. The American Society of Civil Engineers rates most of our public infrastructure at the “C” and “D” levels.

The main thing we have that is better than anyone else’s anywhere in the world is the world’s biggest, most expensive military machine – the real elephant in the room that is bankrupting us, but of course we can’t touch that. What else do we have that really shows off our collective “wealth”? Every other display of riches is from the rich individuals that we celebrate like demigods. Meanwhile the rest of us have been on a long, slow slide for the past three or four decades.

Radical capitalists like Amory Lovins say that the real “wealth of nations” cannot be measured in “financial capital” alone. A wealthy nation also needs infrastructure capital, human capital (both ideas and labor), and resource capital. Our financial capital is being downgraded to plain gambling (derivatives built out of sliced and diced life insurance policies are the new thing); our infrastructure for production, distribution, communication, et cetera is out of date and falling apart; our natural resources are diminished, most of the low-hanging fruit long gone; and as much as a fifth of our human capital is un- or under-employed.

So how’s that private-sector market-based capitalism stuff workin’ out for ya? Personally, I think we need something a little more organized around the production and equitable distribution of what we need, for people and systems that support people, rather than a “recovery” measured in terms of consumer spending for what we just want. And, unfortunately, that won’t come from one-click

George Sibley was born in Western Pennsylvania, but was conceived in Colorado by Colorado natives, and thus considers himself to be a native Coloradan.