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Friday, December 1, 2023

Amazon Has Made Rich Cities Richer—and Also More Dystopian

The coronavirus pandemic has offered a poignant reminder, as if we needed one, that the United States is a profoundly unequal country. Over the past year, the The Washington Post recently reported, nine tech billionaires saw their net worth increase by a total of $360 billion. Eight of the nine men made their fortunes at companies based in the San Francisco Bay Area or Seattle, where most of them still live. (The biggest winner, Elon Musk, recently decided to ditch California for Austin, the tech boomtown of Texas.) Their runaway wealth reflects not just the divide between the top earners and everyone else but the geographic clustering of prosperity in America. 

Things used to be different. From 1930 to 1980, per capita income in most metro areas converged toward the national average. The richest cities in the country included places like Cleveland and Milwaukee. In the 1980s, though,  that pattern reversed. As both political parties embraced a hands-off approach to antitrust enforcement and competition policy, the national economy grew increasingly concentrated in fewer and fewer corporate hands, based in fewer and fewer places. This—along with other factors, including restrictive land-use policies and the decline of American manufacturing—helped get us to where we are now: a country in which housing prices spiral out of control in superstar cities like Seattle and New York, while vacant buildings crumble in places like St. Louis and Detroit. Meanwhile, the political and cultural divisions between regions grow ever wider. 

In Fulfillment: Winning and Losing in One-Click America, Alec MacGillis, a senior reporter for ProPublica, describes the on-the-ground consequences of this regional divergence, focusing on perhaps the biggest overall winner of the winner-take-all economy: Amazon. The company’s economic clout has only increased since MacGillis began his reporting. Since the pandemic began, its value has grown by more than 50 percent—leading, MacGillis notes, to a hiring spree that has put Amazon on pace to become the country’s largest employer by next year. In Baltimore, where MacGillis lives, it is already a dominant presence, with massive fulfillment centers at what used to be the site of the Bethlehem Steel works at Sparrows Point. In Fulfillment, MacGillis explores how the company has become both a symbol and a driver of regional inequality through its treatment of workers, its impact on small businesses, and its ability to influence the political process. We spoke earlier this week. (This interview has been condensed and edited for clarity.)

WIRED: A lot has been written and said about inequality between rich and poor people, but not as much about inequality between rich and poor places. So let's start with that: Why is regional or geographic inequality on its own an important phenomenon?

Alec MacGillis: The reason I chose to focus on regional inequality is pretty simple. It’s because I spent so much time reporting around the country, and what would strike me again and again was just how extraordinary these regional gaps were, to the point where it would become dizzying, and enraging, to see the contrast. During the Great Recession, when I was working at the The Washington Post, I would go out to struggling places in the Midwest or West Virginia or wherever it might be for stories, and then I would come back to DC, which was wealthier than ever in those years and had barely even taken a nick from the recession. 

So it was very visceral for me, deciding to write about that. It was based on reporter's observation, more than an argued point. But the reason it matters so much is, at least partly, because it has such an effect on our politics. We can argue all day, still, about the Trump election, but I'm convinced that so much of that election and what's happening in politics generally the last few years is driven by people's resentment in the left-behind places.

How did telling that story turn into a book that is largely about Amazon? Wasn't the internet supposed to spread prosperity by making physical location less relevant than it used to be?

I wanted to write a book about regional inequality, and then I had to decide how to frame it. I settled on Amazon as the frame for the book for two reasons. One was that the company is simply so ubiquitous that it's a very handy way to take you around the country, because it's everywhere, but everywhere in different forms. 


But more importantly, I chose it because it's also a huge contributor and explanation for regional inequality, because while the internet was supposed to allow us to disperse and be anywhere, it has, in fact, done the opposite. There are well-documented agglomeration effects of the innovation economy—you want proximity to the other engineers and programmers and, not to mention, the venture capitalists—but the bigger reason for Big Tech's role in regional inequality is more about economic policy. So much of our geographic concentration is tied to market concentration. The business, commerce, and wealth that used to be spread all across the country, in various industries, are now increasingly dominated by a few companies that reside in certain places. It happens with media ad revenue, which used to be spread everywhere among newspapers and local TV and radio but is now increasingly hoovered up in the form of digital ad revenues to the two companies [Facebook and Google] that control 60 percent of that market, that both reside in the Bay Area. And retail that used to be spread all around the country, from mom-and-pops up to regional department stores, is now increasingly dominated by a company that resides in Seattle. And so, that was how I arrived at Amazon.

One thing that comes through in the book is how Amazon's footprint—both its economic and its physical footprint—looks really different in different parts of the country. You spend some time on the divide between DC and Baltimore. I live in DC, you live in Baltimore. How does Amazon's footprint differ between these two cities that are only 40 miles apart?

Yes, the Baltimore–Washington divide is really at the heart of the book, because it's something that I've seen up close for 20 years now. I've bounced between Baltimore and Washington for the last two decades. Over that time, watching that gap grow has been really upsetting, and Amazon is very emblematic of it. On the one hand, you have Baltimore becoming, essentially, kind of a warehouse town. It now has three large Amazon warehouses within the city or just outside city limits. It's symbolically resonant that the first of those warehouses went into a big former GM plant that closed back in the aughts. And then the second and third warehouses have now gone into Sparrows Point, which is the home of what had been the world's largest steel works. To have these warehouses going into literally the exact same sites of Baltimore's former industrial life, with people making less than half of what they would have been making at those plants, it's very resonant. 

Amazon names its warehouses by the nearby airports, and it's so striking that some of the warehouses in Baltimore are named after terminals in National Airport in DC. The names were available because DC doesn't have any warehouses. Instead, it is now getting a headquarters. So the fact that you have the second headquarters, with 25,000 high-paid, white-collar jobs, and all the massive investments that will come with HQ2, going into a metro area that was already arguably the wealthiest in the country—it’s the ultimate example of the winner-take-all, rich-get-richer economy. 

And one theme of the book is that this winner-take-all economy makes life miserable not just for people in the losing cities but, to some degree, for the people in the winning cities as well. 

This imbalance is not good for anyone. In the one set of places, you have stagnation and blight and abandonment and resentment and sadness. And then, in the other set, in winner-take-all cities, you have what we're seeing in San Francisco and Seattle, which are the opposite problems. You have housing affordability crises, you have terrible traffic congestion. You have too much of a good thing. In the book, I call it “hyper prosperity.” 

I see regional inequality completely linked with inequality within cities. The more that wealth and prosperity gets concentrated in certain cities, the worse the imbalances are going to get within those cities, and you're going to end up with what you have now, which is dystopian levels of inequality in places like San Francisco and massive displacement of working-class people, especially the Black and brown working class. DC is so far ahead of anywhere else in the country, in terms of massive displacement of Black residents.

About the fight over an employer tax in Seattle, you say “hyper prosperity was not only creating the side effects of unaffordability, congestion, and homelessness but injecting a political poison into the winner cities.” What is that political poison?

It was an extraordinary episode, where you had the progressive elected officials in Seattle trying to deal with that city's horrific homelessness and housing affordability problem. And so they heft a tax on large employers in the spring of 2018 to raise some money to deal with it. They started getting strong resistance from Amazon, which was going to be the main payer of this tax. But, eventually, Amazon actually agreed to a compromise figure for the tax that brought it down quite a bit. And the mayor signs this tax into law. 

Just a day or two later, Amazon, along with some other big companies in town, launches a very well-funded effort to repeal this new tax by referendum. So immediately after having agreed to the lower figure, it sets out to kill the tax. And it manages to do so not only by spending lots of money but by tapping into a real, pretty unpleasant strain in local politics. A city that is hugely, overwhelmingly Democratic and liberal—it voted for Hillary Clinton something like 90 percent in 2016—responded very well to Amazon's arguments against the tax. Basically, a lot of people in Seattle have lost confidence in the government to actually do anything with this new revenue to address housing and homelessness. And they were very receptive to anti-government arguments that were really not all that different from Tea Party–type arguments from the other side a couple years earlier. 

This is far from the only example in the book of Amazon getting incredibly favorable terms from local governments. There are example after example of Amazon entering into secret—they're always secret—negotiations with local governments to get some kind of favorable condition to open something: a warehouse, a data center, of course HQ2. And other than New York City rejecting HQ2, there are no examples of governments telling Amazon to take a hike.


Why do you think these local governments are always so eager to play ball on Amazon's terms, even when it means giving up tax revenues?

The saddest examples, the most glaring ones, are in the places that feel desperate. I was able to get, through FOIAs and also just going to meetings, these really bleakly pathetic examples of local governments just being unbelievably obsequious.

I came across a local official in southwest Ohio apologizing to Amazon for the fact that she had spoken to a local reporter who had accosted her at a meeting, and promising that it would not happen again. The other painful example was a grand opening for the first Amazon warehouse in Baltimore, where the then-mayor and a local congressman get up in front of the Amazon honchos who are there, and start praising Amazon for reliable delivery of their deodorant and skin cream. Really painful to watch. I was there that day. It was just unbelievable that it's come to the point where you have local officials throwing themselves over Amazon for having brought them what were then $12-, $13-an-hour jobs. 

And also jobs that do not provide a path to upward mobility.

I've been thinking about this again recently—the difference between these jobs and the jobs at, say, the steel mill. Those steel mill jobs were so grueling, far more dangerous—one of the things that blew me away in my research on Sparrows Point in Baltimore was just how dangerous those jobs had been. But what comes through when you do the reading, and you talk to people who worked there, including a man who worked there and then went on to work in the Amazon warehouse, was the incredible sense of purpose and community these people, mostly men of course, felt when they worked there. 


I was talking two weeks ago with another man who worked at Sparrows Point mill and still lives in the area. He said it's striking now to see people leaving the Amazon warehouses after their shifts, because they go tearing out of the parking lot. He said it's like they're just desperate to get the hell out of there and get home. They're not hanging out or socializing. Back in the day, these guys, to a degree that was not necessarily healthy for their livers, would roll out as a group to one of many bars in the area or breakfast joints. 

And he talked about the sense he had at the front of the shift. He was there in the later years, when things were actually starting to decline and morale was falling but, he said, still he felt like a firefighter going in. With all the rest of the guys, every day, the sense of “How much steel are we going to roll today? Hw much money are we going to make for our company?” A real, strong sense of fellowship and camaraderie.

The Bethlehem Steel parallel is so interesting. Not just because the same location where this huge steel operation used to be is now the site of huge Amazon warehouses but also because Beth Steel was not exactly warm and cuddly employer itself. It treated workers pretty horribly right until they unionized. Well, as we speak, voting is taking place in a unionization effort at an Amazon fulfillment center in Alabama. Based on your reporting, what do you think of the prospects of unionization succeeding at Amazon? Could that make a difference, the way that it did in the steel industry?

I won't wager any guesses about what's going to happen in Alabama. But I will say that it would make such a huge difference. The Beth Steel example is so relevant. I really do see what's happened in a place like Sparrows Point as an arc-of-history thing. Originally, in the early 20th century, you had people working under incredibly difficult conditions and very low pay, with no say in their work, just totally under the thumb of these Gilded Age industrialists. And then, over the next few decades, they fight, and fight, and fight, and finally, in the 1940s, they get the union. And their pay, benefits, and self-empowerment vastly increased. And then, eventually, the American steel industry in the late 20th century suffers this huge decline, and Sparrows Point is wiped off the map. And now in its place you have the sea of warehouses, and it's kind of back to square one, with workers making low wages for very, very difficult work, with these huge productivity expectations. Very, very little say in their jobs. And what it will take, to get to something closer to the middle-class stability that the steelworkers had midcentury, is the union.

The other policy area that is sort of an implicit theme of the book is antitrust enforcement. You talk about how the rise in corporate consolidation meant economic power clustered in fewer corporate hands, which kind of naturally led to geographic clustering of opportunity. And the other thing that you talk about is so-called labor monopsony, where Amazon might be one of very few employers in a place, that gives it power to not pay super well and to not worry about making unreasonable demands on workers. Do you think that antitrust enforcement has the potential to reverse some of these trends that you're writing about?

Absolutely. I mean, the book is not a solutions book or a policy book; it's a reported narrative. But to the extent that it leaves you with any implicit sense of what needs to be done, it is a whole new regime of antitrust enforcement. One way we can address this regional inequality that's so unhealthy for our country is to address economic concentration. Breaking up the giants would inevitably lead to some dispersal of wealth and prosperity and dynamism around the country. And as far as the prospects go, following it from my 40-miles' vantage, I'm actually quite … “hopeful” is too strong, but it does seem like things are heading in the right direction. Both the signals the Biden administration is giving off, with Lina Khan and Tim Wu coming in, people like that, but then also just the fact that you do have some form of bipartisan potential on this front.

One thing that does still disappoint me about the liberal side of this is that there's not enough recognition of how much this problem, regional inequality, is driving the housing affordability crisis in the winner cities. There's this whole fight going on for several years now in the winner cities on housing affordability, and it's between the supply people and the rent-control people. Do we address this problem by building more housing, or do we do we address it by simply putting limits on what a landlord gets to charge? 

That's been this vicious fight in DC, Seattle, New York, and elsewhere. And what that misses is the broader context that the housing affordability crisis in these cities would not be nearly as bad if there was not so much wealth and prosperity concentrated in these places. It's madness that you have row houses in DC going for seven or eight hundred thousand dollars, when just 40 miles up the road we're demolishing that same row house, possibly a grander version of it, because of Baltimore's massive population decline. I wish that liberals fighting over the housing affordability issue in the winner cities would take more stock of the broader context, would join the fight on regional inequality and antitrust, realizing how connected it is to the housing issue in their cities. 

I'll just say to that, I wish I could get a row house in my neighborhood for $700,000. 

Come to Baltimore, man. You're in the wrong city.

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