Fulfillment: A Conversation on Amazon and Regional Inequality with Alec MacGillis

Apr 08, 2021

Fulfillment author Alec MacGillis joins American Compass research director Wells King for a conversation exploring what the growth of Amazon means for the future of inequality in the U.S., the pros and cons of “one-click America,” and how policymakers and consumers should respond.

Transcript

Wells King: Hello everyone, and thank you for tuning into this American Compass event. I’m Wells King, the research director of American Compass. And I am delighted to be joined today by Alec MacGillis, a reporter at ProPublica and author of the new book, Fulfillment: Winning and Losing in One-Click America. Alec, welcome and congratulations on the book.

Alec MacGillis: Thanks very much. Thanks for having me. It’s really, really good to be here.

Wells King: Well, it’s great to have you, and it’s a really impressive book. You’ve covered just a tremendous amount of ground, both figuratively and literally, in Fulfillment. You cover several cities and regions, several decades at different levels and altitudes, too, from macro trends to individual narratives. It really is an impressive portrait of American life.

But Fulfillment is also a book about Amazon and about the America that enabled Amazon to grow into a colossus, to transform the American economy and society. As you write at one point, “Over time in its astonishing proliferation, Amazon had segmented the country into different sorts of places, each with their assigned rank, income, and purpose. It had not only altered the national landscape itself, but also the landscape of opportunity in America, the options that lay before people, what they could aspire to do with their lives.” So Alec, what is “one-click America” and why is Amazon so critical to understanding it?

Alec MacGillis: This book actually started out not about Amazon, but about these enormous disparities that I was seeing around the country when I would go around as a reporter. Probably even goes back to my growing up in Pittsfield, Massachusetts, a former GE town in Western Mass, that just has fallen a long way from its peak in the mid 20th century. It’s now lagging so badly behind metro Boston. I saw it as I was growing up, and I was very bothered by it. And then again, as I traveled around the country as a reporter for the Washington Post and others in the Great Recession years, the early Obama years, seeing these incredible divides between Midwestern cities and coming back to Washington, DC, and seeing this incredible prosperity and complacency disconnected with what was happening out in the rest of the country. I wanted to capture that in a book, especially after Trump’s election.

I decided to focus or frame the book through Amazon for two reasons that I sort of settled on, that one-click America as a frame for what was happening. One was just that Amazon is now so extraordinarily ubiquitous in our country that it’s just a handy thread to take you around the country because it is everywhere and it’s everywhere in different ways. And it just is a very good metaphor for what we’re becoming as a country because it is so omnipresent. But it’s also a frame for talking about these disparities because it is itself contributing to them. The tech giants have, through their concentration of so much of our economy, in a handful of companies are helping concentrate wealth and prosperity in certain places. So that’s how I got from regional inequality, regional disparities to Amazon as the frame for telling a story.

Wells King: You spend a lot of time in the book in two particular winner-take-all cities, the two Washingtons: Seattle and DC, or as Amazon would call them, HQ1 and HQ2. Both have been transformed by the company, but in different ways. Can you just describe a little bit the ways that they really made Seattle and Washington what they are today and the power and influence they’ve used?

Alec MacGillis: Sure. Actually, I picked Washington, DC, as the second winner-take-all city in the book to feature before Amazon chose it for HQ2, so that was serendipitous, I guess. Seattle, it’s just astonishing what’s happened to that city, a city that was very much kind of a middle-class town. It started out, of course, as really more like a natural resource outpost, the place that you brought the timber down from points north and east to ship off to San Francisco. When I first came to Seattle in 2004 or so, I was just so struck that it still felt like a national resource outpost with big rail yards and the harbor and all that.

Now it just completely transformed, principally by Amazon, which now has 45,000 people working there in the headquarters—even more now, I think. It’s just been turned into this hyper-prosperous city where you have some of the highest housing costs, the highest housing cost increases in the country, really second only to San Francisco. Very few children. It’s the second lowest rate of children of any city in the country after San Francisco. Huge homelessness problem. What I focus on partly in the book is the complete displacement of Seattle’s historically Black neighborhood, the Central District. This once very vital Black community that produced all these great musicians, and really just a complete change of the character of the city.

Then in Washington, DC, you have a city that has, over the last couple decades, even before Amazon arrived, became essentially the wealthiest city in the country. If you’re looking at the full metro area, five or six or ten of the wealthiest counties in the country, principally through the growth of first the lobbying industry, huge growth in the influence industry, and then the growth of the whole Homeland Security complex after 9/11. Now in the crucial winner-take-all moment, the rich get richer moment, is Amazon’s deciding to put a second headquarters there, despite the fact that the city is so crowded and expensive already. They decided that they want to be there.

Their public reason for that, of course, is that there’s just a very skilled workforce. You have all these tech guys already there, tech guys and women, who were there already because of that IT contractor universe. So they want to be there to be able to get some of that talent for their second headquarters.

But the other reason, of course, for them wanting to be there is that it’s the seat of the federal government. And right now the largest threat to Amazon is not so much other companies, but it’s the threat of federal intervention, some attempt to rein them in. So it’s useful for them to build up their presence there in town. And they’ve been doing that, of course, well before HQ2. Bezos bought the Washington Post, bought the biggest mansion in town, renovated it, total price tag of $35 million to turn it into sort of a salon. Greatly increased their lobbying spending to the point where they’re pretty much the biggest lobbying spenders. Tons of federal contracts that they’re getting for their cloud side, and now 25,000 jobs in a massive investment over in Arlington. So the presence of Amazon in DC is just extraordinary right now.

Wells King: Well, the influence in government, I’m glad you pointed that out. I mean, you described that Amazon’s vision is really commerce at its freest and most frictionless.

Alec MacGillis: Right.

Wells King: And you talk about really when Bezos has professed his belief in free markets and entrepreneurship. But you spend, I think, a lot of time really trying to focus in on the ways that Amazon hasn’t just disrupted old models and been a tech company, but the extent to which it’s actually used influence in government to accelerate its growth and to really become the behemoth that it is. You talk about the Swiss Army knife approach to this. What exactly is Amazon’s relationship to government, and to what extent is it actually an embodiment of free and frictionless markets? Or is it more a product of government subsidy?

Alec MacGillis: Well, the Swiss Army knife was a metaphor I used for just all the different forms of, essentially, tax avoidance that the company has prospered from and benefited from, going all the way back to its founding when its initial competitive advantage had a lot to do with the fact that it did not have to assess sales taxes on sales, like brick-and-mortar bookstores had to. Its initial decision to put the company in Seattle had a lot to do with that exact point. The general rule was if you had a physical presence in a state, you had to assess sales taxes in that place.

So, they didn’t want to be in California where most of the other tech companies were, because then they would’ve had to assess sales taxes on the biggest market in the country. So instead they go to a smaller state, like Washington state, where that’s not as much of an issue. And then for all the years following, they kept… Even as they were growing, and even as it would have been helpful to have warehouses in big states where most of their buyers were, their customers were, they often avoided putting warehouses into big states because that would, again, have meant they would have had to assess sales taxes there.

That goes on, on, and on for years. They didn’t get to Ohio, for instance, one of the biggest states in the country, until not long ago with warehouses because they didn’t want to have to assess the taxes there. So you have that whole tax avoidance game, and then of course you have, at the top level, federal income taxes. They’ve been incredibly successful in avoiding paying taxes there through claiming very large losses, through the Luxembourg game. Just a couple of years ago they paid zero federal income taxes at all. Last couple years, it’s been more like a billion a year, which is nothing as a percentage of what they’re bringing in.

But then the key thing that I spend a lot of time in the book talking about, the other part of the Swiss Army knife, is this aggressive pursuit of subsidies from local governments. When you’re coming in, offering to build a warehouse or data center, just this incredibly aggressive pursuit of those subsidies along with demands of secrecy. I got a lot of emails back and forth showing all that kind of pressure, those demands. It really is, if you think about it, just kind of a twofold undermining of government, in the sense that you’re both denying the revenues needed for basic services, services that you’re going to be demanding as your trucks are going on the roads and as your workers are falling ill in the warehouses. You’re reducing the revenues and then you’re also reducing any kind of accountability and transparency through your demand of total secrecy from local officials.

Wells King: Yeah, it really is a striking pattern and strategy for economic development. I like the way you juxtapose it with the past, right? Your treatment, for example, of Dayton, Ohio, and how it evolved from really an innovation hub in sort of the Silicon Valley of its own day, into this post-industrial logistics hub that produces cardboard and sends it elsewhere. Is this winner-take-all pattern of development, is this really a novelty? And how does it differ from past patterns of development and corporate behavior that you note?

Alec MacGillis: What we can say is that, first of all, we’ve always of course had wealthy parts of the country and less wealthy, poorer parts of the country, of course. But those gaps have just gotten a lot bigger in recent decades. Similar to the way that the gaps have grown so starkly on our income ladder between individuals, it’s happened in places, too. There are two striking ways of thinking about this. One is that as recently as in the mid-1960s, the wealthiest 25 cities in the country by median income included all sorts of cities in the Midwest, including Cleveland, Milwaukee, De Moines, and my favorite, Rockford, Illinois. Which now, when you go to Rockford, Illinois, it just breaks your heart and you think that this city was once top 25. Now only a small handful of the top 25 cities are not on the coast.

But then another way of looking at it that’s even starker is that in 1980, only small parts of the country had median income that were 20% above the norm, above the average or above that. Only the Deep South and Appalachia basically had median incomes that were 20% below the average or below that. Now huge swaths of the country are above or below those extremes. The entire Midwest, most of the Great Plains are 20% below or lower.

This concentration of wealth in regional terms has grown much, much more dramatic. What is not unprecedented, of course, in our country, is the concentration of wealth, of the economy in certain companies. We are, in a sense, kind of returning to a gilded age moment, 1910, 1915, pick your date in terms of that level of concentration. We’re back to our own Standard Oil in a sense. And the question is whether we’re going to respond as we did back then.

Wells King: Right. And certain structures and certain ethics too, you note, like sort of a sense of corporate responsibility guided some actors in the past, but Amazon, you note, is somewhat different, at least in terms of the way it thinks about its responsibility to its workers and the communities in which it operates. How is Amazon so different and how does it consistently get away with the types of activities that it does, even at the most local level?

Alec MacGillis: That’s such a good point about that contrast. In Dayton, for instance, I talk about just the way that the industrialists that made that city what it was just took such incredible responsibility for the city as a whole. After Dayton suffered a terrible flood, just a really horrific flood of the Great Miami River, it was essentially the recovery effort was really led principally by the local corporate fathers.

So such a stark contrast with Amazon and, say, Seattle, where the whole chapter of the book focuses on Amazon’s very aggressive and successful fight to repeal a local tax that had been passed to address that city’s terrible homelessness and housing crisis. What was so striking about that was that the company had actually agreed to a compromised tax amount, a lower amount that they kind of negotiated the mayor down to, the council down to. They got it done, they signed it, and then just two days later the company launches, heavily funds a referendum repeal effort, and is successful, just completely outmatches the opposition with their spending to get that law repealed, the tax repealed. So just a much different conception of what corporate citizenship means.

Wells King: And also the action of citizens themselves. You, I think, make some really interesting points about the ways that it’s actually shaped political incentives at the local and national level. Could you talk a little bit about the ways that it’s shaping political attitudes, the extent to which the attitudes of Amazon consumers who tend to be suburban, high net worth, in and around the metros, how they now have a different set of incentives, at least when it comes to Amazon, compared to, say, the workers in the exurbs and in the warehouses?

Alec MacGillis: Right. This was one reason that Amazon was successful in getting that tax repealed in Seattle. They had managed to, even though Seattle is very, very liberal—90% voted against Trump in 2016—Amazon managed to tap into really an unpleasant kind of anti-government, almost Tea Party-ish, leftist Tea Party-ish feeling that whatever money will be raised by this tax, the government will probably just waste it anyway. They won’t really be effective in addressing homelessness.

And also a sort of conflicted feeling on Amazon, where in theory they let the people in Seattle know that the company is not good in all sorts of ways, and has brought Seattle worse traffic and all that and has kind of changed the character of the city. But at the same time, also a feeling that they’ve also made me more prosperous. My home, my little house that I bought for 200,000, it’s now worth a million bucks. There’s a pride in the golden goose that was Amazon and a reluctance to take it on. And you see that more broadly on the left as well.

I mean, the key thing about Amazon is that Amazon’s biggest demographic, its strongest demographic, it’s universal, but its strongest demographic is the upper middle class, urban, mostly liberal consumer. That’s why you see boxes stacked outside apartment buildings in Manhattan that doormen don’t know what to do with. There is a deep affinity for the company among liberal Democrats who would otherwise be sort of wary of the big corporation. Amazon is the most trusted entity in America among Democrats, according to one poll.

That affinity has gotten so much stronger this past year, of course. That reliance, that cultural, deep cultural reliance on the one-click life got even stronger in blue America than it did in red America this past year because blue America had a strikingly different risk assessment about the coronavirus. It was even more insistent on adopting a one-click approach to daily life.

Wells King: Right. And now we’re seeing, or have seen, a pretty aggressive organizing campaign in a red state, in Alabama. To what extent are these concerns and this push for a re-invigorated organized labor movement at Amazon warehouses, to what extent does that show some promise, and to what extent do you think that’ll potentially shape the future of a public relations with Amazon, the way that we think about the winners and the losers that Amazon creates?

Alec MacGillis: It’s hard to say because we don’t know what’s… So much depends actually on what’s going to happen. The stakes are enormous. I think of it kind of in grand historical terms that this has become, the warehouse has become the mass employment option now in our country. They’re hiring so many people, the warehouses are growing so fast, proliferating so fast, this is where you go if you’ve got to get a job at a given moment. The way you used to go down to the mill.

Those mill jobs were uplifted through organizing. They were really low paid, really tough jobs that became middle-class jobs largely through unionization. So the question now is will these warehouse jobs also be somehow uplifted in years to come from something that’s just a $15-an-hour thing that you kind of pass through when you really need a job, but you don’t stay long. Or that it becomes something that can actually sustain some kind of a middle-class family lifestyle.

But as far as how it’s going to affect our attitude or our view of them, I mean, the fact is that even short of unionization, even when we, in theory, know that these jobs are really tough and are not being paid enough and are really grueling and rudimentary and isolating, we as consumers, that has not kept us from…

Wells King: Right. Certainly not during the COVID period where we’ve seen just a surge in online shopping. What do you see as being the future of one-click America as we move on from the COVID-19 pandemic, as we’re awaiting the results of the union vote in Alabama, potentially at an Amazon warehouse there? What do you see as being the future of one-click America, the public’s attitudes and critiques and distrust of Amazon potentially, and the way that we think about trying to bridge these regional divides that Amazon and largely the one-click economy have created?

Alec MacGillis: In addition to the organizing, I see really two main strands right now. One is the antitrust fight in Washington. So much is going to depend on how much reform happens there. And that’s going to be fascinating because it’s largely an intra-Democratic fight between the general affinity for big tech among Democrats, the revolving door from the Obama administration, to Silicon Valley. Then specific voices now on the left, like Lina Khan and Warren, who are trying to do something about this. And whether the Biden administration is willing to break from the Obama laxness toward big tech will be very interesting to watch.

The other strand is us, is the American citizen and consumer, and whether we are going to be willing to… Not go cold turkey, not somehow just… But in some way, re-engage with the physical world around us after this year, and not just in our shopping, but in all sorts of ways. Going back to the theater after having gotten addicted to Netflix, and somehow getting back into the communities around us, the physical world around us. Because if we don’t, then they’re going to continue to wither. The book is really meant partly as a goad to all of us, to some degree, just re-engage in our physical space, our physical place that we live in, our towns and our cities, because they need us.

Wells King: Yes, you spend a lot of time doing interviews and documenting the stories and biographies of Amazon workers and people who have interacted with the one-click America economy on the ground. Do you get a sense, from your experience with them, that things will turn around? Do you see some glimmers of hope? The book does end on a pretty pessimistic note, so where do you see the glimmers of hope beyond Washington and in individual consumer behavior?

Alec MacGillis: I’ve got to say, I have been discouraged this past year by the alacrity with which people… How eager we seem to be to take the permission that we had from the authorities to kind of just to close in. I really do hope that it passes. I find there are people in the book who definitely do give me hope, and I think give readers hope too. They’re small business owners who are still trying to find their way, fight off the goliath. This young man in Southeast Ohio who came back home from Washington to try to help rebuild his very struggling Appalachian town in Southeast Ohio. He’s still at it out there. He’s an amazing young man. He’s in the book. He gives me hope.

I still think that there’s something in all of us that knows that this is not really a good way for us to exist with each other. I do hope that we can find our way forward from this moment and just get back to some kind of a more human way of living our daily life.

Wells King: Well, it certainly is an eye-opening book in that regard, I think in really exposing the underlying facts and features of American life today. Ones that we don’t immediately notice, be it here in Washington or elsewhere. So thanks for writing it. With that, we are out of time, but thank you so much for joining me, Alec. And again, congratulations on the book.

Alec MacGillis: Thank you.

Wells King: Again, the book is Fulfillment: Winning and Losing in One-Click America.

Alec MacGillis: Thanks so much. Thanks for having me.

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