Amazon’s recent announcement of its plan to buy the grocery chain Whole Foods has set off a series of questions and speculation about how the e-commerce giant’s latest purchase will affect Whole Foods’ customer experience, employees, product pricing, and the future of the grocery industry more broadly. Competitive Enterprise Institute (CEI) experts on technology, labor, and economic policy respond to some of these questions.
CEI's Ryan Radia discusses whether we should be concerned about Amazon becoming a monopoly:
During its first 20 years, Amazon lost money every other year and even today, Amazon’s profits remain razor-thin. If Amazon is a monopolist, it’s the least profitable one ever. Meanwhile, the company has upended the retail business, enabling consumers to buy what they want at lower prices than those offered by nearly all other sellers.
Amazon’s cloud computing platform has helped many Internet startups afford storage and bandwidth, while Amazon’s shipping system has saved its customers untold hours waiting in traffic to buy products from traditional retailers. Hypothetical concerns about how Amazon might, in the future, engage in harmful conduct do not justify government intervention in this transaction.
If Amazon introduces more automation at Whole Foods, it’s possible that individuals will lose their jobs, but increases in productivity will boost demand that could, ultimately, require more human workers. Worker displacement comes with hardships, but historically, innovation has supported millions of jobs.
The solution to minimizing the negative impact on workers from automation is better education, skills development, and the removal of arbitrary restrictions on work and entrepreneurship. Although the short-term may be painful, proper public policy reforms that allow innovators to come up with the next big idea and that tears down obstacles to work, should allow those who want to work, to find it.
CEI’s Iain Murray discusses business innovation and the impact it has on employment and the economy:
Amazon has made its fortune by reducing the costs that prevent economic transactions from taking place, and its platform products, in particular, have helped create thousands of new businesses. The future of work depends on this type of innovation lowering costs, so regulators would be foolish to try to increase them again.
What is important is that regulators need to cease creating entry barriers that stop the innovation that leads to the creative destruction of dominant companies. The firm that will topple Amazon may not have been founded yet. It might never be founded if some of the current U.S. employment and financing regulations remain in place.