Political Economy of Flexible Accumulation: Part Two – The Case of Amazon.com


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Fight for 15 protesters at Amazon’s fulfilment center in Baltimore. Photo: People’s World

The ideology of flexible accumulation is neoliberalism, which, David Harvey writes, “seeks to bring all human action into the domain of the market. This requires technologies of information creation and capacities to accumulate, store, transfer, analyse, and use massive databases to guide decisions in the global marketplace. … These technologies have compressed the rising density of market transactions in both space and time.” [Harvey, Brief History of Neoliberalism, Oxford 2007:3] Companies like Uber, Airbnb, and Amazon are in the forefront of accelerating the density of market transactions as well as the “creative destruction” of obstacles like state regulations and taxation.

Amazon aims to dominate consumer access to internet retail through its massive investment in servers and fulfilment centers around the world. Even though it makes a minimal profit on each transaction, the sheer volume of exchanges it hosts generates a surplus. It has been able to accelerate the density of market transactions precisely by using massive databases to store information about consumers. Analysts have noted that “Amazon’s enormous investments in infrastructure and logistics have begun to pay off. The company keeps capturing a larger slice of American and even international purchases. It keeps attracting more users to its Prime fast-shipping subscription program, and, albeit slowly, it is beginning to scratch out higher profits from shoppers. Now that Amazon has hit this point, it’s difficult to see how any other retailer could catch up anytime soon.”

Harvey’s prescient analysis did not extend to how a workforce that is capable of dealing with accelerated rates of commercial, technological, and organizational innovation would be created. But, since he wrote, neoliberal management doctrines, intended to make workers more agile and “self-regulating” through the breaking down of traditional divisions of labor, have resulted in the combination of low-waged labor employed part-time through subcontractors with the promise of fulltime jobs for a few, forcing them all to work ever harder. The flexible workforce marks a new pattern of labor usage, most visible in retail and leading to downsizing and retrenchment; flexible workers have no rights of seniority or fulltime permanence.

Amazon has succeeded in creating a highly flexible workforce; the work conditions in its warehouses are well-known, but it has also pioneered ways to accelerate technical and marketing innovation through internal competition among its white-collar professionals, monitoring their activities in the same way as its consumers. By coercing his employees to voluntarily extend their working day to 80 or 100 hours per week, Amazon chief Jeff Bezos has been able to extract the maximum effort from his marketers and software engineers.

Recently, the New York Times published an article detailing how “Amazon uses a self-reinforcing set of management, data and psychological tools to spur its tens of thousands of white-collar employees to do more and more. … Every aspect of the Amazon system amplifies the others to motivate and discipline the company’s marketers, engineers and finance specialists: the leadership principles; rigorous, continuing feedback on performance; and the competition among peers who fear missing a potential problem or improvement and race to answer an email before anyone else. … To prod employees, Amazon has a powerful lever: more data than any retail operation in history. Its perpetual flow of real-time, ultradetailed metrics allows the company to measure nearly everything its customers do … It can also tell when engineers are not building pages that load quickly enough, or when a vendor manager does not have enough gardening gloves in stock.”

Many who are deemed “inflexible” are fired in annual cullings of the staff. According to the Times, “ ‘Amazon is O.K. with moving through a lot of people to identify and retain superstars,’ said Vijay Ravindran, who worked at the retailer for seven years, the last two as the manager overseeing the checkout technology. ‘They keep the stars by offering a combination of incredible opportunities and incredible compensation. It’s like panning for gold’.”

Harvey notes that accelerated turnover time in production as a result of advances in technology requires a corresponding reduction of turnover time in consumption. To achieve this reduction in turnover time, Amazon directed its technical efforts into streamlining internet ordering and payment processing with features such as 1-click checkout, investing heavily in servers to handle heavy traffic. In addition to automated ordering, shorter delivery times help to increase the volume of commodities exchanged and create new needs for instant gratification.

The Times reported: “Last August, Stephenie Landry, an operations executive, joined in discussions about how to shorten delivery times and developed an idea for rushing goods to urban customers in an hour or less. … ‘A customer was able to get an Elsa doll that they could not find in all of New York City, and they had it delivered to their house in 23 minutes,’ said Ms. Landry … ‘We’re trying to create those moments for customers where we’re solving a really practical need,’ Ms. Landry said, ‘in this way that feels really futuristic and magical’.”

Shortening delivery times is key to Amazon’s strategy: in some metropolitan centers it offers same-day service. Locating and packing products is achieved through a grueling 24-hour operation in its vast warehouses: “Through the engineering of its fulfillment centers, Amazon has built the world’s most nimble infrastructure for the transfer of things … The packing stations are a whirl of activity where algorithms test human endurance. … Workers whip through the folding, packing, and sealing of boxes at a speed that could only come through days, months, and years of practice. The pace cannot slow if Amazon wants to meet the demand the company itself has stoked through the speed and reliability of its fulfillment operation.”

Amazon aims to both step up the pace of consumption and, like Apple, lock in a captive customer base. After the launch of 2-day shipping through Amazon Prime, the company’s sales growth took off. Time magazine notes: “Early on, Amazon discovered that Prime subscribers overwhelmingly made their online purchases via Amazon, and therefore they stopped shopping elsewhere. Naturally, a customer’s Amazon purchases skyrocket once he or she is signed up for Prime.”

The New York Times reported: “Because Amazon is still expanding madly, its expenses remain enormous and its retail profits tiny. In its last quarter, its operating margin on the North American retail business was 3.5 percent, while Amazon Web Services’s margin was 25 percent.” But the growth in Prime subscriptions is the key to how Amazon intends to generate profits. “Analysts at Morgan Stanley reported recently that ‘retail gross profit dollars per customer’ — a fancy way of measuring how much Amazon makes from each shopper — has accelerated in each of the last four quarters, in part because of Prime. Amazon keeps winning ‘a larger share of customers’ wallets’.”

An ex-employee explains: “Amazon has boundless ambition. It wants to eat global retail. … Amazon has decided to continue to invest to arm itself for a much larger scale of business. … lowering its shipping costs and increasing the speed of shipping items to customers is like a shot of adrenaline to customer’s propensity to buy from them, and so it has doubled down on building more and more fulfillment centers around the world. … That is a gargantuan investment, billions of dollars worth, and it takes a significant bite out of Amazon’s free cash flow.”

Increasing the velocity of commodity capital turnover offsets Amazon’s lower margins, resulting in a relative advantage over competitors: as Bezos is reputed to have said, “your margin is my opportunity.” But faster delivery times depend on an increase of fixed capital tied up in warehouse facilities across the world, which soaks up the surplus. This makes the company more dependent on finance capital for expansion into new markets; according to analysts, the company is searching for “one or two winning bets to make it all worthwhile” – or rather, it is speculating on future gains in the unpredictable world of consumer tastes.

Amazon makes its profit from the redistribution of the surplus value realized from the exchange of large quantities of commodities, which means the labor involved in shipping and warehousing is essential for the process to be completed. This is the company’s weakness: it was able to beat back an attempt to unionize maintenance engineers in its Delaware warehouse, but as Wired.com noted: “… however sophisticated its ordering and distribution systems, Amazon still relies on a host of human hands to pull items off the shelves … And as demonstrated by several exposés on working conditions at Amazon’s warehouses, its algorithms can only be as efficient as the hands and feet executing their instructions. … Amazon can’t outsource its main business — online retail — to workers overseas. Getting more orders to more people more quickly depends on getting as geographically close to customers as possible. As a result, any conflicts and complaints involving the workers filling those orders will be more visible to American consumers, Amazon’s main customer base.”

Amazon’s eventual goal is to establish an absolute monopoly in internet-based exchange and distribution, so that value can be siphoned off by the retailer and enrich Jeff Bezos. However, its plans are built on the backs of a low-waged workforce, while workers have been moving to establish unions and push back against the intensity of algorithm-directed labor. In last Tuesday’s Fight for 15 day of action, hundreds of protesters picketed the Amazon Fulfillment Center in Baltimore, where most of the jobs are part time with no guarantee of full time employment.  Amazon cannot escape the movement of the low-paid for a living wage and decent benefits.

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Filed under amazon.com, david harvey, flexible accumulation, low-waged, Neoliberalism, political economy, Uncategorized

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