Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Amazon and the power of big digital platforms

Dario Guarascio, Andrea Coveri, Claudio Cozza and 2 more 17th January 2022

Platform power is often traced to markets, implying anti-trust action. The source, and the solution, lie elsewhere.

Amazon,digital platforms,monopoly capital
Not everyone smiling—Amazon workers at Vélizy-Villacoublay in France (Frederic Legrand—COMEO / shutterstock.com)

The big American digital platforms—Meta (Facebook), Amazon, Microsoft, Alphabet (Google) and Apple—have accumulated a mass of economic power unprecedented in the history of capitalism. Their Chinese counterparts (Alibaba, Baidu and Tencent) are doing likewise. With its ubiquity, across sectors and geographically (albeit excluding China), physical as well as digital, Amazon is however paradigmatic.

Such power can be viewed from different angles. First, there is market capitalisation: with a vertiginous growth in its share price (Figure 1), Amazon’s value of $1.68 trillion is greater than the gross domestic product of Spain and about to overtake that of Italy.

Figure 1: evolution of Amazon stock quotes, 2012-20 ($)

Amazon,digital platforms,monopoly capital
Source: Macrotrends.net

Then there is the wealth accumulated by those at the top: with a net worth of $197 billion, Jeff Bezos (founder and former chief executive officer) is third in the global billionaire ranking compiled by the business magazine Forbes, where he is accompanied by eight other founders, CEOs and top managers of Microsoft, Alphabet and Meta.

Another benchmark would be the continual, though often unsuccessful, attempts by governments and anti-trust authorities to contain this power by punishing anti-competitive practices or increasing the tax demanded of Amazon and other platforms. Yet another measure would be the plethora of political and trade union conflicts which have seen the platforms accused of exploitation of workers, discrimination and anti-union policies (Amazon and Alphabet), distortion of public debate and electoral processes (Facebook and Twitter) and negative environmental impacts from their digital activities.

Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content.


We will never send you spam and you can unsubscribe anytime.

Thank you!

Please check your inbox and click on the link in the confirmation email to complete your newsletter subscription.

.

Fundamental engine

The concentration of power in large innovative companies has been characteristic of capitalism since its origins. Karl Marx, Joseph Schumpeter, Rudolf Hilferding and Vladimir Lenin recognised that large technological oligopolies and transnational cartels constituted a fundamental engine of economic, social and technological transformation—as well as a primary cause of class polarisation, political instability and war.

Today’s platforms are however able to control and condition the actions of workers, consumers, suppliers, competitors and governments much more intensely than the large multinationals of the last century. To grasp these discontinuities, it is necessary to go beyond a view of economic power confined to the market.

There are very useful insights in explaining the platforms’ concentration by ‘demand-side externalities’: the utility users derive and thus their willingness to pay increases as their number increases. The same is true of ‘multi-sided-network effects’: the utility derived by agents on one side of the market, such as Amazon consumers, grows as the number on the other side, such as companies using Amazon to market their products, grows. Yet these mechanisms characterise many other sectors too—computer hardware, software, credit cards—and thus are not sufficient to explain the power large platforms enjoy.

Monopoly capital

We have attempted to do so by referring to a particular strand of literature—the theory of ‘monopoly capital’ developed by Paul Baran, Paul Sweezy and Keith Cowling, among others. The latter focuses not on market relations as conceived by standard microeconomic theory but on the ability of the firm to control the economic space and to exert influence and hierarchical power outside its formal perimeter—physical, legal and market-related. Jan Eeckhout calls it the ‘moat’ they construct.

Our analysis centres on Amazon and identifies four factors in the power of platforms:


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

  • growth and sectoral diversification,
  • research and development and a monopoly of key technologies,
  • fragmentation of labour and its control and
  • the conditioning of governments and retaliatory power.

What coheres these factors is the ability to control all the information produced within the platform’s sphere of influence—internet segments and their physical counterparts—effectively subordinating the actions of other actors to the strategies of the platform itself.

This is somewhat similar to what Shoshana Zuboff calls ‘surveillance capitalism’. In this context, however, the capillary control of (digital) information is not placed at the centre of the scene as an instrument of ‘commodification of privacy’. Rather, such control greatly increases the platform’s ability to influence the agents with whom it interacts and so to extract value—thereby allowing it to expand its sphere of influence at significantly lower cost and a much faster pace than the multinational corporations studied by Baran and Sweezy and their successors.

Firm control

In the Amazon case, exponential growth and diversification come from its control of the strategic services—cloud, logistics, advertising and online profiling—instrumental to producing, distributing and selling any other good (Figure 2). More, it systematically resorts to imitation and predatory pricing to colonise the product segments with greatest growth prospects.

Figure 2: Amazon revenues from tariffs paid by third parties (orange) and network services (blue)

Amazon,digital platforms,monopoly capital
Source: Amazon’s Monopoly Tollbooth

Amazon competes with other major platforms in its attempt to monopolise technologies such as ‘big data’, cloud computing, artificial intelligence and machine learning. These are essential to maintain firm control of the network (digital and physical) and, above all, the information within it. The tools used to ensure dominance are skills attracted from major universities, R&D, patents (Figure 3) and acquisition of innovative start-ups.

Figure 3: Amazon patents by technological domain

Amazon,digital platforms,monopoly capital
Source: Forbes

Furthermore, the power of Amazon is linked to the control and exploitation of a huge and heterogeneous mass of workers. This includes those operating the physical component of the network—the logistics workforce subject to high exploitation via outsourcing and use of the most advanced monitoring and efficiency-enhancing AI technologies. But it also includes the digital workers—the myriad individuals scattered around the world, paid very little to carry out the tasks necessary to ensure the functioning of the network and the algorithms on which it rests.

Finally, Amazon’s power reflects the platform’s ability to influence governments and public authorities by resisting hostile regulation in the areas of taxation, competition, privacy and trade union rights. This is closely linked to control of a politically vital commodity—information—as well as seduction of a complicit consumer base, now almost coinciding with the entire western population, which would hardly vote for a party with an agenda hostile to Amazon services. Together with its employment relevance in the physical world, which makes it different from other big platforms, this gives Amazon far greater retaliatory power against governments than pre-internet multinationals enjoyed.

Progressive strategy

The power Amazon has today is the result of an act of original accumulation exercised on an uncontaminated space—the ‘commercialisation of the internet‘, enabled by political choices by United States governments in the early 1990s, from which today’s platforms originate. Yet their power can be challenged, provided one is willing to go beyond conventional anti-trust policies and privacy protection. These do not call into question the privatisation of digital information—which could even be exacerbated by stronger privacy-protection rules—still less its profit-oriented use.

A progressive strategy, aiming for economic and political democracy, should strive towards the decommodification of personal data through socialisation of data and platform infrastructures. The challenge will be to democratically manage data for society as a whole without foregoing the opportunities platforms can provide for shared prosperity.

In this perspective, Amazon’s capability to co-ordinate the actors in its network and efficiently to plan the production and distribution of goods and services—thanks to the harnessing of a growing pool of data—provides us with a glimpse of the shared social benefits which could derive from a radical reorientation of its infrastructure towards the public good.

An earlier version of this article was published in Italian on Il Menabò di Etica ed Economia

Dario Guarascio

Dario Guarascio is an assistant professor of economic policy at the Sapienza University of Rome. He is also affiliated to the Sant’Anna School of Advanced Studies in Pisa. His research covers the economics of innovation, digitalisation and labour markets, the European economy and industrial policy.

Andrea Coveri

Andrea Coveri is a postdoctoral research fellow in applied economics at the University of Urbino, where he has taught global political economy and microeconomics. His research interests include global value chains, innovation dynamics and the theory of value, price and distribution.

Claudio Cozza

Claudio Cozza is an associate professor in economic policy at the University of Naples 'Parthenope'. His research interests include the economics of science, technology and innovation, regional development and internationalisation.

Home ・ Economy ・ Amazon and the power of big digital platforms

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

defence,europe,spending Ukraine and Europe’s defence spendingValerio Alfonso Bruno and Adriano Cozzolino
North Atlantic Treaty Organization,NATO,Ukraine The Ukraine war and NATO’s renewed credibilityPaul Rogers
transnational list,European constituency,European elections,European public sphere A European constituency for a European public sphereDomènec Ruiz Devesa
hydrogen,gas,LNG,REPowerEU EU hydrogen targets—a neo-colonial resource grabPascoe Sabido and Chloé Mikolajczak
Big Tech,Big Oil,Big Pharma,agribusiness,wealth,capital,Oxfam,report,inequality,companies Control the vampire companiesJayati Ghosh

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube