The other day I was speaking with a financial services friend of mine, someone I’ve known for a long time – a very kind, warm person, albeit highly analytical. My friend, who’s in private equity, is fascinated by a metamorphosis he thinks he is seeing underway – the transition of the Jeff Bezos substantially-owned Amazon, Inc into a country, at least in de-facto if not de-jure sense.
My friend forwarded to me a provocative article by the journalist Edward Ongweso, Jr. which appeared through Motherboard-VICE Media. The article was entitled plainly enough and to the point for the reader, “Amazon Is Looking More and More Like a Nation-State”.
Mr. Ongweso begins his article, citing the recent exchange of broadsides between France and Amazon. Using its sovereign discretion, the French Republic chose to impose a new 3% surtax on global tech firms, defined as those information technology firms making more than EUR 750 mln globally on an annual basis or more than EUR 25 mln in the French national market.
Rather than just weathering the sovereign diktat, Amazon responded in kind, layering an additional 3% charge on its French business clients to compensate for the local surtax.
Amazon’s position in e-commerce backed up the company’s chutzpah, and implicitly, its virtual act of sovereign reciprocity. Looking at this as just another example of what he’s seeing, my friend is wondering about what’s evolving. Amazon is becoming wealthy enough. Given how wealthy it’s becoming, is it becoming powerful enough, too? So much so that it can become insouciant vis-a-vis a powerful sovereign actor like, say, France?
True – Amazon the company takes on national account GDP-style dimensions. In addition to a planetary-like market capitalization, the “everything store” posted total revenues of USD 280.5 bln in 2019, and operating income of USD 14.5 bln for the same year.
It also employs 876,000 full-time and part-time workers world-wide. The fact that a company employs close to a million people, and therefore makes a material difference in their lives, does say something about Amazon’s political weight. For all of these people depending on the paychecks it writes, Amazon takes on almost an ersatz sovereign authority. Not bad for a business begun in a rented garage in Bellevue, Washington.
And, Amazon is everywhere, and doing everything, making it a versatile would-be sovereign. Amazon’s mainstay had traditionally been e-commerce, but the company is now also a major market presence in cloud computing. Amazon is involved in digital distribution. It is exploring the commercial value from artificial intelligence. It’s looking into self-driving cars. Amazon is protean.
So, Amazon is an entity through which much social and economic activity happens and from which many people derive livelihoods. Its institutions – the agreed measures, rules and incentives by which it and its employees conduct themselves – facilitate its ongoing existence. Someone could say, though, that unlike a country, Amazon can’t issue a currency. But one could also say that Amazon stock is like sovereign fiat currency. That share of Amazon stock reflects how investors accord credibility to Amazon’s commercial success – its value. Based on that level of conviction, the stock is fungible. If it were fractionated sufficiently, a person could transact with it in any number of ways for goods and services – just like people do with fiat currencies.
Of course, one feature which the bona-fide sovereign has – and which Amazon doesn’t – is a monopoly on the sanctioned use of force. Amazon can fire you if it’s your employer, it can litigate and sue you because it’s a corporate person, but it can’t arrest you – because Amazon doesn’t exercise the sole sanctioned use of force, inherent to the state as it enforces the country’s enacted laws.
So, Amazon is not a sovereign; it is not a state actor. But it is an actor – or stakeholder, if that sounds more cogent. And it does have influence – Amazon can choose to move, taking jobs and tax revenues with it. That said, anywhere Amazon resides on the surface of the earth, the company will find itself subject to sovereign discretion of some kind, whether of the despotic or liberal sort.