Geekwire recently ran a story that deserves our (our as in Seattle’s) attention. It concerns a young Swiss, Diego Granziol, “who graduated from Oxford University in 2020 with [a] doctorate in machine learning.” Amazon hired him, and he moved to Seattle only to lose the job before he even started. The engineer, who is “an accomplished guitarist [and] power lifter,” endured “an eight-month U.S. visa process,” and he turned down other offers to instead work for Amazon and live in Seattle, a city that he apparently holds in high regard. He is now “suing Amazon after the company [rudely] withdrew his job offer.”
Amazon confirmed that it has withdrawn job offers in a process of downsizing that began at the dawn of the present year. The downsizing has yet to see an end in sight. But what to make of all this? Seattle Times, as expected, has thrown almost no light on the substance of these recent developments. It has simply parroted the explanation tech executives release to the press.
Amazon, like many tech companies, says it faced economic pressures for most of last year, from inflation to supply chain shortages. Although Amazon remained optimistic about customer demand, it told investors last year that as customers considered cutting back on their spending — both on Amazon’s online marketplace and in Amazon’s cloud computing division — the tech and e-commerce giant also began looking at how to tighten its belt.
Amazon’s first-quarter revenue actually grew by an impressive 9%. This beat Wall Street estimates. And the corporation expects revenue will “rise between 5% and 10% from the same period a year earlier.” In short, Amazon is expecting to make “$127 billion to $133 billion” in the present quarter. This means Amazon is still growing, still making serious money. So why the layoffs? This is more puzzling when you consider that its business model has famously emphasized expansion over profits. This model, as the Marxist geographer David Harvey has pointed out several times, sees mass—the command the company has in a given market—as the true key to success.
From Ben Unglesbee’s superb Retail Dive article:
As founder Jeff Bezos said in a 1997 letter to shareholders, “We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.”
Despite going through ups and downs during the first decades of the present century, Amazon pretty much stuck to this business model: mass is what matters most. David Harvey recognizes the value of this logic. Indeed, he used to refute a key Marxist concept: the falling rate of profit.It goes something like this: When a new market opens or a new product enters the market, profits (if all goes well) tend to be spectacular. Think only of the iPhone in 2007. In Marxist economics, this is known as relative surplus value, which is different from absolute surplus value—the extraction of value (which become profits in the final moment of capital accumulation) by the raw exploitation workers (lengthening the working day, for example).
Marx, Capital Volume 1, “The Concept of Relative Surplus-Value”:
The surplus-value produced by prolongation of the working day, I call absolute surplus-value. On the other hand, the surplus-value arising from the curtailment of the necessary labour-time, and from the corresponding alteration in the respective lengths of the two components of the working day, I call relative surplus-value.
In the main, Marxists have argued that the drive to capture relative value results in the increasing replacement of living labor (troublesome) with that of machines (obedient); the structure of this development is called the organic composition of capital. And because Marx adopted a labor theory of value from the first deeply theoretical bourgeois economist of the 19th century, David Ricardo (this theory says labor is the source of value, and it’s exactly this value that a final sale in the accumulation process transforms into a profit), the logical conclusion is: The increase in machine (dead) labor over living labor is a corresponding decrease in profits. The problem with this concept? Capitalism is still around, still growing, still exploiting workers. If the law of the falling rate of profit accurately describes economic phenomena and development, then the system should have reached its end long ago. Something of the kind was also suggested by the top bourgeois economist of the first half of the 20th century, John Maynard Keynes, in his 1930 essay “Economic Possibilities for our Grandchildren.” He predicted that by our time, the time of his generation’s grandchildren, the great abundance of capital will make it worthless and we will finally be liberated from “the love of money as a possession.”
David Harvey’s answer as to why we have not reached a capitalist’s hell/socialist’s paradise: the steady state? Relative surplus value is less important than mass (the command of the market). Jeff Bezos was at one with Harvey on this point. And also with Marx, who first presented the idea, though he argued that both the mass and rate of profits are operative (they “go hand in hand“)? for the first two decades of the century, Wall Street was one with Bezos.
The total value of output of goods and services in 1950 was $9 trillion, and it’s now over $90 trillion.
This is the rising mass.
— Verso Books (@VersoBooks) May 14, 2023
But something happened in 2022.
…[S]hareholders loved it when Amazon invested in itself. That happy era for the company may be coming to end. As evidence, consider the company’s recently announced $10 billion share repurchase program and recent spending on repurchases. Both signal that the company is ready to spend more of its profits on shareholders, after years of plowing all its cash back into operations and avoiding the Wall Street pressures that other retailers have had to wrestle with.
I explained the mainstream’s justification for buybacks in my post “Seattle Times Systematically Misinformed Readers About Boeing Until It Was Too Late.” It basically states that a company, when confident about its future, will reward shareholders with its free cash. But what do we see actually taking place? Layoffs and buybacks going hand in hand. This happened with Boeing during the previous decade. This is now happening not only with Amazon but also our region’s other corporate behemoth, Microsoft. It’s eliminating tech jobs at a steady clip (“Microsoft cutting more jobs in Seattle region”) as it buys back its stock (“Microsoft Board Approves $60B Share Repurchase Program”). Meta, a significant regional employer, authorized “$40 billion” as it cut 13% of its workforce.
What to make of all this? In the words of Axios‘s Matt Phillips: “Big Tech bows to the ways of Wall Street.” But Seattle is, of course, not paying attention to any of these important developments. Its mayor, business leaders, and leading media institutions are too busy making life even more miserable for people who, because of their culturally imposed poverty, already live in miserable conditions (the streets) and, as a consequence, have little to no impact on the region’s economy. This is the inverted world we live in. It’s also this very inversion that defines speculators/rentiers as investors. The former, however, extract value; the latter, by definition, add it. Seattle’s tech companies are surrendering mass, which when expanding increases value, to the value extraction of speculators/rentiers. This is, of course, a form of corporate raiding that has been with us since the Reagan years. The explanatory power far of this conclusion far surpasses the main one daily offered by mainstream media: “‘What we’re finding in the tech sector is a lot of the technology companies overextended themselves…’ Kaseya CEO told FOX Business.”