Davos Man, page 7
U.S. Steel, the conglomerate that owned the Granite City mill, declared a loss of $440 million in 2016. Still, the company paid out $31 million18 in dividends to its shareholders. It provided a $1.5 million salary19 to its president and CEO, Mario Longhi, plus stock-based compensation and other benefits that swelled his total pay beyond $10.9 million.
This was how capitalism worked in the United States. When trouble arose, the consequences fell on working people in the form of joblessness, bankruptcy, and depression. Corporate overseers found a way to add to their coffers no matter what happened.
Some economists warned early on that allowing China into the global trading system posed perils for manufacturing towns everywhere else.
Washington’s assent “will signal to the world that the United States has, in effect, abandoned the cause of putting worker rights and environmental standards on the agenda of international trade,” declared the economist Jeff Faux20 in 2000.
But such talk was drowned out by exuberant cheerleading from Davos Man and his collaborators. Investing in China was not just good for shareholders, they said, but good for the world. It would tether China’s fortunes to the global economy, which would force its leaders to embrace the values of its trading partners. Davos Man was not exploiting China for cheap labor; he was championing civil liberties.
Bill Clinton embraced this formulation as he campaigned for China’s inclusion into the WTO—along the way vacuuming up hefty campaign contributions from the multinational companies eager to get a crack at the Chinese market.
“China is not simply agreeing to import more of our products, it is agreeing to import one of democracy’s most cherished values, economic freedom,” Clinton declared in 200021. “It is likely to have a profound impact on human rights and political liberty.”
Five years later, Clinton accepted an invitation from China’s most prominent Davos Man, Jack Ma, the founder of the e-commerce company Alibaba, to give a keynote address at a Chinese internet conference. It was hosted in Ma’s hometown, the lakefront city of Hangzhou. Yahoo, the web portal, then owned 40 percent of Ma’s company.
A Chinese journalist22 who had used a Yahoo email account to leak information to an international human rights organization had just been sentenced to ten years in prison. Yahoo had identified him to Chinese authorities, claiming that it had to comply with local laws. Human rights groups were urging Clinton to use his presence to call attention to this episode, but he said nothing about it in his speech, which celebrated the internet as a force for human liberation.
When I tried to ask Clinton afterward how he squared his talk of freedom with the jailing of a journalist handed over by the people paying for his junket, he grinned, motioned that he could not hear the question, and melted into a security cordon.
Far from changing China, Western businesses were themselves changed by China. JPMorgan Chase handed out internships23 to the children of Chinese Communist Party officials, whose parents subsequently developed an appreciation for the company’s investment banking services.
Schwarzman’s private equity company, Blackstone, sold tens of billions of dollars’ worth of real estate to Chinese companies, including the Waldorf Astoria hotel in New York. A Chinese sovereign wealth fund24, the State Investment Company of China, invested $3 billion in Blackstone’s initial public offering, taking a nearly 10 percent stake in the company. The deal gained the swift blessing of China’s leadership.
Schwarzman promoted his most passionate cause, the Schwarzman Scholars program, as a crucial source of progress. Modeled on the Rhodes scholarship, it brought students from Harvard, Yale, Cambridge, and other prestigious campuses to study at China’s Tsinghua University in the name of boosting international understanding.
The Blackstone chief delighted in the ceremonies celebrating the young scholars backed by his fortune. He typically ducked questions about the role of senior Chinese Communist Party leaders25 in selecting the applicants. Tsinghua University “oversees the process of selecting Chinese Scholars,” Blackstone said in a written statement, in response to questions I posed to Schwarzman. “Since the founding of the program, the intention has always been for China to identify its future leaders for participation.” He was also not keen to discuss how the Schwarzman Scholars had invited as a graduation speaker26 the CEO of a Chinese company that built artificial intelligence used in the surveillance of the ethnic minority Uyghurs, who had been forced into concentration camps in western China. “The program chose as a speaker a recognized global leader in Artificial Intelligence, given the relevance and importance of the topic for future leaders,” Blackstone’s statement continued. “Your broader charge that hosting a campus speaker represents full involvement in or endorsement of all their alleged activities is absurd. Such a view is fundamentally at odds with long-running academic tradition and common sense.”
The Blackstone statement boldfaced and underscored one sentence: “We fundamentally reject your premise that canceling cultural exchanges between young student leaders who will help set future policy is the best path to create a more peaceful world.” That was, in fact, not my premise. I lived in China for almost six years. Schwarzman and I once spent three days at the same high-level conference with Schwarzman in Beijing, during which we met with President Xi Jinping. In knocking down this straw man, Blackstone was highlighting Davos Man’s tendency to present false binary choices as a defense of the status quo. We could either have American billionaires cozying up to China’s leaders while extracting investment or we could cut ties.
The workers in Granite City were not wrong in their obsession over China. Chinese competition was a menace to their living standards. But the ultimate culprit for their deteriorating fortunes was in their own country—in boardrooms in New York and Silicon Valley, and in government offices in Washington, where Davos Man wrote the rules.
In some places, especially Scandinavian countries, those harmed by trade saw the damage limited and repaired by government programs. The state trained workers for new careers when they lost jobs while helping them with their bills while they were out of work. But in the United States, spending on social safety net programs had been gutted as Davos Man shrunk his tax bill.
In Denmark27, when the typical breadwinner in a family of four lost their job, they could count on 88 percent of their previous income six months later, thanks to unemployment benefits and other social programs. In the United States, the same family had to find a way to survive on 27 percent of their previous income.
Denmark collected taxes worth about 45 percent of its annual economic output. In the United States, the government was operating with tax revenues worth less than 25 percent of its economy.
It was not globalization that was to blame for the despair in Granite City. It was the way the gains had been apportioned—not by accident, but willfully and meticulously, as a means of directing more treasure to Davos Men like Bezos.
Amazon was, on the surface, a minor player in Granite City. It operated a warehouse that employed workers cast off by the steel mill. Same as everywhere, its trucks navigated local streets, dropping off packages. But its real impact was foundational. As much as any company, Amazon had altered the balance of power between employees and employers.
With a workforce nearing 1.3 million, Amazon has risen into the second-largest private employer in the United States, behind only Walmart. It has applied its scale toward downgrading wages while squeezing additional productivity out of every hour of labor.
In short, Amazon has helped sort the contemporary world into winners and losers—those positioned to enjoy the utility of its unparalleled distribution network, and those harmed by its market supremacy.
The Robber Barons amassed their dominance in an age when steel was central to industry. Bezos constructed his empire in a time in which internet bandwidth was a crucial commodity, allowing him to set his sights on the globe while insinuating his services into nearly every area of modern commerce.
Bezos was both a beneficiary of the international trade regime constructed in the decades after World War II, and a primary actor in perverting its workings to divert most of the gains to billionaires like himself.
Raised in upper-middle-class comfort, Bezos was a serial achiever who was not shy about sharing this information.
“I have always been academically smart,”28 he once said.
At Miami Palmetto Senior High School29, he let everyone know that he would be the valedictorian, and then achieved it. Then he enrolled at Princeton, the only college that interested him. (“Einstein was there30 for goodness’ sake,” he said.)
He graduated summa cum laude in 1986, took a job at a telecommunications startup, passed through banking, and then landed in the hedge fund world, working for David E. Shaw, a legendary investor who was early to the technique of employing mathematical algorithms to ferret out profitable trades. It was there that Bezos hatched the idea31 that would become Amazon—what he and Shaw referred to as “the everything store.”
It was the middle of the 1990s, and the internet was about to reshape the business world. Shaw tasked Bezos with figuring out what products could be most profitably sold online. Books were a counterintuitive example—the internet appeared poised to destroy print media—but Bezos cracked the code. There were 3 million books in print32. That was more than any brick-and-mortar superstore could ever stock, supplying an online marketplace an immediate advantage.
Bezos hired people whose brains were wired like his. Job interviews entailed33 Socratic interrogations—How many gas stations are there in the United States?—allowing Bezos to observe how the subject broke down the problem.
He emulated Walmart’s dominance34, poaching its executives and embracing its frugality. He made a show of getting his loyalty card stamped35 at the coffee kiosk at Amazon’s headquarters in Seattle. He had chosen the city36 as his base in part to limit Amazon’s exposure to sales taxes: they were due only on orders delivered to people in states where the company had physical operations, and Washington was home to relatively few people. Employees had to pay for parking37.
Bezos favored the word relentless. Every minute of every day was required if Amazon was to achieve Bezos’s mission of market domination. When a female employee asked him about the possibility of a healthier work-life balance, Bezos was withering.
“The reason we are here38 is to get stuff done,” he said. “If you can’t excel and put everything into it, this might not be the place for you.”
Nearly everyone respected him as the smartest person in every room, even as they struggled to square his intensity with his preposterous laugh. Its sound was variously described as that of “a jackass gargling bumblebees,” or “a cross between a mating elephant and a power tool.” The uninitiated could easily have misinterpreted it as a cry for emergency medical attention.
Laugh notwithstanding, Bezos was the source of abject fear among those assigned to present their ideas to him. He didn’t suffer fools, and he found them everywhere.
“We need to apply39 some human intelligence to this problem,” he once said after an employee laid out a proposal that did not win the boss’s favor. “Are you lazy40 or just incompetent?” he snapped at another underling.
For an Amazon executive41, nothing was more alarming than a customer service complaint forwarded to them by Bezos with his addition of a single character at the top—a question mark.
In a transformation that is now well-known yet decisive, Amazon grew into the central clearinghouse for a vast array of products—clothing, office supplies, electronics, toys, and, eventually, groceries. By 2019, its international distribution network was delivering 3.5 billion packages a year, or one for every two people on earth.
It expanded into video streaming and then turned itself into a major player in Hollywood, producing movies and television shows. It earned the lion’s share of its revenues through a dominant hold on the business of hosting and transporting computer data, operating like the railway system for the digital age. Bezos was also pursuing his childhood fascination with life beyond Earth, launching satellites and pursuing a commercial space exploration business.
As the journalist Franklin Foer put it, “If Marxist revolutionaries42 ever seized power in the United States, they could nationalize Amazon and call it a day.”
In culture and composition, Bezos’s company reflected the traditional power configuration of the society that produced him. By late 2019, the seventeen executives43 who comprised Bezos’s senior team included precisely zero African Americans and one woman. Still, he insisted that Amazon was a meritocracy, disdaining the word diversity as synonymous with a lowering of standards.
During the late 1990s, in the midst of the dot-com boom, Bezos had been a star draw at the Forum. Like many of his fellow participants, he cast his personal success as a form of societal triumph, validation for the system that had allowed him to turn a good idea into a jackpot. He and the other billionaires in Davos projected an understanding that their success was the result not of a rigged system, or racial privilege, or inclusion in Ivy League social networks, but of simply having worked harder. The wealth they commanded was their just reward, as if the only thing separating Bezos and the people laboring in his warehouses was their failure to cram as hard for the test.
Davos Man deployed this idea as a prophylactic against profit-diluting regulation. Bezos’s intelligence and work ethic were beyond reproach, but his astonishing wealth was not the result of purely market forces: he had applied his money and savvy toward warping the marketplace in his favor.
Amazon’s success rested on international trade. Bezos constructed an intuitive website and a sophisticated logistics operation, but he depended on factories around the world to make what he was delivering. This was the concept for “the everything store” that he had dreamed up with Shaw.
“The idea was always44 that someone would be allowed to make a profit as an intermediary,” D. E. Shaw said in 1999. “The key question is: Who will get to be that middleman?”
Amazon actively recruited Chinese suppliers45 to sell to its customers, producing a surge of products that did not arrive as advertised, or violated federal safety standards, according to a Wall Street Journal investigation. By 2019, nearly 40 percent of Amazon’s most active accounts were based in China (though the company disputed this).
Bezos had long dodged criticism about his company—his shoddy treatment of warehouse workers, his ruthless undercutting of independent booksellers and other competitors—by positing himself as a canny beneficiary of changes that were essentially inevitable, borne by technology, and beyond the powers of earthlings to contain.
“Amazon isn’t happening46 to the book business,” he once said. “The future is happening to the book business.”
But Bezos had deliberately shaped that future. Amazon had financed lobbying efforts to fight off sales taxes that threatened to encroach on its business. States that contemplated collecting sales taxes found themselves bullied by Amazon, as the company threatened to bolt for more hospitable jurisdictions. Amazon applied its muscle47 toward rolling back corporate taxes—a campaign that came to fruition when Trump took office.
By 2018, Amazon was employing twenty-eight lobbyists48 in Washington, more than any other technology business, plus one hundred more retained on contract. This formidable apparatus included four former members of Congress.
Beyond the United States, the company tangled with unions, especially in France and Germany, drawing accusations that it was seeking to Americanize the workforce—a synonym for lowering pay.
Amazon had also proven a prime beneficiary of years of corporate lobbying that had defenestrated American antitrust law, enabling Bezos to swallow up scores of companies in amassing greater market share. Amazon had been allowed to marshal unprecedented volumes of data about the buying habits of its customers, and then use that knowledge to sell more in a fashion that was in no way transparent. It had leveraged its status49 as the decisive marketplace for everything from ballpoint pens to dishwashing liquid to steer customers to its own products. Part of why Bezos had assembled a fortune larger than the annual economic output of Kuwait was because his customers were unwittingly paying a premium.
This was ironic given that Amazon was, above all, a beneficiary of decades of corporate lobbying that weakened antitrust law through a decisive claim: Big businesses were more efficient, which made them better for consumers.
This was the same argument that Davos Man’s forefathers had deployed to dismantle the protections against corporate abuses that went back to the New Deal of the 1930s. This was how large companies fended off enforcement for their exploitation of labor and their predatory treatment of smaller businesses. Anything that yielded lower prices was to be applauded as consistent with the public interest. Amazon was a monument to the success of that formulation.
Even as Amazon raised pay50 for five hundred thousand of its workers to a minimum of $15 an hour in April 2021—its response to reports of dangerous conditions inside its warehouses—the move resonated more as a way to harm competitors than to redress unfair treatment. By lifting wages, Amazon ensured that rivals like Walmart would struggle to hire enough workers. Amazon could then capture more of the e-commerce market, reinforcing its dominance.
Trade and globalization had worked as the Bretton Woods forebears had envisioned, turning adversaries into trading powers, generating jobs and economic growth, and delivering a profusion of affordable products to shops around the globe. But Davos Men like Bezos had seized most of the gains.
This is how Michael Morrison, a longtime steelworker in Granite City, found himself so desperate for a paycheck that he reluctantly went to work at an Amazon warehouse, earning a fraction of his previous wages.
Morrison had started working at the steel mill in 1999, when he was thirty-eight—a father with three young children, suddenly contemplating the long haul.
“I felt like I had finally gotten into a place that was so reliable I could retire there,” he said.
