A Grand Unified Theory of Bad New Economy Firms

The wildly successful internet economy firms mostly operate by evading laws. New technology which has allowed firms to move their business to less-regulated jurisdictions and a generation of deregulation and favorable court decisions have allowed these firms to be bad places to work and bad places to do business with. Here’s a catalog of some of their abuses:

Evasion of local laws through national operations. Amazon notoriously picks jurisdictions with lax labor laws for its warehouses. Uber simply ignores local laws until penalized. When penalized, they initiate political campaigns to get the laws overridden at the state level.

Extortionate business practices. Doordash infamously underpays its workers. Grubhub notoriously overcharges restaurants. Uber has the resurrected long-illegal practice of raising taxi rates when demand is highest.

Monopolistic practices. Enforcement in this area has long been moribund, and the big national firms take advantage of this. Elizabeth Warren has written at length about this, so I’ll send you to her paper on the subject, “ It’s Time to Break Up Amazon, Google, and Facebook .”

Abusive labor practices. Overwork and underpay is the norm for these firms, which often evade even the weak protections of most state employment law by declaring their employees contractors.

Dangerous operating practices. Amazon is the clear leader here, leading to high injury rates in its warehouses, high accident rates for its delivery drivers, and, now, high COVID-19 infection rates in its warehouses as well.

Questionable finances. Uber is losing money, yet it is still kept afloat by deep-pocketed investors. It is not clear why: full automation of ride services may never be possible. In the pre-Reagan days of regulation, they would never have been allowed to operate. It is hard to see a positive end here: Uber either has to be allowed to entirely monopolize local ride services and raise their rates, cannibalize existing public transportation services, or just go under, after severely damaging the whole market.

The most discouraging thing about all of this is that it is utterly unnecessary. These firms are based on good ideas and would probably be profitable without all these abuses. What they wouldn’t be is insanely profitable.

We press on, into the future…or is it the past?