This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.
The spat between Amazon’s Jeff Bezos and Donald Trump is yet another reminder of how Big Tech America touches us all – and how the clout of the Magnificent Seven corporations may help contain Trump’s excesses.
The Amazon story is straightforward enough. An American news website reported that the company wanted to show the additional cost of import tariffs on one of its services.
The Donald did not like this at all and his press secretary, Karoline Leavitt, savaged the plan, holding up a picture of Jeff Bezos and calling the idea “a hostile and political act”.
A phone conversation between Bezos and Trump ensued, after which it became pretty clear Amazon had backed down, for the President said: “Jeff Bezos was very nice. He was terrific. He solved the problem very quickly. Good guy.”
You can interpret this in several ways: an example of a tycoon knowing when to step back when confronted by an angry President; or of the thin-skinned nature of this administration, worried that it will get the blame for any surge in prices that occurs because of the tariffs, and knowing that inflation is politically its weakest link; or as a minor issue for Amazon, which said it never intended to add the cost of tariffs to its main site and that this was only considered for Amazon Haul, a spin-off selling items for less than $20.
Or maybe it tells of a sense of frustration at the top of Amazon that their business is being seriously damaged by the chaos of recent weeks – its shares are down some 25 per cent from their peak in early February; if things go on like this, the company will be damaged further.
Tech still holds the power
The thing is that Amazon is extraordinarily powerful, not just in America, but worldwide. So too are the other Magnificent Seven: Alphabet (Google’s parent company), Apple, Meta Platforms (Facebook, WhatsApp, Instagram, etc.), Microsoft, Nvidia, and Tesla.
Think about what it means here. Last month, more than 93 per cent of the searches in the UK used Google – we are their largest market outside the US itself. And 86 per cent of us use Amazon, with 70 per cent buying something at least once a month.
Roughly half the mobile phones in the UK are iPhones. In the UK, 44 per cent of the population uses Facebook every day. Microsoft’s Windows operating system is on 68 per cent of our desktop computers.
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And as for Tesla, while its market share is off a bit with the recent ructions, it was still the best selling electric car brand in the UK last month.
This is power. You don’t have to buy a Tesla and you can get along without Amazon if you have to, but to manage without Google would, for most people, be really difficult. Most of our computers use operating systems by either Microsoft or Apple, and virtually all our mobile phones are on Google’s Android or Apple’s iOS. In a sense, we are trapped.
Come back to Amazon and America. Jeff Bezos is going to be running his business long after Donald Trump is out of office. Bezos knows that, and like the rest of the US business community will work with whoever happens to be running the show at the White House.
You don’t need to have a quarrel. He is, after all, the second-richest person in the world, coming in at $209bn on the latest Bloomberg Billionaires Index, behind only Elon Musk, and probably with a more secure base to his fortune.
The wealthy can wait Trump out
Trump, by contrast, is not on the list at all – it only covers the top 500 billionaires and you need $6.34bn to make the cut. According to Forbes, he is worth “only” $5.1bn.
Furthermore, Bezos is well aware that his fortune has been hit by Trump’s policies. Thanks to the decline in the share price of Amazon, he is down $29.5bn so far this year.
Whatever your view on tariffs, the competence of this new administration, and the extent to which it may have chipped away at the soft power of the giant American corporations, there is one incontrovertible fact: it has made most of its richest citizens poorer.
Money matters. That spat between Bezos and Trump – “a hostile and political act” one moment, an example of Bezos as a “good guy” the next – actually shows that wealthy America is learning how to play its mercurial new President.
This is a long game. Despite taking a hit, the country’s richest citizens still hold all the cards.
Need to knowThe power of Big Tech America is endlessly fascinating, because while the US as an entity dominated the world to a greater extent during the immediate post-1945 period than it does now, its technology is arguably more outstanding now than it was then.
For much of the second half of the last century it was the world’s largest economy (of course) but in technological terms it did not have much of a lead. Its cars were no better than those of the European manufacturers – arguably worse. Its pharmaceutical companies were matched by those of the UK, Germany, and Switzerland. Japan challenged it on consumer durables and electrical/electronic goods. Europe led on mobile telephony.
But Microsoft and Apple changed everything, and that created a base from which the rest of the high tech giants raced forward. Europe and the UK lost ground. We used to have a choice – but now we don’t. We want and need the services that this handful of giant enterprises has created. We are hooked, and that can be most uncomfortable.
My own experience of this was upgrading my laptop from Windows 10 to Windows 11, which it seems we are supposed to do as the company is stopping support of Windows 10 in October.
But I found I hated the new system: the home screen looked ugly, the battery drained fast, controls were in different places, and so on. Mercifully if you move within 10 days you can go back to what you had before, and restore everything in a couple of minutes. So a huge relief – but also a brutal reminder of the power that Microsoft has over all of us. It’s small comfort that there are apparently 1.4bn Windows 10 users wrestling with the same problem.
There is a further twist. The only practical alternatives to WhatsApp, YouTube, Facebook and various other applications are Chinese – think of TikTok and WeChat. While most of us are content, if not happy, with our data going to West Coast America, do we really want it going to Beijing?
According to Wikipedia’s tally of social media platforms, the top European one is Viber, based in Cyprus, and owned by a Japanese company. I cannot find anything significant that is British-owned. Or European-owned for that matter.
In a slightly different category, Skype, the communications service developed by an Estonian team, was bought by Microsoft… and shut down this month.
None of us can resolve this problem. But we are right to be concerned.
This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.
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