The popular explanation for why Jeff Bezos now has as many dollars as there are stars in our galaxy is that the pandemic has been extraordinarily good to him.
In this reading of the matter, much of Bezos's current net worth, which now sits at around $200 billion, can be attributed to sheer chance. In November of 2017, Bezos crossed the $100 billion mark. The next year, he lost nearly $40 billion in a divorce settlement. Near the end of 2019, Bezos lost his richest-person position to Bill Gates, another Seattle-area billionaire. Then COVID-19 became American, the economy crashed, and a partial lockdown began
Needham analyst Laura Martin recently said AMZN stock could be worth $5,000/share over the long term. She says 43% of its revenue now comes from services, including merchants, video, and its Prime membership. A sum of the parts analysis seriously understates the company’s value, she says.
Getting 34% year-over-year sales growth while at a $400 billion/year run rate is impressive. But will that growth continue after the pandemic?
And so, the key factor of the pandemic explains the accelerating expansion of Bezos's billions. Most will leave it at that, plump their pillows, and go to sleep hoping that luck will one day be as generous to them. This is the essence of the American dream. The hope of being at the right place and time when suddenly dark clouds clear and the sun of fortune shines with blinding brilliance.
But all this is so much nonsense. The pandemic is, undeniably, making Bezos's billions more billions, but this understanding totally misses the point: He already had $100 billion before the Americanization of COVID-19. In the kind of economy we live in, a catastrophe can act like dark energy (the unknown force expanding the universe at an accelerating rate) on billions but have a negligible effect on thousands and no (or, more likely, a negative) effect on hundreds.
What I want to explain in this post is how this excessive or obscene centralization of capital in one person—one spot in a world with over 7.5 billion persons—is in keeping with the core logic of capital. But you will not understand my explanation if you do not let go of the belief that capitalism is ultimately about consumption or consumers.
I will keep this short because I have to introduce a dusty Russian from the end of the 19th century. At that time and place, an economist named Mikhail Tugan-Baranovsky made a big splash in both left and right circles with a strange idea that he extracted from the macroeconomic models Karl Marx presented in the second volume of his incomplete work, Capital (he only finished the first one). One model Marx called Simple Reproduction (which is reproduction with no accumulation), and the second he called Expanding Reproduction (reproduction with accumulation). The arithmetic that explains these models, which are built on simple or unreal assumptions, is tiresome, but it does represent an early attempt to see capitalism, the economy as a whole.
Now, Tugan-Baranovsky reworked the second model in such a way that it produced this bizarre result: Capitalism could survive, indeed thrive, without ever worrying about consumption. He imagined a nightmare scenario where machines made machines to make capitalists ever-more money, and that this could go on until the end of all time. In this maddening economy, consumers could reach the brink of extinction and the machines would not stop making machines from the accumulated capital of previous machines. Once one was made, it would pay for the next two.
The details of this theory first appeared in Studien zur Theorie und Geschichte der Handelskrisen in England (Study of the Theory and History of Business Crisis in England), a book that was first published in 1894. Despite its considerable influence on European economic thought, and its subject (England), the book has never been translated into English. But a key passage from this book, one that explains so perfectly Bezos's billions, managed to enter the world of leftist economics in English by way of Paul Sweezy's 1946 masterpiece, The Theory of Capitalist Development. Sweezy, an American Marxist trained at Harvard and once a member of Franklin Roosevelt's administration, translated the passage from the German translation (1901) of the second Russian edition (1900) of Tugan-Baranovsky's book. (If you can read German, a PDF of the work is here. English readers familiar with Marxist terminology will be able to get through it slowly with the aid of a dictionary. Oddly enough, Tugan-Baranovsky's Russian Factory in the 19th Century was translated into English.)
The nightmare of a passage:
If all workers except one disappear and are replaced by machines, then this one single worker will place the whole enormous mass of machinery in motion and with its assistance produce new machines and the consumption goods of the capitalists. The working class will disappear, which will not in the least disturb the self-expansion process [Verwertungsprozess] of capital. The capitalists will receive no smaller mass of consumption goods, the entire product of one year will be realized and utilized by the production and consumption of the capitalists in the following year. Even if the capitalists desire to limit their own consumption, no difficulty is presented; in this case the production of capitalists' consumption goods partially ceases, and an even larger part of the social product consists of means of production, which serve the purpose of further expanding production. For example, iron and coal are produced which serve always to expand the production of iron and coal. The expanded production of iron and coal of each succeeding year uses up the increased mass of products turned out in the preceding year, until the supply of necessary minerals is exhausted.
Before opening this passage, I want the English reader to know that Rosa Luxemburg's gorgeous work, The Accumulation of Capital, also offers lots of samples from the German translation of Study of the Theory and History of Business Crisis in England.
Machines making machines forever? Does that sound familiar? It is of course Bezos making billions after billions with no end in sight. But how is this possible? Right now, we are watching the value of financial markets (the primary instruments by which the force of the pandemic acts on Bezos's billions) rapidly inflate despite the slump in the conventional economy, or what many call the "real economy"—but even if it is concrete, there is very little about this economy that's real.
Tugan-Baranovsky wrote at a time when financial markets (or loan capital, as Luxemburg calls it) was still directed at machines that made the machines for railway transportation. And it was indeed the expansion of these machines around the world that absorbed surplus capital. Later, in the American century, the automobile, suburbanization, and military spending would replace the railways as "capital sinks" (more about that in another post). By the beginning of the third millennium, what the economist Jan Toporowski called in 2001 capital market inflation become the railway machines of the second of half of the 19th century and the suburbanization/militarization of the 20th century.
You might argue that at least railways and cars and tanks and homes and such are real and useful things, and that the same cannot be said of the trillions in virtual paper daily exchanged on stock markets. But this gets the whole point wrong. Tugan-Baranovsky's deep insight is that capitalism is not about consumption. It's about the accumulation of capital, which is, in cultural terms, a form of social power.
A society that makes machines to make more machines is indifferent to basic human needs. The same is true if this society, at a later stage, expands endless billions that no one will ever see or touch or eat.