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Is Government Making Walmart and Amazon Rich?

The COVID-19 pandemic and consequent shutdowns have been difficult. Kids have been sent home from school, jobs have been lost, churches have closed, and life has changed. The sacrifice has been shared by everybody.

Well, almost everybody.

You guessed it: Walmart and Amazon are doing just fine. Shutdowns across the nation require “non-essential” retail to close, but Walmart sells “essential” items, so it remains open. Amazon, meanwhile, becomes the only source to acquire many thousands of consumer products.

The retail giants prosper while the competition gets swept away.

I am not, generally, a big fan of government throwing its weight around in the business world. Many people who complain the loudest would suggest that the free market is the problem and that government should “do something.” But they’re wrong: it is the government that has already put its thumb on the scale. Jim Cramer gets this basically right:

The government has acted. Walmart and Amazon are the beneficiaries. The actions, in this case, take the form of executive orders that force thousands of businesses to close while leaving “essential” businesses open. That’s not to say that it is bad for Walmart and Amazon to be open–they offer important products at affordable prices. But it is government action that has provided them with an environment to flourish.

Ironically, it is not necessary for the pandemic lockdowns to improve their profits for the retail giants to benefit. If the lockdowns wipe out their competition, they benefit even when their own numbers fall. The increase in earnings is simply a bonus.

It would be a mistake, however, to suggest that the lockdowns are the sole reason for the growing power of Amazon and Walmart. Brick-and-mortar retail has withered under Amazon’s sustained assault for years. Iconic brands like Sears and Toys R Us collapsed long before anyone had heard of COVID-19, and shopping malls are becoming ghost towns. The pandemic is simply an accelerant, a can of gasoline dumped upon an already-roaring fire.

We already know that this is happening. Massive retailers move in to a geographic region or a product market and eviscerate smaller companies using economies of scale to provide better selections of more affordable products. To some extent, this has real benefits to consumers. Who doesn’t like cheap groceries, affordable books, or quality merchandise delivered to your door for free in two days?

The problem is that the pandemic is hardly the first time the government has intervened in the affairs of business. Growing bodies of legislation and agency regulation place increasingly high burdens on business to function. All businesses bear these burdens, but giants like Walmart and Amazon can afford the incremental cost increases, while mom-and-pop stores must pay for expensive third-party services or invest hours of extra work to meet the requirements. Big businesses are just fine with regulation when it inflicts greater proportional damage on the competition. They are a large yacht planing on top of the waves as the rowboats of small business toss and founder.

The immense size and influence of these companies has, of course, begun to attract criticism from the populist wing of conservatism, led by Missouri Senator Josh Hawley. His bull-in-a-china-shop style provides a useful political check as he takes aim at corporate giants like Amazon and Facebook.

It seems notable, however, that the decidedly un-populist website the Bulwark has joined the battle. Richard North Patterson goes in to some detail to argue that Amazon should be broken up by anti-trust regulators, and it is worth reading.

Is there a place for such drastic action? Arguments like this that would be mocked out of conservatism just a few years ago are now read thoughtfully across the Right. Conservatives don’t like the idea of the government dabbling with business, but that Rubicon has been crossed. Small businesses need help. They need a level playing field, or they need more emergency support, or they need both.

The question is not whether the government’s thumb should be placed on the scale, but whether, and how, that thumb should be moved to a different side.

With the current cataclysm rapidly depleting the retail landscape, these questions will only grow in urgency.

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