Price rises over the last 18 months have meant a lucky few companies, and their owners, have been making extraordinary profits. BP, Shell and other fossil fuel giants have reported record earnings as soaring gas and oil prices last year saw hard-pressed consumers forced to hand over billions for essential energy costs.
Food prices rises have seen the same process take place, with the four largest global agribusinesses reporting an incredible 255 per cent increase in profits since 2019. In the post-pandemic economy, it’s obvious who the winners are: Oxfam has reported 62 new “food billionaires” have been created from the impoverishment of millions around the world.
Yet even while a lucky few capitalists have profited, the rest of the system is creaking. Those companies that once seemed to represent the future, and which grew fat during the pandemic and its exceptional government spending, are now under pressure. The shift online during lockdowns marked a change in how we live and work, with 44 per cent of employees today in Britain under some form of hybrid working – sometimes in the workplace, sometimes at home. Online retail sales now account for 25 per cent of all sales – up from 20 per cent in December 2019.
But, crucially, neither online retail nor homeworking are as common as they were at the peak of the pandemic. And the ultra-low interest rates of the last decade have gone, replaced by central banks cranking up the cost of borrowing in the desperate, if misguided, belief this will restrain inflation. With markets for digital products smaller than they were when most of us were locked up indoors, and with the flow of cheap, easy money now dried up, the tech sector is feeling the pinch. Amazon, Google parent company Alphabet, Facebook owners Meta and Microsoft have all announced global layoffs in the last six months. Smaller tech companies in the UK are giving profit warnings to their shareholders, with 75 issuing an alert in the first three months of this year – the highest number since the pandemic.
This is a very familiar pattern in capitalist economies – sudden enthusiasm for an industry or a product grips investors and speculators, who rush to put their money into increasingly risky ventures. The Tulip bubble in Holland in the 1600s is infamous, but Railway Mania in Britain in the 1830s and the dotcom bubble in the 2000s were both examples of the same pattern. It’s not necessarily wrong to think some new technology or product could become important – railways were built in the rush, and the dotcom bubble left behind the infrastructure of the modern internet in companies like Google and Amazon. The pandemic really did see an acceleration of the shift to online living. But the rush of investment is excessive and when the bubble bursts, the consequences can be painful. Companies go bust and workers are laid off, as we are now seeing.
The cost of living crisis is a critical element. As prices for essentials have soared, consumers have cut back on the non-essential spending. Streaming service Netflix lost a million subscribers last year as people cancelled their payments to save money. So the cost of living crisis has produced some very clear winners, but also a large number of losers – not only most of us, forced to pay through the nose for things we can’t do without, but also smaller businesses like pubs and restaurants, with pub and bar closures in the UK at record levels. The digital economy as a whole is losing out.
There’s no need to shed any tears for the billionaires. If Elon Musk has managed to lose $39 billion since 2022, he’s still got another $180 billion to play with. But for workers in the companies now under pressure, it’s a different story. Workplace practices have been notoriously brutal in tech, from the to-the-second monitoring of Amazon warehouse workers to the all-night “crunches” expected from software developers ahead of deadline. But layoffs have given an extra push to unionisation drives. Amazon warehouse workers have been striking across the globe, with workers in Coventry taking the first official industrial action at the company in the UK in the last few weeks. Alphabet Workers Union is growing rapidly in the US. The UK’s Union of Tech and Allied Workers has seen its membership triple in the last six months.
Facebook’s old motto was “move fast, and break things” – and we’ve seen in the last decade how that works out. Good company behaviour starts with being a good employer. If workers in the sector can win better pay and conditions for themselves, pushing back on the kind of brutal business practices Elon Musk has brought to Twitter, it can start to transform how these companies operate for all of us.
James Meadway is an economist and director of the Progressive Economy Forum, an independent thinktank (progressiveeconomyforum.com)
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