For the past 25 years, I’ve lived in Northern Virginia. Because of its proximity to Uncle Sam and its ever-engorging government, the area has experienced tremendous growth and change since my moving here from Miami in the early 90’s.
Of course, roads, schools, housing, green space, etc. have all been affected by this. But, what strikes me most about the change is what’s happened to our local area retail establishments. New malls with their big box stores have popped up (and down). Banks seem to grow like weeds. McDonalds, Starbucks and 7-11’s occupy every popular intersection.
But sadly, gone is the five-and-dime, the new-and-used book shop, and the local RadioShack.
Last year alone, 6,700 retail outlets closed – a record. Brand names like Macy's shut 68 stores. Walgreens, 600 stores. Notwithstanding the growing economy, all indications are that that trend will continue, with industry estimates showing nearly 4,000 more closures by the end of the year.
ToysRUs, which had been around for 70 years, shuttered its outlets for good this June. And just last week, Brookstone announced it was closing its mall stores. I mean, this all seems like hitting below the belt.
Industry statistics show that online retail sales represent about 13% of retail sales in the U.S. – or, about $450 billion on $5 trillion of all sales. That’s a 16% jump from the year before compared with a far smaller 3.6% gain for physical stores. As the Supreme Court declared in a recent ruling, "Last year, e-commerce grew at four times the rate of traditional retail, and it shows no sign of any slower pace."
A dominant driver in all of this is Amazon. Just under half of all online sales go through the company. 100+ million Americans have an Amazon Prime subscription. Its annual “Prime Day,” though plagued by site closures, was its biggest shopping event ever, enabling over 100 million product purchases, more than any previous Cyber Monday, Black Friday or Prime Day. At $1,800 a share, analysts remain bullish on the company’s future.
But Amazon – and other e-commerce retailers in Silicon Valley – didn’t do this alone. Quite simply, U.S. policy plays a vital, if not purposely distorting role, in favoring these Internet companies and their business practices.
Chief among this help is Congress’ Telecom Act of 1996, which seeks “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.” While this framework primed the entire Internet ecosystem for growth, in practice it and the tech-progressive-ism which created it have placed Silicon Valley off-limits from heavy-handed regulatory mandates, unlike its competitors in the rest of the economy.
Clear examples of this can be seen during President Obama’s tenure. His administration essentially turned a blind-eye to Silicon Valley companies and their abuses of privacy, piracy, and competition law, among other dubious behaviors, clearly favoring them over physical retail establishments. This kid gloves approach to Silicon Valley still largely persists. Moreover, it strays into areas one might think have nothing to do with the tech world.
Such as the Snail Mail.
During Obama’s second term in 2013, Amazon signed a sweetheart deal with the U.S. Postal Service, which according to one study shows the USPS losing $1.46 per Amazon package. Because Amazon ships about 40% of its business via the USPS, it is estimated that the service is losing “billions” each year with the subsidy to the company and its shareholders.
Look, I’m no fan of increased rules or government hurdles. But, all of this doesn’t feel right, especially when you look at what’s happening on Main Street. While it’s true that a handful of developments during the present administration have tipped the scales back somewhat, Congress should take a good, hard look at the official favoritism, distortion and subsidy it bestows on companies like Amazon and in Silicon Valley, and start asking some tough questions.
· How much support does Silicon Valley get from Uncle Sam's laws, regulations and policies each year?
· Are the reasons for such support still valid or necessary?
· How does a company like Amazon, with nearly $200 billion in retail sales, deserve such a favorable deal with the USPS?
· And, even recognizing that Americans have benefited immensely from the Internet, is the hollowing-out of Main Street retail via the Web a good thing for U.S. jobs, prosperity and our way of life?
I live on Main Street, not in some Silicon Valley server. Congress might reconsider its policies which want me to relocate.
Mike Wendy is president of Media Freedom, a 501(c)(3) nonprofit organization.
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