The world’s most successful business, Amazon, is getting bigger and the world’s richest man, Jeff Bezos, is getting richer. There is nothing wrong with using the free market to get wealthy, because the wealth you garner is correlated to the benefits you bestow with great services and products to consumers. The problem emerges when a company goes full Crony Capitalism and relies on the taxpayer as the guarantor of government largess.
During the 2012 presidential election, the company’s cloud division, Amazon Web Services (AWS), provided the technology used in President Obama’s re-election campaign. After the election, an Amazon executive wrote that using Amazon’s service helped the Obama campaign “avoid an IT investment that would have run into the tens of millions of dollars.”
That savings to Obama has reaped enormous profits to AWS in the form of government contracts. Maybe Amazon has no other markets to open other than government contracting, but the company is getting into a dangerous area. AWS has contracted with a large company in China that may have compromised some of the technology they use to house cloud computing data. Amazon has a large contract with the Central Intelligence Agency (CIA) to house sensitive cloud computing that was a prelude to Amazon’s recent play for the motherload of all contracts – one to conduct all the cloud computing for the Department of Defense. AWS was forced to diversify the CIA contract and the Defense contract was recently put on hold. If Amazon gets the contract, expect that company to become the most powerful private entity on the planet.
Bezos has already become the most powerful individual on the planet who does not hold government office. Bezos personally owns the Washington Post,giving him the power to communicate whatever message he would like in of the most respected newspapers in the nation. Even President Donald J. Trump is worried that Bezos is using the Post to guard Amazon against repercussions under the antitrust laws. Amazon is working on moving a large corporate presence to the Washington, D.C. area to get closer to the levers of power and the decision makers who dole out government contracts.
According to Bloomberg, Bezos net worth rose $52 billion over the past year to $152 billion. To put that in perspective, the $52 billion 2017 increase in Bezos’s net worth is more that the GDP of over 100 nations and is three times (3x) the GDP of Iceland. Bezos is worth $55 billion more than Bill Gates of Microsoft. One way he has done so is to cozy up to D.C. decision makers like Secretary of Defense James Mattis and Attorney General Jeff Sessions. According to the Wall Street Journal in a report on June 20, 2018, “Amazon now has an army of nearly 100 lobbyists at more than a dozen lobbying firms working on a list of issues including taxes, trade, government procurement, internet policy, drone regulation, grocery rules, music licensing and, more recently, food stamps. Last year, the company spent $13 million on lobbying, five times as much as it spent five years earlier, putting it just behind some of last year’s biggest corporate lobbyists, including Google and AT&T Inc.” Amazon is becoming very good at the game in D.C. of securing massive contracts.
At issue right now is a proposed $10 billion contract over 10 years with the Department of Defense that has wisely been put on temporary hold by the federal government. It makes sense that the contract was held up because there are questions as to whether it is wise to give all these contracts to one company. It may raise antitrust concerns, as well as the wisdom of putting important defense and intelligence data in the hands of one company.
Amazon is a classic example of a great company going to the dark side of government contracting. The decision on the future of Defense contracting in the hands of Amazon Web Services has been influenced by cronyism, favoritism and intense lobbying. Any decision on this contract should consider national security and competition. Multiple cloud computing providers might mitigate the concerns raised under antitrust law and may be a safer alternative to protect taxpayer cash and our military data safety.