The gap is becoming a chasm
Coronavirus has made Big Tech even wealthier – and everyone else poorer
“Tech companies are the big winners of the coronavirus crisis”. That phrase quickly became a cliché. And like most other boring and overused cliches, it’s actually true. The tech sector, with all of its branches – software, fintech, social media, e-commerce and so on – is not only still growing, but in some cases it’s growing even faster than before the coronavirus.
All of this is actually logical – tech companies had no problem going into remote mode, there is more demand for digital services because millions were and are in lockdown – and because there was always going to be a “winner”. But even though all this sounds logical, technology is opening an economical gap – or even a chasm – because almost everybody else is on the losing side and is getting poorer. Closing the wealth gap is one of the main priorities in most rich countries, so the governments there should pay close attention to those who are coming out of the crisis even stronger. The problem is that there is no recipe for inequality management and the question is more or less still on theoretical grounds.
The gap can be seen both on macro- and microlevel. Eight out of the ten richest people in the world right now are coming from tech. Jeff Bezos, founder and CEO of Amazon, as well as the richest person in the world for the last few years, has added 72.4 billion dollars to his fortune just from the beginning of this year and his wealth now stands at 187 billion dollars, according to Bloomberg data. The reason: Amazon stock has skyrocketed this year because of the jump in sales due to several reasons: traditional retailers had to close doors, some for a while, some forever; a lot of people couldn’t leave their houses because of the lockdown; and others did not want to, even if they could.
The company, along with other big names in technology, are also the reason why the stock market indices are still close to their record levels, even though the American economy has collapsed in the second quarter and there are severe contractions everywhere else in the world.
Tech and everybody else
While a lot of small and middle-sized businesses are on the verge of bankrupcy, big tech companies are going into more and more sectors of the economy, and while they bring with themselves innovations, they also mean unemployment and inequality. Most IT firms have a relatively small workforce in relation to their revenue or market cap, compared to the traditional giants of yesterday. The most extreme case is Facebook, which has only 53 000 employees with a market cap of about 800 billion dollars. It’s a similar case at Apple, the world’s biggest company, which has 137 thousand employees with a 2 trillion dollar market cap. But there is a difference – Apple actually has a supply chain in manufacturing, which gives jobs to hundreds of thousands through other companies.
The reason IT giants can afford to have such a small number of employees is that their real assets are actually data. They cannot be harmed by coronavirus. On the contrary: when there are more people spending more time online, that means more and more data, which leads to better algorithms and models – all of this for free. This is a self-reliant business model with an enormous power over everyday lives of people throughout the world.
There is nothing wrong with the IT sector’s success per se. What society should fear however is that the economical pie is getting bigger only for very few people and companies. In most cases this is also happening on the back of traditional sectors, such as media, advertisement, brick and mortar businesses etc. – all of which have no other choice but to become clients of Facebook, Google, Amazon, Microsoft and others.
What is already happening with Big Tech will also happen on a smaller scale to other stable IT companies, that will come out of this crisis stronger than before. The ones helping with the digitalization of traditional sectors of economy had their own fears at the beginning of all this, but with more and more off-line businesses investing heavily in faster digital services and products, their fear were allayed. Tech is already the fastest growing sector in absolute terms and will become even bigger and faster in relative terms. The goal is not to stop their growth – the goal is their success to be shared with those left outside of the bubble.