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The Trillion(s) Dollar Question

Harsh Khurana

July 13 2020

We all wonder where the money goes when the government prints it and distributes it to our citizens and companies. It’s something that affects all of us, inevitably, through inflation, wealth distribution, and other economic factors we generally forget to think about. The recent Covid stimulus package is a great case study. A big portion of the stimulus went to large corporations and small businesses but $600 billion of it went to individuals and families. In this post, we’ll specifically take a look at how individual shopping through e-commerce circulates that wealth and affects each and every one of us in ways unimaginable when we’re looking for the easiest ways to consume.

For starters, the US consumer is projected to spend between $700 and $800 billion online in 2020, far outpacing 2019, especially given the COVID-19 pandemic. Who benefits from this? Well, data1 show about 50% of our e-commerce spending is through Amazon and more than 50% of the top 10,000 sellers in the US Amazon marketplace are based in foreign countries. So, if we use that as a benchmark and estimate roughly $350 billion of our online shopping is done through Amazon, then $175 billion of it is directly going abroad (aside from Amazon’s cut). Indirectly, this doesn’t take into account local sellers and chains curating foreign products and selling through the Amazon marketplace or other e-commerce marketplaces.

Using Amazon as the benchmark to extrapolate the remaining e-commerce spend, nearly half of every dollar spent is sent abroad - which equates to ~$350 billion and growing, while our manufacturing hubs reel from job losses leading to poor infrastructure from lost tax revenue, and other economic impacts. There is an argument to be made that many businesses manufacture abroad for cheaper cost of materials which allows them to hire locally, impacting our local economies positively. While that may be true, we’re destroying our manufacturing industry, which used to be an industry that drove nearly 20 percent of our economic activity but is now down to 12 percent. As we discussed in our mission post, if these companies were to manufacture in the US and invest in technological advancements for manufacturing, they would generate at least a 50% greater benefit to our local economies.

What about those import tariffs? Aren’t they supposed to help our local businesses become more competitive with foreign goods and help local manufacturing? Great question - stay tuned for our next post!

1 "US Amazon market share in e-commerce and retail ... - Statista." 9 Aug. 2019, https://www.statista.com/statistics/788109/amazon-retail-market-share-usa/. Accessed 7 Jul. 2020.