Silicon Valley needs to have an intelligent, civil conversation about inequality
Income equality is not going to improve; technology is about to make matters worse. Over the next decade, it will begin to disrupt nearly every industry, take away millions of jobs, and make the rich richer. While everyone will be able to live better, healthier lives and benefit from technological advancements, widening the gap will cause greater resentment and create a bigger cauldron of dissent. This is something we have to be prepared for.
Already, in Silicon Valley, the Google bus has become a symbol of inequity. These ultra-luxury Wi-Fi-connected buses take workers from the Mission district to the GooglePlex in Mountain View. The Google bus is not atypical; most major tech companies now offer this type of transportation. But they are so divisive that in a normally liberal San Francisco, activists are shouting angrily at buses plying the city’s streets and bus stops, completely ignoring the fact that they are pulling dozens of cars off the roads. Teslas have also become symbols of the obnoxious technoelite rather than being celebrated for being environmentally game-changing electric vehicles. In short, there is very little logic in emotionally charged discussions.
(Also see: Google bus blocked during a protest against gentrification in San Francisco)
Intellectuals attempt to construct frameworks for understanding why the divide, which first opened up in the 1990s, continues to deepen. Thomas Piketty explained in his book Capital in the 21st Century that the economic inequality gap widens if the rate of return on invested capital is greater than the growth rate of the economy as a whole. His proposed response is to redistribute income through progressive taxation. A competing theory, by an MIT graduate student, holds that much of the wealth inequality can be attributed to real estate and scarcity. Silicon Valley has both: an explosion of wealth for investors and company founders, and a real estate market constrained by development limits.
So far, Valley tycoons have largely denied that the technology will kill millions of jobs and increase inequality. They prefer to believe that they are building a utopia that has no dark side. But one of Silicon Valley’s most influential people, Paul Graham, broke ranks and wrote an essay on the role of startups in income inequality. This created a firestorm and launched an important debate.
Graham explained that income inequality is an inevitable result of start-ups and asked what choices we want to make. He acknowledged that extreme poverty coexists with staggering wealth and that resentment is growing. He expressed concerns about the backlash and its potential to generate reckless government policies to tax start-ups more heavily. He argued that this could stifle growth and stifle innovation.
Almost every aspect of Graham’s essay was criticized by other venture capitalists, angry socialists and the press. But his concerns are valid. There’s a very good reason Silicon Valley remains home to the majority of the planet’s vibrant tech companies. As Graham notes, many start-ups produce tremendous value for society.
The best of these disruptive startups create far more value than they capture, even as they disrupt or even destroy older, less efficient industries. Uber may generate a lot of controversy, but no one will argue that the old ways of moving people around densely populated areas can be improved upon. It goes beyond taxis and into a future of weaving all transportation systems into one smart, flexible service that makes it easier to travel at lower cost, with less environmental impact. Twitter and Facebook may deserve some criticism, but these social platforms were the primary information distribution mechanisms that fueled the Arab Spring, and they continue to fuel other democratic uprisings around the world.
Yes, the digital transition of the economy amplifies globalization and affects American workers. Automation is already decimating the global manufacturing sector, turning a reliable mass employer providing middle-class incomes into a much smaller employer of people with higher education and skills. The growth of the “Gig Economy” is moving companies toward the goal of part-time, on-demand employment, with aggressive avoidance of health insurance obligations and longer-term benefits. The win-win nature of the tech industry explains why only a few giant digital companies compete to dominate the global economy. A substantial part of the value they capture is concentrated in the center and mainly benefits a few shareholders, executives and employees. With technological advances and convergence, we are in the midst of a gold rush. Technology makes amazing things possible, but it also drives the economic chasm.
We need to have open discussions about the pros and cons of technology and mitigate its negative impact. As robots and artificial intelligence increasingly do the work of human workers and multiple industries are simultaneously disrupted, we are heading towards a jobless future and must rethink the nature of capitalism itself. It can’t just be about taxing the rich, because that’s not what Americans want. They have never claimed equal income and have always been fans of the entrepreneur, both Henry Ford and Mark Zuckerberg. What Americans really want is economic security. What makes us unequal is not so much the money we have at any given time, but our ability to cope with critical events like cancer or late mortgage payments. Technological advances can provide the basic needs of every human being, so that a job is no longer a matter of survival or sustenance.
A more fruitful discussion would be how we can mitigate the impact of technology and social change. We need to discuss safety nets, retraining workers and the concept of a universal basic income for all. We need a nationwide dialogue about how we can distribute the new prosperity we are creating. Equally important, we need to create fairness and justice in our sorely lacking legal, judicial and economic systems. Otherwise, we will see even more anger and unrest across the country.
© 2016 The Washington Post
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