The Dark Side of the High-Tech Religion
New data from California’s Silicon Valley undermines some of the most deeply held beliefs of America’s progressive elites. For years, the region’s mix of top-notch universities, high-tech industries, achingly correct politics and fantastic opulence seemed to offer a happy blend of business acumen and social responsibility.
Yet, just as the Silicon Valley “model” enjoys unrivaled influence among policy-makers in Sacramento and Washington, its economic vulnerability and class biases are becoming painfully evident. By allowing elite interests to dominate all others, the region severely limits opportunities for working-class and immigrant advancement while dangerously constraining its industrial options.
In 1998, annual job growth in the San Jose metropolitan area plunged to 0.7%, from a peak of about 6% just 15 months earlier. By contrast, L.A. County is producing jobs at four times Silicon Valley’s rate, while Orange, Riverside and San Bernardino counties are expanding from five to seven times as fast. With Silicon Valley stalled, Southern California’s growth is substantially outpacing the Bay Area’s for the first time in three years.
Furthermore, a Silicon Valley think-tank report, released earlier this month, highlighted the region’s staggering inequality. During 1991-97, despite an unprecedented economic boom, real incomes for the poorest 20% of all households in the region fell by 8%, while rising by 2% in California overall. Incomes for the richest fifth of the valley’s residents skyrocketed by nearly 20%, more than double the statewide rate.
To be sure, Bay Area defenders quickly interpreted Silicon Valley’s decline as a welcome break from a period of overheated growth. Regional inequality, many suggested, reflects the sad fact that ethnic populations, especially Latinos, don’t get educated fast or well enough to earn a place on the high-tech gravy train. There’s an unfortunate mismatch between what high-tech employers demand and what the poor and working class are willing to learn.
The region’s problems, however, arise from far more troubling sources. Once the Bay Area’s most open, least class-conscious area--it was derided for years as a “mini L.A.”--greater San Jose steadily integrated into the Bay Area’s elite-dominated political culture throughout the 1990s. As the interests of wealthy, yuppified classes prevailed in local politics and land-use decisions, “messy,” undesirable industries crucial for working-class and immigrant advancement lost out to exclusive, high-end business and housing developments.
Like many of this decade’s other celebrated economies, including New York, Seattle and Portland, Silicon Valley society sharply fragmented. At one extreme grew a spectacularly compensated, insular, well-educated elite plugged into Wall Street and showered with fawning media attention. At the other was a growing population of working poor precluded from building independent equity and wealth by any means except the high-tech path favored by regional elites.
Since 1992, when Silicon Valley’s last recession bottomed out, industrial employment in blue-collar industries, like heavy construction, fell by 20%, compared with a rise of 24% in California as a whole. While the state generated more than 45,000 light-manufacturing jobs in such blue-collar industries as textiles, plastics and food processing, the same industries lost employment in the Valley. More surprising still, given its professed interest in education, state and local education employment rose by just 11% in the region, compared with 17% for the rest of California.
Overall, Silicon Valley’s economy has shifted away from its traditional and still enormous manufacturing base toward high-end professional, on the one hand, and lower-end amenity-service jobs catering to the wealthy, on the other. Food-store, restaurant and bar, garden-supply and automotive dealer and service occupations, for example, accounted for 10 times more new jobs this decade than the region’s heralded computer and office-equipment sector. Retail trade and health-service employment, not manufacturing or engineering, expanded at nearly twice the statewide rate.
These developments help explain both Silicon Valley’s yawning income disparities and its economic slowdown. The blue-collar, administrative and other mid-tier industries that Bay Area elites discount not only provide additional upward-mobility opportunities for the working poor, they also help broaden what’s otherwise a limited economic base.
Ironically, the Silicon Valley’s growing industrial and social insularity puts its elite at risk. High-tech and stock-market proselytizers relentlessly preach that places like San Jose have discovered a “new economy” permanently immune from business cycles. In reality, regions overly committed to high tech are even more vulnerable to economic shocks and periodic adjustments than those that foster less ballyhooed, but more diverse economies. High-tech sectors like software and computers are actually far more volatile than most others, according to Ross DeVol, an economist at the Santa Monica-based Milken Institute. During business-cycle swings, high-tech industrial output varies as much as 75% from baseline trends, compared with just 5% for the rest of the economy. Over the last 20 years, in fact, the San Jose region experienced some of the most dramatic employment swings in the state, crashing in the mid-1980s, again in the early 1990s and once more over the last several months.
These problems are magnified in regions overly dependent on high-tech development, because even the most competitive industries are vulnerable to unforeseen trade reversals or unanticipated technological change. A whopping 24% of Silicon Valley’s personal income is generated by Asian exports, far more than any other part of the country. That’s one reason why business cutbacks caused by the Asian financial crisis are hitting the Bay Area much harder than most anywhere else.
Seductive though it may be, regions that tailor land use and local politics to foster what elites think are the “best” development options, like high tech, may shut out unforeseeable economic opportunities. “‘Economic development overly channeled to very specific sectors can reduce the evolution of the kind of industries that Silicon Valley itself fostered,” says DeVol. In the early 1980s, for instance, New York officials who today hype their city’s minute high-tech “cluster” airily dismissed Silicon Valley for generating only “crummy” jobs.
Silicon Valley’s recent setbacks invite reflection about the economic and social theories that guide our leaders. The Democrats’ stunning triumph last November already has stimulated policies informed by the region’s purported “lessons”: proposals for high-tech training and development subsidies; moratoria in places like Los Angeles’ South Bay blocking blue-collar warehouse and delivery activity in favor of Rodeo Drive-inspired retail complexes; state and federal storm water, air and “environmental justice” requirements that will retard all but elite-sanctioned urban growth, and the scuttling, for at least a year, of a Sacramento Delta water accord.
Silicon Valley’s experience, however, suggests that regional and statewide preferred-sector strategies, coupled with elite-dominated bureaucracies, will almost certainly disenfranchise California’s working and immigrant classes. Some activists, like the Sierra Club’s anti-immigration faction, explicitly recognize, if not advocate this result. Others believe that California’s working poor can be educated into “appropriate” occupations, although demand in even the fastest-growing high-tech sectors will generate nowhere near enough jobs to accommodate the state’s mammoth labor force.
A better option is the Silicon Valley model as it was at the beginning, a place where people could, and did, create a future that traditional elites ignored or discounted. That means reducing the influence of no-growth and exclusionist classes by establishing reasonable environmental and social expectations for the state’s urban communities, and refocusing conservation activism on controlling ex-urban sprawl and preserving vast, environmentally pristine landscapes. Within these broad parameters, urban elites will have to accept that social mobility often involves “unseemly” industries and career paths unlike their own.
Yet, in part because so many either live or want to reside in the region, the Bay Area’s development model remains the preferred social blueprint guiding California’s new leaders. Gambling on the health of a handful of high-tech industries while stimulating growth in low-end jobs serving an increasingly privileged elite, however, seems risky indeed. As Silicon Valley signals, there are serious bugs in the program.*