Economy Needs More than Tech Sector


We are entering a domain where looms a lost decade of income, growth and opportunity – and maybe it's time to address that fact. Yes, the stock market is high, social-media types are rolling in billions, and asset inflation now extends to the residential home, the one investment where the middle and upper-middle classes can make a "killing." But, overall, everyone but the wealthy – the top 7 percent – are continuing to get pummeled, notes a recent Pew study.

Actually, it's worse than that in terms of the great progressive value, "equality." Hurt particularly has been the middle class – whatever the ethnicity – whose jobs have been decreasing most rapidly, while much of the new employment is in very low-paid work. In reality, many of the major metro regions with the greatest degree of inequality are in deep-blue states like California, New York or, in the belly of the beast, Washington D.C.

But, outside of pontificating, neither political party is ready to address this issue. Under an alliance of the ostensible "party of the people" and the corporate serfs of the Republican Party, Wall Street, arguably the primary felon of the Great Recession, has been protected from any serious reform. Indeed, with Federal Reserve Chairman Ben Bernanke essentially giving it free money, the financial industry gets to party on, while middle-class incomes stagnate or fall.

All most of us are left with is the hopeful upside in housing, but this boom is being fueled largely by investors, including some investment interests who fueled the previous bubble. Meanwhile, in California and other states, the pipeline for new housing, particularly the single-family homes preferred by the vast majority of people, faces an ever-more rigorous regulatory torture test.

The entire political system reflects the growing class divisions in our society. Essentially, it is devolving into a battle between two factions – the tech oligarchs, allied with the public sector and much of academia, against the old power structure of agribusiness, energy, manufacturing and consumer products, including housing. It is a conflict that holds little promise.

Popular oligarchs?

Like Skynet in the "Terminator" films, the Silicon Valley billionaires, and their counterparts in places like Seattle, are now conscious of their real and potential power. "Politics for me is the most obvious area [to be disrupted by the Web]," suggests former Facebook President Sean Parker.

The success with which the tech industry assisted President Obama's re-election effort offers clear support for Parker's assertion. In addition, the tech oligarchs have lots of quick money – of the world's 29 billionaires under age 40, 10 come from the tech sector.

Perhaps more important still, unlike most of American business, the tech oligarchs are widely beloved by much of the population. As Christopher Lasch noted, modern society teaches "people to want a never-ending supply of new toys." People love their toys, and as long as Apple, Google and the rest keep supplying them, those firms are likely to remain something of American heroes.

Yet, for the most part, these people – including those in the entertainment sector – are not generating lots of middle-wage jobs, or any at all. Over the past decade, the information sector has lost more than 850,000 jobs. Social-media firms do not employ very many people overall; and many of their employees do not require high salaries as long as they get to play in the glitiziest sandbox. There are still 40,000 fewer people working in Silicon Valley than in 2001.

Blue-collar heroes

In contrast, energy continues to create a high number of good-paying jobs – 200,000 in Texas alone – for both white- and blue-collar professions. Manufacturing has made a modest recovery, and there are at least some stirrings in construction, as well. Oil riggers, machine-tool firms and suburban homebuilders may not often be celebrated, but they certainly do more for the middle-class economy, at least in terms of jobs, than the tech oligarchs.

This is not to suggest that we should favor one sector over another. Or that there are not many positive effects from social media and the Internet. Information technology could provide the basis for a more practical way of life, with more people working from home, higher levels of productivity and less need to waste so much time – and resources – in travel.

But the real world matters at least as much, if not more. The next generation, we can safely say, will not have it easy. Degrees in the liberal arts and, of course, law, are no longer guaranteed tickets to the upper-middle class; sometimes they serve as little more than calling cards for far less-prestigious work. Even many American IT graduates, perhaps nearly half, notes a recent Economic Policy Institute study, are having a hard time finding steady work.

The key for society – and for geographic regions – lies not in obliterating one economy in favor of another. Some firms, such as Google, seem committed to energy policies, for example, that guarantee high electricity prices and, likely, poorer reliability. They can play with green-sponsored land policies, which help make new homes in the Bay Area absurdly expensive, because their employees already have houses and, if not, they can afford almost anything, anyway.

Yet, such policies cause havoc in the real economy; high energy prices, and likely reliability problems, are a potential negative for many industries, particularly manufacturing. Regulations that favor high-density occupancy and impose ultrarigorous rules make it difficult to build new housing projects. Yet, by itself the tech economy is no panacea, in large part because it is less and less focused on middle-class jobs. Those can be pushed out to other countries or to the cheaper, more business-friendly great American interior. Tech doesn't seem likely to turn around the economy in Oakland, much less in Stockton, Sacramento or Santa Ana.

Work together

What needs to happen – and soon – is a truce between the tech sector and the "real economy." They need each other; innovation can help make Detroit competitive, but society really benefits if that car is designed and made in the United States. Tech can drive the economy, but it is simply not enough by itself. Living on the creative edge cannot create sufficient employment, opportunities or an overall positive impact on day-to-day life. A generation hooked on Facebook – and working at Starbucks – is not likely to be terribly productive or successful.

California, particularly Southern California, could prove a leader here. The region's legacy – from the aqueducts to the development of aerospace, planned communities and entertainment visual effects – has been about the applications of technology. It retains the intellectual firepower through its concentration of universities and retains at least a residue of talent from the aerospace sector. The still-dominant entertainment industries, and the influential design community, also provide powerful assets that could spur new local industries with jobs potential.

But if we are to move this notion forward, there must be a clear idea of what our goal is – not a few very good jobs but a broad array of opportunities. Detached from productive use, tech by itself can be largely a diversion and, sometimes, painfully disruptive. Rather than seeing tech as some kind of alchemy that will save us all, we need to see it, as the French sociologist Marcel Mauss noted, as "a traditional action made effective" – and a way to kick our lethargic economic engine into higher gear.

Joel Kotkin is executive editor of and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

This piece originally appeared in the Orange County Register.